China Invokes A “Stop Loss” On OTC Derivatives

Posted at 10:19 PM (CST) by & filed under General Editorial.

My Dear Friends,

China tells the Wall Street OTC derivative manufacturers and distributors to go straight to hell.

China has invoked a "Stop Loss" on these fraud ridden instruments.

If you create a specific performance contract that you know under even the slightest pressure cannot perform, you have committed fraud.

My English bull dog Mia, bless her soul, figured out the non-performance characteristics of these financial WMDs.

This will have a MAJOR impact on the sociopath US manufacturers and distributors of OTC derivatives like CDSs that struck the world over with these weapons of mass financial destruction.

This could roll the financial world one more time.

Doing the right thing is never easy. Doing the right thing takes character and courage.

The Chinese are doing exactly the right thing and exactly what the West should have done years ago when long term capital flopped.

Now the rest of the BRIC nations will follow suit.

China’s actions here are another reason why China is headed for the largest economy on the planet.

While the West enriches the creators of this disaster, China herein tells them, to go straight to hell, and that they will not get their money to enrich themselves more. China has invoked a "Stop Loss."

Here is an example of how China will act with regards to the dollar late this fall. You can take that to the bank if you can find a solvent one in the USA, GB or Euroland.

The Wall Street types who are talking heads surmise that China thinks and will act like the Wall Street Weenies. They are so very WRONG.

Screw with China and you will get bitten in the ass by a real dragon. China leads the BRICs.

This will have a MAJOR impact on the sociopath USA manufacturers and distributors of OTC derivatives that struck the world over with these weapons of mass financial destruction, enriching themselves in the process by many trillions.

If China’s banks were the losers on these instruments then the winners, now not getting paid, are the sociopath USA manufacturers and distributors of OTC derivatives. These instruments were not created between Chinese banks, but made and packaged primarily in the good old US of A. Think it out. This is a stop loss for the Chinese.

I was correct 10 years ago when people denigrated me. I am correct on the price of gold as people still denigrate me.

I will have the last word with all these jealous fools.

Respectfully yours,
Jim

China warns banks on OTC hedge defaults -report
Sat Aug 29, 2009 9:47am IST

BEIJING, Aug 29 (Reuters) – Chinese state-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, a leading financial magazine said.

China’s SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), had told the financial institutions that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying.

It did not name the banks or the firms in question, but said Keith Noyes, an official with the International Swaps and Derivatives Association, had confirmed he was aware of the letter to the banks. He declined to comment further to Caijing.

It also cited a SASAC official as saying that almost every SOE involved in foreign exchange or trade had some exposure to derivatives such as crude oil, non-ferrous metals, agricultural commodities, iron ore and coal, although only 31 SOEs were licensed to do so.

Nobody at SASAC was immediately available to comment on Saturday.

SASAC took over the job of overseeing SOEs’ derivatives trading from the securities regulator in February after several Chinese firms reported huge losses from derivatives, and quickly tightened the rules, ordering firms to quit risky contracts and report their positions on a quarterly basis.

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http://in.reuters.com/article/oilRpt/idINPEK33016020090829

UPDATE 1-Beijing’s derivative default stance rattles banks
Mon Aug 31, 2009 7:42am EDT
By Eadie Chen and Chen Aizhu

BEIJING, Aug 31 (Reuters) – A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.

While the details of the report could not be confirmed, it was Monday’s hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.

The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse — leaving them with losses.

While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.

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Jim Sinclair’s Commentary

China will not Federally fund the OTC derivative winners as the West has by making gift loans to the OTC derivatives losers to fund the non-Chinese OTC derivative winners.

Here comes the standard of "when yes means no." The pressure against doing this will be Titanic but then there are Titanic pressures everywhere to not rock the boat that is rocking anyway.

China targets some, not all, derivative deals: source
Tue Sep 1, 2009 4:52am EDT

BEIJING (Reuters) – A reported warning over defaults on derivatives deals with state-owned Chinese corporates was meant to address specific "problematic" contracts, not the industry as a whole, a government source told Reuters on Tuesday.

The comments appeared to play down concerns of widespread defaults on over-the-counter hedging deals, which had been raised by a weekend report that the State-owned Assets Supervision and Administration Commission had told six foreign banks that state firms reserved the right to default on OTC contracts.

The report on Saturday in the Caijing financial magazine, quoting an unnamed industry source, triggered anger and dismay among investment banks, and a momentary panic over the possibility of defaults on commodity imports or heavy position unwinding, although bankers said both were unlikely.

On Tuesday, Beijing-based officials and analysts said that SASAC, the regulator and nominal shareholder for state-owned enterprises (SOEs), appeared to be stepping up the pressure on foreign banks to allow corporates to exit specific deals that may have been too complex for the companies to understand.

"The move is not meant to cover a comprehensive range of businesses and companies. It’s mainly to deal with some problematic contracts that were signed before, especially those that might have insufficient information disclosure or two parties have disputes over certain details," a government official with knowledge of the issue told Reuters.

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