Wednesday, November 13, 2013

Banks begging Hedge Funds

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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