Or choose individually:
- The Shortest Correction Of All Time
- Now YOU Can Understand How The Goldman Abacus Deal Worked
- Paulson Didn’t Even Need His $1 Billion Abacus Profit
- This Is What The Greece Endgame Looks Like
- Check Out The New Housing Frenzy Our Government Engineered
That was quick.
After Friday's selloff, pretty much everyone and their mother announced the beginning of a new correction.
Well, it didn't happen.
Confused about this Goldman Sachs (GS) Abacus deal you've been hearing about?
It's really pretty simple.
John Paulson made $1 billion from Goldman's 2007 Abacus deal according to SEC documents related to fraud charges filed against Goldman last week. That's a lot of money and an outrageous loss for the counterparties if in fact they were treated unfairly.
But for Paulson, this deal's profit was a drop in the bucket relative to the $15 billion his funds made in 2007 across a variety of smart trades according to Portfolio.com.
So his guru status should stand the test of time regardless of how Goldman may or may not have helped him out. That's why his negative press right now is so unfortunate for him.
(In the chart here we assume that the full $1 billion earned on Abacus was completely realised in 2007 as part of his $15 billion in total, which is the most conservative measure. Some or all may have been realised in early 2008, the SEC documents don't specify this, which would only make the red slice even smaller)
Yes, you've been hearing about Greek bond yields rising for some time now, but now it is far different -- they're rising, and they've gone vertical.
Below we show the spread between Greek bonds and German bonds. We show the spread, rather than just the plain Greek bond yields in order to remove any broader eurozone concerns. Thus this chart shows the additional yield the market is demanding to hold Greek rather than German bonds.
You can see how the spread has just exploded, rising faster than at any time. This shows a collapse of Greece's perceived creditworthiness.
Note how the 2-year spread is now higher than the 10-year. That's mainly because 2-year Greek bonds are yielding over 10% due to their market rout, and the 10 year Greek bond is at about 8.8%. Extend this trend for even a short period of time and it's all over for Greece's finances.
Thanks to the upcoming April 30 expiration of the government's new-home-buyer tax credits, in March the U.S. just experienced the sharpest spikes in new home sales back to 1963.
According to the U.S. Census Bureau, new homes sales leaped at an annualized 27% rate in March. You'll see this below, on the right. It's clearly an abnormally high jump -- welcome to the distorting force of government in markets. People were rushing to buy ahead of the April 30th deadline to qualify for the tax incentives.
Thing is, this isn't healthy buying behaviour. Given we just came off a housing mania, creating new mini-buying manias seems a bit dangerous. It's kind of like taking shots to cure a hangover.
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