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The Federal Reserve Set to Expand Quantitative Djenting

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The Federal Reserve plans to scale up its Quantitative Djenting program in the second quarter of 2014, Chairwoman Janet Yellen announced at an appearance before the House Financial Services Committee Monday. “We still predict slack in the economy going into the Summer, so we will continue with the program to try and cut it off at the pass,” said Ms. Yellen.

“Quantitative Djenting”, or “QD,” is a subsidiary initiative of the Fed’s controversial Quantitative Easing program. Since the beginning of the financial crisis in 2008, the Fed has been injecting money into the financial bloodstream to purchase things like treasuries, securities, and mortgage-backed securities. Although meant to stimulate job growth and economic recovery, the program has come under intense scrutiny by critics who claim that the program could lead to inflation, while providing cheap money to Wall Street firms.

Included in the program, but buried in a subsection of dense legalese, was a plan for Quantitative Djenting. “QD” is a rather convoluted financial process whereby the central bank bankrolls recording contracts, studio fees, publicity, merchandising, and tour support for the structured investment vehicle known as “Djent.” As the output of these “bands” tends towards “0000” sub-prime Guitar Riff Derivatives, the Fed was able to achieve synergy with the program by lowering interest rates to near-zero.

“QD was really a response to a financially-strapped metal landscape, following the collapse of the Neo-Thrash and New-Nu-Metal bubbles,” claims Trafferson Foster, of the statistical research firm, Foster & Fosterson Global Markets. “The Fed pretty much caved to pressure from Major and independent labels alike to do something in the wake of the crash.”

Although former chairman Ben Bernanke claimed that QD was never intended to expand beyond its initial investments – which included Wall Street-owned companies like Animals as Leaders, Periphery, Tesseract, and Textures – the subsidiary program has expanded each year since its inception. This has led Wall Street analysts to speak affectionately of “QD-infinity,” which speculates that like a Djent Guitar Riff Derivative product, QD has become so enmeshed in the U.S. financial system that it could seemingly go on forever.

Several prominent economists have become particularly concerned with the evolution of the products that Djent companies are selling. Like credit default swaps and collateralized debt obligations, these firms have begun throwing together Guitar Riff Derivatives in baskets, and then selling that packaged basket.

“In practical economic terms, there really isn’t a difference between these Guitar Riff Derivatives and the Collateralized Debt Obligations that brought down the financial system in 2008,” argues Simon Carufsky, president of Fairer Markets, a non-partisan regulatory reform non-profit. “These companies are selling sub-prime 0000 guitar riffs within sub-prime 0000 guitar riffs, within sub-prime 0000 guitar riffs, and then calling that package a AAA-rated security.”

The apportioning of cash to Djent companies works kind of like a bartender pouring a pitcher of beer into five mugs lined up on a bar. The beer in the pitcher is the cash generated from royalty payments that companies like Emmure receive each month, while the mugs represent the different pools of Guitar Riff Derivatives. The bartender fills the highest-rated mug first, then the second highest, and so on down the line until either all five mugs are full or the pitcher runs out of beer. If there are enough defaults on royalty payments, the fifth, fourth, third, or even second mug might go dry – and if writers’ block happens in the studio, even the first mug might not get filled. If the mugs become too dependent on being filled by the pitcher, says Carufsky, then the progression of heavy metal could be brought to a sharp standstill.

“The whole thing is like a financial Inception. It’s absolute insanity, even before you factor in the Fed’s allotment of easy cash to companies like Animals as Leaders.”

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SPECIAL REPORT: Metallica Looking to Stage Leveraged Buyout of Megadeth

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(The Chief Executives of Metallica, pictured above with President Obama, Senator John McCain, and other Federal Reserve Officials in a meeting about the legality of their proposed Megadeth buyout)

We all know about the Super Collider debacle: with the collapse of their latest dud product, the executives of Megadeth have been circling the drain for months. Rumors of a top-line overhaul have leaked out of boardroom minutes, but it seemed as though the crisis was contained, at least, to the 42nd-floor offices of the company’s CEO, CFO, and CDO. Of course, Megadeth has been bleeding capital since at least 2004, but now it looks as though Wall Street is looking to turn the fallen eagle into a veritable vulture’s picnic.

Here’s how the story began: Metallica, one of the largest investment banks on Wall Street and former owners of Megadeth, gradually began buying back Megadeth stock earlier this summer. The bank announced in early July that they would be purchasing up to 20 million Megadeth shares at prices between $52 and $58 a share, supervised by Iva Harrison’s firm, Lazard Freres. In August, they bought even more – 21 million shares – at $53.50 each. Megadeth, which had traded around $52 a share in anticipation of the buyback, immediately fell back into the mid-forties. Metallica had spent more than $1.1 billion buying Megadeth stock, and its price was lower than ever. Private equity analysts began sweating about what this spelled for Megadeth’s future.

“This reeks of classic hostile takeover,” said J. Tonlimson Heartvord, founder of Clearer Markets, a nonpartisan financial accountability firm. “Metallica purchases Megadeth stock en grosse. The stock price then falls, making the company vulnerable to a takeover.”

In a leveraged buyout, a bank, company, or hedge fund takes another, publicly held, company private. The buyout is “leveraged” because the purchaser usually needs a good deal of debt to finance it. Metallica has owned large shares of Megadeth stock since 1984, but according to classified “top-drawer” reports prepared by Metallica’s Mergers & Acquisitions arm, Mergertacquisitionallica, the bank is preparing a complete takeover of Megadeth. One such document obtained by Tyranny of Tradition, “On Megadeth Civil Service Examinations” could be straight out of Orwell:

“This report concludes by stressing the need for “report cards” to furnish conclusions concerning Megadeth staff, expressed in arithmetical terms… This includes personality, which deals with intangible elements the existence of which do not readily admit of proof, but nevertheless, each employee must be rated on personality.”

Another, “Special Report On Megadeth Research & Development” stresses the need to cut back on Megadeth staffing, by “eliminating unnecessary employees,” in order to concentrate capital on R&D projects.

Edvard Robinson and Henry Henderson, formerly of Shearson Lehman, expressed concerns about the vulnerability of Megadeth. “I hope Metallica has a plan for what to do about Megadeth, a company that has been a cash drain for nearly a decade,” said Robinson. “If they can pull off this takeover, we’ll be sure to see some major overhauls of Megadeth personnel, from the top down.”

Henderson speculated about other, far scarier, scenarios. “This could blow up in Metallica’s face – we’re already hearing whispers that other private equity firms, including Kohlberg Kravis Roberts (KKR), The Dillinger Escape Plan (TDEP), The Ocean Collective (TOC), and Lamb of God, LLC (LOG) are taking a serious look at Megadeth.”

KKR defeated Dillinger and Metallica back in 1989 to complete the leveraged buyout of RJR Nabisco, which at the time was the largest buyout in history. Subsequent layoffs, downsizing, and restructuring spelled doom for RJR Reynolds and Nabisco employees across the country, as well as the ruin of towns like Winston-Salem. In that sinking ship of a business deal, the executives, financiers, and lawyers floated to safety on golden-parachute life rafts, taking home millions in bonuses while thousands of employees of both companies lost their jobs.

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