I wanted to share a rather interesting story of how
government stupidity as displayed from the US to Japan and from Germany to
Greece has changed the landscape of the financial system once again, but this
time for the better. With a drain in liquidity banks had to search at
alternative places for it and my colleagues and I discussed this topic during a
conference this past weekend as I was asked if I was interested in getting on
board as well.
What am I talking about?
A new little asset which is gaining popularity among niche
hedge funds called Capital Relieve Trade or CRT. A CRT is referred to when
banks hand off a portion of their risks associated to loans they made to a
third-party in order to meet capital requirements.
Moronic governments and regulators have unleashed a serious
of counter-productive rules designed to kill financial innovation and hurt competitiveness
which has caused banks to scramble and choke off business units, stop lending
and cut their overall business in order to meet the new set of rules and
regulatory guidelines designed to crush profitability which is exactly what
socialists who are allowed to govern desire.
Most banks decided to throw their hands up in the air and
kill their business units, put their tail between their legs and get leashed by
regulators. Then there are the few fighters out there who turned to the only
sector of the financial system which never needed nor asked for a pathetic
bailout; hedge funds. While CRT’s are not exactly popular with hedge funds,
there has been an increase in assistance from this sector to the banking
sector.
The reason why CRT’s are not very much liked not traded
around global hedge funds is that often those banks who get down on both knees
and beg for help, this is dumb money asking smart money for assistance, have
already accepted some sort of government assistance and therefore have the
morons from the regulators as well as government socialists breathing down
their neck. Most smart money hedge fund managers stay away from this toxic mess
as it only invites the government and its puppies to the sole untouched sector
of the financial world.
I have no interest in trading CRT’s and could care less if
banks go bust, but it is a rather interesting development and those banks who
want to show regulators the middle finger are always on my radar as I
appreciate their will to fight.
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