eurokriisi

INVESTMENT - Bear - 09-11 - SOROS: Financial Meltdown Possible

One of the guys who I have utmost respect for: George Soros in Business Insider:

George Soros said on Saturday on CNN that failing to resolve the sovereign debt crisis in Europe could lead to a “real meltdown” of the global financial system.

And suddenly, he’s not convinced that authorities can do what it takes to resolve it.


Read more…

Kreikkalainen Kathimerini-lehti tekee melko osuvan havainnon:

”Vaikka eurooppalaiset eivät haluakaan enää tappaa toisiaan, he eivät myöskään ole halukkaita auttamaan toisiaan vaikeina aikoina.”

Minustakaan Kypros ei ole suinkaan mikään kylmästi pakkaseen hylätty kosteasilmäinen koiranpentu, vaan havainto Euroopan tilasta vuonna 2013 vain sattuu olemaan melko osuva. Valitettavasti. Kypros on viesti, etteivät euromaat ole valmiita menemään sen enempää eteenpäin kuin perääntymäänkään. Sen seurauksena maataan paikoillaan.

Jotta päästäisiin takaisin jaloille ja eteenpäin, pitäisi Berliinissä herätä. Saksan vaalit ovat edessä syksyllä, ja sitä ennen tuskin asiat muuttuvat, mutta luultavasti jossain vaiheessa sen jälkeen kylläkin. Ellei valuuttasirkus taas pyörähdä käyntiin, mikä lienee hyvin mahdollista.

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Lisää terävää havainnointikykyä Suomen mediarajojen ulkopuolelta:

FT:n kolumnisti Gideon Rachman kirjoittaa, miten yhä enemmän Saksan yksin johtama Eurooppa on vaaraksi koko EU:n idealle.

Näin on siksi, että eurokriisi ei ole vain osoitus Saksan vahvuudesta, vaan pitkälti juuri muun Euroopan heikkoudesta. Erityisesti Ranskan, joka perinteisesti on kantanut suuren intellektuellisen vastuun EU:n kehittämisestä. Nyt Ranska leikkii kuollutta ja loistaa poissaolollaan keskusteluista.

Rachmanin mukaan jopa suomalaiset vaikuttivat osallistuvan Kypros-debattiin painavammin kuin Ranska. Tämä on hyvin huono merkki - ei vähiten siksi, että Suomi ajaa lähes samaa rakennesopeutusta ilman yhteisvastuuta kuin Saksakin.

Tärkeä havainto on myös tämä:

”But the anti-austerians have failed to come up with a set of alternative policies that is coherent enough to turn the intellectual tide.”

Niin kauan kuin Saksan konservatiivipuolueen ajamalle hevoskuuri- ja vyönkiristyspolitiikalle ei löydy riittävän uskottavaa vaihtoehtoa, sen hegemonia on vankkumaton. Tämä on austerity-politiikan haastamisen kannalta olennainen tosiasia. Vaihtoehtoja kyllä on, mutta niiden tarjoaminen ei ole edennyt vielä siihen pisteeseen, että leikkauslinja olisi kyetty riittävän uskottavasti haastamaan.

Samalla monenkeskinen Eurooppa on valitettavasti nyt noudatetun yhdenkeskisen linjan myötä yhä kaukaisempi tavoite.

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Tässä vielä yksi Kyprokseen ja Saksaan liittyvä olennainen kommentti.

Paul Krugman kirjoittaa New York Timesin kolumnissaan, miksi euro on epäoptimaalinen valuutta-alue - koska Saksan hintatason mukaan asettuva euron kurssi on hyvin tuhoisa Etelä-Euroopalle.

“Oma valuutta nostaisi maiden taloustoimikustannuksia ja tekisi liiketoiminnan harjoittamisesta vaikeampaa; mutta omasta valuutasta luopuminen tarkoittaa, että sen myötä valuutan yliarvostumiseen on sopeuduttava deflaation kautta, mikä on huomattavasti kalliimpaa kuin devalvointi.”

Suomalainenkin veronmaksaja saatetaan maksumieheksi, jotta hulttiopankinjohtajat etelän maissa pääsevät kuin koira veräjästä.

Ja kuitenkin juuri pankkisektorin johtomiesten olisi pitänyt olla niitä, joilla on kaikki tieto ja taito käytettävissään. Ei oteta riskejä, toimitaan terveitten pankkiperiaatteitten mukaan. Mutta kun ei. Erilaiset optio- ja palkitsemisjärjestelmät ovat tuoneet mukaan lyhytjänteisen voitontavoittelun, jonka perusteella itse hyödytään. Ja mikäpä on ollut tässä mielessä houkuttelevampaa, kuin luotoittaa kriiseihin ajautuvia etelän maita, joitten valtionlainojen korot ovat nousemistaan nousseet. Eihän todellisia riskejä paljoakaan ole, koska veronmaksajat kuitenkin tavalla tai toisella saadaan tappioitten maksumieheksi – ja voitot jäävät omaan pussiin. Tässä suhteessa viime yön päätös vain vahvisti spekulanttien analyysin oikeaksi.

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Oikeistostakin aletaan esittää kritiikkiä eurokriisin “hoitoa” vastaan, joka Ilaskiven mukaan enemmän luo kuin estää talouslamaa.

http://blogit.iltalehti.fi/raimo-ilaskivi/2012/06/29/kaikki-on-mennyt-menkoon-loputkin/

INVESTMENT - 09-11 - Bear - S&P DOWNGRADES ITALY

Who is next? Spain?

Standard & Poor’s downgraded Italian debt Monday evening to A/A-1 with a negative outlook, warning of the county’s weakening economy and precarious debt situation.

“In our opinion, the measures included in and the implementation timeline of Italy’s National Reform Plan will likely do little to boost Italy’s economic performance, particularly against the backdrop of tightening financial conditions and the government’s fiscal austerity program,” S&P said in a statement.

Also justifying the unexpected action, the ratings agency cited a fragile governing coalition as a reason for the downgrade.

INVESTMENT - Bear - 09-11 - EUROTARP at risk

A few hours ago Timothy Geithner was in Poland promoting his plan for a EuroTARP, while Greek PM George Papandreou was preparing to fly to New York for meetings with the U.N. and the IMF.

But something went wrong.

Geithner’s meeting ended in discord with no pledge to recapitalize banks.

Papandreou canceled his trip after talking to Finance Minister Evangelos Venizelos, who had been in Poland with Geithner, planning instead to return to Greece.

“The prime minister judged that he should not be away. He wants to ensure that all of Greece’s commitments (to its European Union partners) are fulfilled,” government spokesman Ilias Mossialos told Reuters.

Greece meets with the Troika next week to secure the next $8 billion loan tranche. Rumor has it that the Troika wants harder austerity measures.


Read more: http://www.businessinsider.com/papandreou-cancel-geithner-poland-2011-9#ixzz1YEdSsy3l

INVESTMENT - 09-11 - 10 Key Dates That Are Crucial For The Future of Europe

The next few weeks will decide the fate of the Greek bailout and determine the future of the eurozone as an economic and monetary union.

With a few crucial votes still left to take place on expanding the powers of the European Financial Stability Fund and a collateral deal still up in the air, “particularly high uncertainty” pervades the euro area.

Even Greece’s participation in the bailout is uncertain. It has not received the 90% private sector participation it demanded to go through with a pivotal bond swap and unhappy Greeks are ramping up anti-austerity protests across the country.

While there’s a limit to how far we can predict, here are ten of the next big events you can look forward to in the euro zone.

 … Read more @ http://www.businessinsider.com/key-dates-to-watch-in-europe-2011-9

INVESTMENT - 09-11 - Bear - Euro economies enters 'dangerous phase'

From BBC News:

The sovereign debt crisis continues to unfold in Europe, with every country appearing to get sucked in one by one.

Three nations in the eurozone - the 17 nations that use the euro - have been recipients of bailouts as attempts to solve the crisis keep stalling.

Italy became the latest to feel the domino effect of the markets when its debt rating was lowered, the latest in a series of downgrades.

Greece, Spain, the Irish Republic and even Cyprus have also had their ratings cut this year. The future of the euro is being questioned in a way it never has since 1999.

Which countries have fallen, and which are feared to be next?

Read it all here…

INVESTMENT - 09-11 - The euro zone is in intensive care

An interesting article from The Economist:

Fighting for its life

The euro zone is in intensive care

WHAT’S the French for “this sucker could go down”? Echoes of 2008, when the global financial system wobbled and George Bush gave his pithy view of the American economy, now resound on the other side of the Atlantic. Credit-default-swap spreads for European banks, a measure of how costly it is to buy insurance against their default, are at record highs (see chart 1).


The rates that banks charge each other for loans in the interbank market are rising, too, as they did then. Rumours swirl and panic flares: shares in BNP Paribas, a well-run French bank, dropped by 12% on the morning of September 13th following reports that no one would lend it dollars. BNP’s denials saw the shares bounce back later in the day. Shares in Société Générale, another French bank, whipsawed too. The French banks’ reliance on short-term dollar funding, which American money-market funds are increasingly leery of providing, is one reason why Moody’s, a ratings agency, downgraded Société Générale on September 14th, though exposure to sovereign default is also a key factor.

Meanwhile large banks in Germany, Switzerland and Britain have more cash than they can put to good use as corporate customers shift their deposits from weaker countries or smaller banks. The beneficiaries are loth to tie the cash up in long-term loans because they fear that the flows could reverse at any moment. “It’s hot money,” says one bank chairman.

Thus the role of the Frankfurt-based European Central Bank (ECB) grows larger. The northern banks deposit their excess cash there rather than lend in the interbank market. The banks on the periphery increasingly depend on the ECB for liquidity. More than a fifth of Greek bank funding is now provided through Frankfurt; Italian lenders have upped their ECB borrowing sharply over the summer.

Banks are finding it hard to issue longer-term debt, too. The market for unsecured bonds has been closed for weeks, leaving banks with no option but to sell covered bonds at usurious interest rates that will challenge their profitability.

One way of bolstering the banking system would be to inject more capital into it. Goldman Sachs, an investment bank, reckons that Europe’s 38 biggest banks might need between €30 billion and €92 billion ($41 billion-$126 billion) in extra capital to cope with haircuts to Greek, Irish and Portuguese government bonds and losses on Italian and Spanish government debt. An analysis by the IMF suggests that banks would see a hit of close to €200 billion if the default probabilities implicit in today’s market prices were realised, although European governments and banks dispute the fund’s calculations.

Raising capital in current markets will not be easy. Bank valuations are low; several banks might need to raise several times more than their current market value. Those shareholders that do not participate will have their holdings deeply diluted. That suggests governments might have to underwrite some of the rights issues.

Here the parallels with the credit crisis three years ago become ominously inexact. In 2008 governments did what was needed to protect their banks: guarantees were issued, equity injected. In the euro-zone crisis the threat of sovereign default renders some governments impotent, while those which could act have chosen not to do so decisively.

The government at the heart of concerns again this week is that of Greece. Panicked officials are racing to plug a gaping hole in the budget and accelerate reforms in the face of speculation that international lenders will withhold the next €8 billion tranche of the country’s bail-out. If the funds are not released within two weeks, the government risks being unable to pay wages and pensions. A hastily announced property tax should raise about €2 billion, which may just keep the budget deficit below 9% of GDP this year.

The troika monitoring the Greek plan (the European Commission, the ECB and the IMF) also wants to see a realistic budget draft for 2012. That means making drastic spending cuts as revenues are being squeezed by the deepening recession. The Greek economy is likely to contract by at least 5.3% this year. The government has already decided to increase the number of public-sector workers parked on 60% of their salaries pending dismissal or retirement. About 40,000 workers are now likely to be made redundant by year-end. Greece’s debt managers are also finalising a €135 billion package of debt swaps and rollovers for private-sector investors which would allow the country to delay the repayment of about one-third of its bills for up to 30 years.

The scrambling might be enough to allow Greece to escape immediate default; but it will also make a more brutal restructuring in the future much harder. And such a future restructuring seems inevitable. On September 12th Philipp Rösler, the leader of Germany’s Free Democratic Party, the junior partner to Angela Merkel’s Christian Democratic Union, said it was time to address the taboo subject of a possible Greek bankruptcy. Some go further still: the prospect of a Greek departure from the euro is now widely discussed.

Stark choices

Mrs Merkel is having none of it. On September 14th, after a conference call with George Papandreou, the Greek prime minister, she and Nicolas Sarzoky, the French president, reaffirmed Greece’s place in the euro zone. For now euro-zone leaders seem determined to plough ahead, shepherding the second Greek bail-out package through national parliaments along with measures to increase the scope and firepower of the European Financial Stability Facility (EFSF), Europe’s bail-out fund.

The problem is that although a beefed-up EFSF will be able to cope with the smaller peripherals, it is unable to support the refinancing needs of an economy as big as Italy. At an auction of Italian five-year bonds on September 13th its borrowing costs jumped to 5.6%, up from 4.9% at a similar auction in July.

The pressure on European banks will keep increasing unless something else is done. Rumours that China will ride to the rescue of struggling countries are fanciful. Again, the real last resort is the ECB, which could relieve the pressures on the system by being prepared to buy without limit the bonds of solvent euro-zone countries. But the ECB is itself riven by disagreement.

On September 9th Jürgen Stark, the central bank’s chief economist and a former Bundesbanker, announced his resignation “for personal reasons”. Mr Stark opposed the ECB’s buying of Greek government bonds last year. When the bank began supporting Italian and Spanish government bonds, too, it was apparently more than he could take. Axel Weber, the head of the Bundesbank until May 1st, ruled himself out of the running to replace Jean-Claude Trichet, the ECB president, earlier this year because of similar qualms.

Explore our interactive guide to Europe’s troubled economies 

The German government moved swiftly to fill the hole left by Mr Stark. Jörg Asmussen, chief secretary at the finance ministry, will move to the ECB, assuming the formalities go without a hitch. Both Mr Asmussen and Jens Weidmann, Mr Weber’s successor at the Bundesbank, appear more flexible personalities than their predecessors. But persuading them, and the German public, to sign up to what amounts to a policy of massive quantitative easing (creating money to buy bonds) will be extremely difficult. In 2008 free-market Americans swallowed their misgivings to rescue Wall Street. Inflation-phobic Germans now face a similar choice.

INVESTMENT - 09-11 - Central banks to the rescue

Imo a realistic question is: Are the tax payers monies enough at this scale?

Here is an article form The Economist:

THE pledge by the world’s leading central banks to provide unlimited dollar liquidity in three month-loans to battered European lenders cheered up markets on September 15th. European stockmarkets closed up, by more than 3% in France and Germany. French bank shares, which have been in the eye of the storm, recovered sharply (BNP Paribas was up 13% on the day while Société Générale rose by 5%). But the co-ordinated action, while helpful, is a palliative rather than a solution.

European banks need the official help because the American money-market funds, on which they rely heavily to finance their dollar lending, have taken fright as the euro area’s sovereign-debt crisis has worsened and morphed into a renewed banking crisis. Through swap lines with America’s Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank will be able to plug the gap in the months ahead (the central banks’ action will start in October with follow-up operations in November and December). In a show of solidarity the Bank of Japan also made a similar pledge.

The concerted action may have reassured the markets, but the very fact that it was necessary shows how far the rot has gone. European lenders are now seen as shakier than at the height of the financial crisis following the bankruptcy of Lehman three years ago. Then five-year credit default swap (CDS) spreads, which measure the cost of insuring against their defaulting on their debt, peaked at around two percentage points, now they have reached three. 

Moreover, the lesson of the financial crisis of 2008 was that central banks can only help up to a point. If the funding fears are based on self-feeding panic, monetary authorities can calm the waters. But if they are grounded on genuine worries about the solvency of banks, only national treasuries backed by taxpayers can resolve the problem. The turning point in the previous crisis was the decision, led by Britain, to recapitalise the banks whether they liked it or not.

Christine Lagarde, the new head of the IMF and former French finance minister, annoyed European officialdom when she called in late August for “urgent recapitalisation” of European banks, “using public funds if necessary”. Now her warning looks prescient.

But a simple read-across from the solution to the 2008 financial crisis would be mistaken. Then the toxic assets on banks’ books were claims on the private sector; now the worry is about losses on euro-zone sovereign debt. And whether or not those losses materialise depends mainly upon the decisions of European governments, above all Germany’s. If European leaders were simply to announce a recapitalisation programme, markets might smell a rat—for example a resolution of the Greek crisis through a swingeing default on Greek government bonds. Only a comprehensive rescue plan, which allays such doubts, will quell the euro crisis.

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Trader on BBC: “Eurozone market will crash. Be prepared.”

All he says is completely logical and imo this scenario is quite probable. A lot more probable than the option where a sound, long lasting, recovery producing solution is found and executed timely.

I also think we are currently witnessing a phenomenon that is caused by a fundamental flaw in the democratic systems, which I further think can not be corrected anymore. The window for taking action was closed some 10-15 years ago already. More on this later… Now watch the video :)

INVESTMENT - 10-11 - Scenarios on Greece's Debt Crisis Odyssey

Imo a very informative and interesting flow chart to study:

Starting from the top, follow the decision tree to decide what happens next.

“Best"  case scenario: PYRRHIC VICTORY

"Worst” case scenario: GLOBAL MELTDOWN

Read it all here…

Why the “quotation marks” above? Simply because I think the outcome in the “Best” case scenario may not be so good in the long run (slow economic growth etc.).

I mean allowing the markets to self correct (ie crash) might have more pleasant long term consequences as the healthy structures that survive will be stronger.

INVESTMENT - 09-11 - Bear -Europe's four big dilemmas

As reported on BBC News:

Decision time for the euro is fast approaching

Related Stories

As Europe’s leaders seemingly dance on the edge of disaster, what are the real problems facing the euro?

For many onlookers, the issues may seem complicated and interconnected.

But essentially they boil down to four big dilemmas.

And how these dilemmas are resolved will decide whether the eurozone stays together, or ultimately unravels.

Borrowers vs Lenders

What the market thinks of Greek government debt

Like the US and UK, Europe faces an enormous overhang of accumulated government and private-sector debt, much of which is now unrepayable.

So the question is, how much gets written off, and who picks up the tab?

For the eurozone as a whole, the debt problem is comparable with that of the US, and potentially manageable.

The problem is that some eurozone countries are much more heavily indebted than others.

Markets already assume that very soon Greece will have to write down its massive debt by at least half.

They also think the Portuguese, Irish, and even the Spanish and Italian governments, may eventually follow suit.

But when bad debts get written off, someone has to take a loss.

While some of those debts are held in the US, UK or elsewhere overseas, most of it is held by the European banks, and increasingly by the European Central Bank (ECB).

Germany may end up footing much of the bill

This is the primary reason for the recent loss of confidence in the European banking system.

But while Germany can afford to rescue its banks, as the Irish Republic has already demonstrated, other countries may not be able to rescue theirs.

So ultimately Germany and other less-indebted countries may have to bear much of rescuing the eurozone’s banks as well as its weaker governments.

Austerity vs Growth

Like everywhere else, most European governments have seen their borrowing balloon during the recession and anaemic recovery.

At the same time, fears over southern European governments’ ability to repay their debts mean their borrowing costs have also gone through the roof.

Under pressure from Germany and the ECB, all of these countries have been pushing through painful spending cuts and tax rises.

Continue reading the main story

Diverging fortunes

Rate at which markets are willing to lend to governments for 10 years:

  • Germany: 1.92%
  • France: 2.65%
  • Spain: 5.25%
  • Italy: 5.39%
  • Ireland: 8.24%
  • Portugal: 10.61%
  • Greece: 19.12%

Source: Bloomberg. Data as of 16 September 2011

To set a good example, Germany has even donned the hairshirt itself, promising to eliminate its own modest deficit by 2013.

But here’s the problem: Austerity is killing growth throughout Europe.

And with less profits to tax and more dole cheques to write, weak growth makes it even harder for governments to cut their borrowing and repay their debts.

In order to turn the slowing eurozone economy around, the ECB now looks set to slash interest rates from their current 1.5%.

The central bank may also buy up more Italian and Spanish debt, pumping cash into the financial system and easing the pressure on those countries to slash their borrowing.

But this move has been strongly opposed by German members of the ECB.

Another option to stimulate growth is for the few other countries that markets are still willing to lend to to borrow and spend more, offsetting spending cuts in southern Europe.

Yet for Germany, who can currently borrow at unprecedentedly cheap interest rates, borrowing is anathema.

Discipline vs Solidarity

Germany’s view on the eurozone crisis is simple.

Southern European governments borrowed recklessly at the cheap interest rates available inside the euro.

Now they are being punished by markets, and must learn discipline.

Germany wants to impose strict rules other governments to incorporate strict rules into their constituitions to stop such recklessness in future.

A 20% unemployment rate helped spark Egyptian-style mass protests in Spain

But rules, with penalties attached, may not be credible. Imposing a fine on an overindebted government is rather like kicking someone when they are down.

Indeed, just such a “stability pact”, insisted on by Germany at the euro’s creation, was quickly broken with impunity by Germany itself.

Moreover, the focus on discipline misses a bigger point.

While Germany’s view may be apt for Greece - whose government cheated on its borrowing statistics to qualify for the euro in the first place - it is grossly unfair for Spain.

Before the financial crisis, Spain’s government had lower debt levels than Germany’s, and (unlike Germany) actually spent less than it earned in taxes.

But the country experienced a property bubble that then burst spectacularly, leaving its economy high and dry.

Wages, inflated during the good years, are now uncompetitive, and unemployment has shot up to 20%.

Yet, inside the euro, Spain cannot devalue to regain a price advantage. Nor can it necessarily expect the ECB to cut interest rates or buy up its debts.

Being put a fiscal straitjacket as well just makes things worse.

Detroit, in Michigan, has suffered an economic disaster, mitigated by US government money

Compare this with the US state of Michigan, where the collapse of the US car industry has spelled disaster.

Unlike in Europe, the US has a federal government that can tax other states in order to help out Michigan, by paying for unemployment benefits and rehabilitating the big car companies.

If the euro is to function in the future, economists warn, then a similar system of centralised fiscal transfers will be needed there too.

And in the current crisis, again it is Germany that would foot much of the bill.

Europe vs the Nations

On the face of it, the big political standoff in Europe is one of paymaster Germany versus bankrupt southern Europe.

For German voters, their country’s post-War economic miracle was built on a hard currency, prudent finances, and strong exports.

It is hard for German voters to fathom that these very virtues are at the heart of the current crisis.

But Germany has everything to lose if it does not help the south out, and the eurozone unravels.

If the Greeks, Italians and others default on their debts, German and French lenders would be the biggest losers.

If they also leave the euro, it would be a legal and financial disaster for all concerned.

Moreover, German export success for the past decade has been built on the weaker, more competitive exchange rate that came with sharing a currency with southern Europe.

Without the euro, safe haven Germany could expect its currency to shoot up, with devastating consequences for the country’s industry.

As Greece’s economy shrinks and shrinks, its people cry out. But can German voters hear them?

Southern Europeans meanwhile would see their currencies plummet outside the euro, leading to rises in inflation and their cost of living as painful as the austerity they are protesting against.

Yet these stark realities are not widely appreciated in Germany or its neighbours.

Because the real problem is that there is nobody who can credibly speak for the common interest of Europe.

Since its inception in the 1950s, the European project has be run and controlled by a club of national governments.

The political process has been one of haggling behind closed doors, with issues presented to electorates as a matter of competing national interests.

But such haggling is dangerous in a financial crisis.

Jose Manuel Barroso: “The measures have taken too long and they have not been fully delivered”

Any solution must be agreed by 17 governments, and ratified by 17 parliaments, an impossibly slow process.

And the longer it takes, the more bitter the dispute risks becoming, and the greater the market’s loss of confidence in the euro becomes, undermining Europe’s fragile economy.

The European Commission president, Jose Manuel Barroso, has tried to speak for the common interest, pleading for the Commission to take the lead in solving Europe’s problems.

But he is a political appointee, and as such, he is easily ignored by national leaders and scarcely noticed by the wider public.

Perhaps, if Mr Barroso were an elected leader, he could guide European public opinion towards a comprehensive solution to the crisis that balanced the interests of the different nations.

But as it is, the European public is very far from understanding the issues, or agreeing to the greater economic and political integration that may be needed to save the euro.

Sadly, this political dilemma is one that may not have a workable solution.

INVESTMENT - 11-11 - Bear - Goldman Sachs On The One PIIG That Really Matters: Italy

from Business Insider:

…Given fragile market sentiment and the perceived lack of delivery by the Italian authorities thus far, tensions in the BTP market are likely to persist. In the short term, these will continue to be contained by the ECB. As said above, we strongly doubt the ECB will force yields down pro-actively, but rather continue preventing discontinuities in the price formation from occurring. That said, the central bank will also likely attempt keeping the 10-yr yield spread between on Italy/Spain and AAA-rated EMU sovereigns below 450bp (for reference, Italy closed on Friday at 400bp over and Spain at 320bp, underscoring the strong pressures on the former). This is roughly the threshold that would trigger higher margin calls in the private sector…


Read the article here


My insight: Valid stuff. Technically, regarding monetary politics. Once again: Unfortunately these operations do not solve the real structural/deficit problems desperately needed to be solved in the long run. The Western World economic crisis is not solved any close at all. I think the following old wisdom fits the current situation perfectly: “You can piss your pants and it gets warm for a while but then it gets freezing”.

INVESTMENT - 10-11 -Bear - Italy and Spain debt downgraded by Fitch

Italian and Spanish government debt have both been downgraded by the Fitch credit rating agency.

Fitch cut Italy’s rating by one notch, from AA- to A+, following fellow agency Moody’s downgrade earlier this week.

Fitch cited the “intensification” of the eurozone debt crisis that “constitutes a significant financial and economic shock which has weakened Italy’s sovereign risk profile”.

Read more here…

INVESTMENT - 10-11 - Bear - German politics: Bail-outs? Nein, danke!

This could put Angela Merkel’s regime in a very tough position indeed. I also think people have a very just cause here. It is very important to handle the crisis in a manner that signals good for the people instead of goods for a few bankers.

The Economist:

BABY-FACED and bespectacled, Frank Schäffler does not look like a bomb-thrower. But the 42-year-old legislator from North Rhine-Westphalia is threatening to blow up Germany’s strategy for the euro, and thus the government itself. He wants the 65,000 members of his Free Democratic Party (FDP), part of Angela Merkel’s coalition, to vote on whether to endorse the European Stability Mechanism (ESM), a permanent bail-out fund due to begin operating in 2013. The result will be binding on the FDP if one-third of members participate. If, as Mr Schäffler hopes, the party’s members say no, Mrs Merkel will face a choice: accept the decision, which would mean pulling out of a European agreement to save the euro, or defy it, which could break up the coalition.

The liberal FDP is in the dumps.

Read more here…


INVESTMENT - 11-11 - Bear - Euro Crisis, the Modern Tulip Mania

From Wikipedia:

Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.[2] At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble)

My insight: The analogies with fiat money seem very real indeed. The worst thing is that people at as high levels as the German government may be fixing the books to make short term ends meet.

From Zerohedge:

As usual, the most surreal news of the day, perhaps week, is saved for Friday night, when we learn that Germany has magically raised over a quarter of its total EFSF obligation of €211 billion by way of what is essentially magic. The Telegraph reports that “Germany is €55bn richer than it previously thought because of an accounting error at state-owned bank Hypo Real Estate Holding. The mistake at "bad bank” FMS Wertmanagement, happened because collateral for derivatives wasn’t netted between the asset and liability side, an FMS spokesman said. As a result, FMS will only contribute about €161bn to Germany’s debt this year, down from €216.5bn in 2010.“ Another way of representing the error is that it is equal to a ridiculous 1% of the country’s debt to GDP ratio. ”Germany’s 2010 debt-to-GDP ratio also drops, to 83.2% from the previous 84.2%, a finance ministry spokesman said.“ In other words, the modern world, best characterized by the imploding fiat ponzi, has discovered a way to raise capital (electronic, naturally) courtesy of CDS bookmarking errors. And now, we have seen it all.

Read the rest here

INVESTMENT - 10-11 - Bear - Bank Recapitalization in Germany Probable

I presonally think this scenario is the most probable of all current alternatives. So seems Merkel to think:

German Chancellor Angela Merkel told reporters in Brussels today that her country “is prepared to move to bank recapitalization” in an upcoming meeting of eurozone leaders, according to Dow Jones.

She said she would support a plan to shore up the European banking system if EU leaders deemed it necessary.

Merkel even told reporters, “If a given country cannot do it and the euro’s stability in danger” the European Financial Stability Facility can step in and provide aid to banks under certain conditions.

This follows reports yesterday that EU finance ministers have been considering a plan to recapitalize European financial institutions in order to prove to markets that the EU’s banking system is sound.


If this scenario becomes reality, I think the key issue to be solved is about on what terms are the banks allowed to be saved.

If no re-structuring of the shares issued are made, nor any re-adjusments in the highest ranks of managers it is a clear signal that a banker can get away with just about anything.

INVESTMENT - 10-11 - Eurozone crisis: Experts debate options

from BBC News:

A number of ideas are reportedly being discussed to tackle the eurozone debt crisis.

These include a 50% write-down of Greece’s government debts, strengthening big European banks that could be hit by any defaults by highly indebted governments, and boosting the size of the eurozone bailout fund, the European Financial Stability Facility (EFSF).

Here, eight economists discuss what they think will happen and what they think needs to happen in the eurozone…

Read the whole story…

My thoughts: Frankly, given the visions of most experts thinking this should be solved within some weeks, I do see quite potentially a very stressed time ahead of us. These kinds of matters tend to get out of control when executed hastily. So… The risks remain high. Very high.

Secondarily, even a successful operation of preventing the markets from crashing will not solve the actual macro economical real problems causing the current problems. The aimed operation is a mere patch to save the financial system in the short run.

INVESTMENT - 10-11 -Bear - IMF advisor says we face a Worldwide Banking Meltdown

Dr. Robert Shapiro who advised Presidents Clinton and Obama and who currently advises the IMF predicts a cascading meltdown of the World’s banking system starting with Sovereign debt in the Eurozone, affecting the UK then finally bringing down the global banking system.


The clip was aired October 5, 2011 on the popular News show Newsnight with the corporation’s top interviewer Jeremy Paxman.

Market Analyst predicts bank failures unless hundreds of billions of Euros are injected now.

PS. This time I wont wish anyone good night. I simply can’t after watching this…