Hutchin Hill Quits 'London Whale' Trades

From FinAlt:
Another hedge fund is laying down the harpoon with which it speared JPMorgan Chase.

Hutchin Hill Capital has exited its credit-default swap trades betting against JPMorgan Chase's huge CDS index bets, trades that cost the bank at least $2 billion—although recent reports indicate the loss could be as much as $9 billion. Hutchin Hill is the second hedge fund that jumped on the opportunity offered by JPMorgan's so-called "London Whale," trader Bruno Iksil, known to have closed its positions.

Saba Capital Management was reported to have done so earlier this week.

Another of the hedge funds that profited from JPMorgan's predicament, BlueMountain Capital Management, has been engaged by the bank to help it unwind the disastrous derivatives trades.

Doubleline is still Defensive

Luz Padilla, Fund Manager at DoubleLine says she turned defensive in April after realizing that the EU debt crisis wasn't going to change for the better.

David Zervos is ecstatic

The ECB's balance sheet has been opened up via the ESM to directly recapitalize the European banking system. And that my friends is a game changer!! Oh yes, they finally figured it out - separating bank financing from state financing is the key to lifting the systemic risk cloud that has been hanging over the entire GLOBAL financial system. Having an effective backstop, and resolution structure, for bad European banks is all we wanted. Was it really that much to ask for? No one wanted to see the entire Irish state saddled with the cancer that had infected the Irish banks. That was insanity! And here in the US we don't care if Europe has structural growth problems or labor market inefficiencies. If everyone Frenchman wants a 35 hour work week so be it! And we don't need European growth for global growth. But what we can't have is a European banking run with systemic global ramifications. When the top 6 banks in the US have 300 TRILLION in OTC derivatives, much of which is linked to the European banks, we will have serious problems if the European banking and monetary system breaks. That card however has just been taken off the table. The ESM, with access to the ECB balance for leverage, is a fiscal backstop (with a printing press) for the resolution of bad European banks. Hallelujah!!!! This is a huge step in the right direction for the global reflation trade.

Risk on, here we go:
Germany lost a much bigger battle yesterday - the one for ECB balance integrity and mutual fiscal burden sharing for European bank losses. That loss I suspect will send risk assets MUCH MUCH higher than Balotelli's gaming clenching goal.

El-Erian: Few Places Safe for Investors

Mohamed El-Erian, Pimco CEO & co-CIO, says it is increasingly inevitable that Greece will exit the euro zone, adding that Spain shows investors are losing confidence in policymakers.

Wolf: Debt Crisis Won't Pass for Another 20 Years

Guy Wolf, Marex Spectron, says the EU never gained a democratic mandate, and adds that the debt crisis will not pass for another 20 years.

John Burbank is still bearish

Expect weak Q2 earnings and a market decline

Jim Chanos on His Big China Short

[From Maneet Ahuja's Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds]

His Positioning:
Kynikos is short the property developers in China through the H-shares in Hong Kong as well as most of the larger Chinese banks, which the firm believes are going to need ongoing injections of capital, much of which will come from Western investors. The fund has been short an oddball collection of one-off Chinese companies, such as Chinese Media Express, that have floated issues in the United States. Chanos has dubbed casinos "long corruption, short property." But his overall short in China stands as one of the highest exposures he has had to a single theme. China is one thing he's betting against in a big way -- it currently stands as the highest exposure he's ever had to a single theme in the portfolio.

Chinese equity markets:
"So I think it's very problematic for Western investors to make money in the share market in China. Not only because I think the macro's bad, I think the micro's bad, too. You're basically being fleeced as the Western investor in many of these companies."

Chinese Debt:
"We estimated that China's total debt reached about 180 percent of GDP in late 2011. If we assume that China will grow total credit this year between 30 percent to 40 percent of GDP, and half of that debt will go bad, that is 15 percent to 20 percent. Say the recoveries on that are 50 percent. That means that China, on an after write-off basis, may not be growing at all. It may have to simply write off some of this stuff in the future so its 9% growth may be zero."

John Paulson: The big loser

Businessweek has an epic smack down of Paulson in it's latest issue, including the cover shot below with the title "The Big Loser." AUM at Paulson Capital has dropped to $22B from a peak of $38B and the Advantage Plus fund is down 10% YTD through May. However, Paulson is still sticking with gold miners (AngloGold Ashanti and Goldfields) believing them to be underpriced vs. the gold that they mine.

From the article:
“We view gold as a currency, not a commodity. Its importance as a currency will continue to increase as the major central banks around the world continue to print money.” He adds that as the market keeps shuddering, demand for gold will stay high, and soon enough all of his depressed gold holdings should shoot up. He also thinks that anyone in Greece, Italy, and France should pull all their money out of the banking system and purchase gold bars before the Continent collapses.

“Some people like playing chess, some like backgammon. This is like a game, and playing games is fun. It’s more fun when you win.”

Richard Duncan: How Credit Expansion Led to the Global Crisis

Richard Duncan, Chief Economist, Blackhorse Asset Management and Author of "The New Depression: The Breakdown of The Paper Money Economy" explains how credit growth has led to the current global economic crisis. He sees more government life support for economies, but says this approach is not sustainable.

Yen Is the 'Mother Of All Bubbles': Pro

Brad Mcfadden, Founder, Daily Trading Report said the yen and JGB markets are incredibly risky and unstable.

AIMCo CEO: May Work With Sovereign Funds

Leo de Bever, chief executive officer of Alberta Investment Management Corp. in Calgary, talks about his company's relationships with sovereign-wealth funds

Morgan Stanley's James Gorman on Wall Street, Europe

David Malpass: Germany Must Be Specific on Austerity

David Malpass, president and founder of Encima Global, talks about Europe's debt crisis. He speaks with Tom Keene, Sara Eisen and Ken Prewitt on Bloomberg Television's "Surveillance." Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley Asia, also speaks.

David Kotok: Overweight Banks, Underweight Europe

Charles Nenner: Stocks to Bottom This Week

Equities:
Nenner sees a cyclical low coming in the next few days. He's a buyer anywhere from 1,280 to 1,230 on the S&P 500 but cautions those who are looking for a chance to buy and hold profitably.

"People looking for major moves are going to be disappointed. Timing and trading are key as stocks are going to be locked into a 5-10% range for an extended period.

Gold:
Nenner's downside target for gold is $1375 to $1325 but he's a buyer in size there; his long-term target remains $2,500.

Bonds:
"First people lost their shirts on the stock market then the gold market. I'm afraid that now they're going to lose a lot of money on their bond positions."