Eurozone Banks Out Of Money As 2Nd Funding Crisis Looms

[Realistbear]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHl8DzEheXq8&pos=2

Europe’s Banks Face Second Funding Squeeze on Sovereign Crisis

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By Gavin Finch and John Glover

June 14 (Bloomberg) -- European banks at risk of writedowns from the sovereign debt crisis face a funding squeeze that may depress earnings, curb lending and imperil economic recovery in the region.

Investors are shunning bank securities on concern Greek, Portuguese and Spanish bonds held by the lenders will plunge in value. Bank bond sales slowed in May to the lowest since Lehman Brothers Holdings Inc.’s failure in 2008 as the extra yield buyers demand to hold the securities over government debt soared to the highest this year. Firms are wary of lending to each other, depositing record funds with the European Central Bank.

“There is a lot of mistrust,” said Christoph Rieger, co- head of fixed-income strategy at Commerzbank AG in Frankfurt. “Banks are trading with the ECB rather than with each other.”

The sovereign debt crisis is surely going to cost far more than the few hundred billion that the ECB has made available so far. How long before the other shoe drops as the stock markets rally, the Euro rises and everything is fine.

Is it all about to break out again and we are standing at the edge of a large SM correction and a dramatic drop (20% +) in the Euro which so far has not occurred?

What is holding it together right now? Is the fact that the whole world is in a mess and we are all in it together so there is nowhere to run and hide (sell off and move to something else). Is this why Gold has not gone to the moon despite news about as bad as it can get?

I think we could see some heft 20% + stock market corrections and some further big shifts in currencies with the Euro heading toward parity with the $.

[Deckard]

Next Eurozone sovereign debt shock (Spain?) --> Asian CBs start selling their Euro denominated assets --> EUR/USD = 1

100% guaranteed

[lowrentyieldmakessense(honest!)]

counterfeiters not trusting other counterfeiters

[plummet expert]

Next Eurozone sovereign debt shock (Spain?) --> Asian CBs start selling their Euro denominated assets --> EUR/USD = 1

100% guaranteed

There is contagion out there. The news is massaged to try and allow a 'recovery' to take root. I think we should keep a careful eye on Japan as a possible catalyst of further market trouble. As the third largest economy, with the highest debt GDP ratio in the world (on normal measures) , which has to borrow 50% of its spending, which cannot raies interest rates as it could not afford the debt, which canot cut its deficit as that has apparently been policitical suicide every time attempted since the 90's, which cannot go on much longer as it will be bankrupt at 0% interest rates!! The PM there is announcing cuts!

China is more of a balloon than we are being told. The USA is not really recovering, rather still suffering and probably actually contracting if you subtract TARP. Oh these markets are so fickle. The number of puts bought betting on a fall of stock markets has reached the highest since the Lehman collapse - but yet as high.

What do we know....things ain't right!

[Realistbear]

There is contagion out there. The news is massaged to try and allow a 'recovery' to take root. I think we should keep a careful eye on Japan as a possible catalyst of further market trouble. As the third largest economy, with the highest debt GDP ratio in the world (on normal measures) , which has to borrow 50% of its spending, which cannot raies interest rates as it could not afford the debt, which canot cut its deficit as that has apparently been policitical suicide every time attempted since the 90's, which cannot go on much longer as it will be bankrupt at 0% interest rates!! The PM there is announcing cuts!

China is more of a balloon than we are being told. The USA is not really recovering, rather still suffering and probably actually contracting if you subtract TARP. Oh these markets are so fickle. The number of puts bought betting on a fall of stock markets has reached the highest since the Lehman collapse - but yet as high.

What do we know....things ain't right!

Agree.

Things have gone very "quiet" over the last few weeks as everyone seems to have digested the shocking reality of sovereign debt and upcoming austerity. However, no one feels austerity so the beat goes on in the meantime. Our house bubble wobbles but not by much as banks ignore debt issues and begin 90% mortgages again to "help" buyers get on the ladder at 5 to 6 times income. Sterling is up 3 cents today on the news that our debt is worse than they thought and the stockmarkets are all doing well in the face of growing sovereign debt warnings and Japan admitting they have unsustainable 200% of GDP debt levels. Nice.

We are in one of those summers again where judgement day looms but life is back to normal in the unsure "meantime."

I see no evidence of austerity around here and the only evidence of a pull back in houses prices is two of three friends who can't sell and the one who took a 5k below asking to get the property moving. Time will tell if her chain breaks down. A couple more houses close to us have come back on the market after having been "sold" for awhile. EAs should go back to using "under offer" and that way they might get some back up offers as "sold" says to most that the property is sold whereas it is under offer until contracts are exchanged.

I think we may have to wait until Autumn comes before any visible signs of the consequences of the financial collapse filter down to the real world. At the moment its all theoretical and swirling around the banking sector as they scramble to massage data and figure to maximize bonuses for next year (said to be about twice to three times this year's bonuses as they are doing several hundred percent better than the days when they were effectively bankrupt but for taxpayer bailouts--and the bailout income is counted in the bonus calculations).

[Deckard]

I think we may have to wait until Autumn comes before any visible signs of the consequences of the financial collapse filter down to the real world.

Not if this is true.

A potentially destabilizing report appeared earlier today in the Frankfurter Allgemeine Zeitung (FAZ), according to which countries in the EU are preparing to bail out Spain, which has immediately prompted denials out of both the EU Commission, which claimed that the "report on aid for Spain is completely untrue." Of course, in January Joaquin Almunia almost ate that Bloomberg reporter who, for the first time ever, suggested that the EU would need to bail out Greece. Four months later Greece was bankrupt and the EU was on hook for a cool trillion. And in adding to the ongoing contradictions, Spain's Treasury Secretary has said Spain has no problem financing its debt, even as it was reported that Spanish banks have raised a record €85.6 billion in ECB funding, and Spain's Ocana understated that the "liquidity freeze in Spain in foreign markets is a problem." On the other hand, of course Spain has no problem in "financing" its debt - the ECB is gladly monetizing it all. Lastly, the fact that Spanish unions have called for a general strike is likely going to shift the balance of power to the truth instead of the baseless propaganda, and within a week or so, Spain will be another raging Greece.

[Realistbear]

Not if this is true.

Indeed. IF Spain is about to go Grecian it would set the dog among the pheasants. Denials have been coming thick and fast recently whcih suggests the opposite may be true and about to explode.

That said, the markets are behaving as if all is back to normal:

http://uk.finance.yahoo.com/news/oil-up-2-5-percent-to76-reuters_molt-ebf99e32857e.html?x=0

David Sheppard, 15:57, Monday 14 June 2010

LONDON (Reuters) - Oil prices rallied by 2 percent to above $75 a barrel on Monday as

renewed optimism about global economic recovery

boosted the fuel demand outlook and sent stock markets higher across the globe.

Is the market THAT dumb?

[Deckard]

Is the market THAT dumb?

It appears scalpers are having the upper hand in the market, particularly in FX.

Intra-day price action is mainly momentum and correlation trades, and the scalpers tend to be all square at the end of the day.

Meanwhile, the big boys have built up their positions, and are just waiting for the inevitable.

[Realistbear]

http://uk.finance.yahoo.com/news/sterling-hits-1-month-high-vs-dollar-on-fiscal-forecast-reuters_molt-274700d0fb51.html?x=0

LONDON (Reuters) - Sterling rose more than 1 percent to hit a one-month high against the dollar on Monday, buoyed by

lower UK public borrowing

forecasts, hawkish comments from policymakers and better sentiment towards risky assets.

http://uk.finance.yahoo.com/news/budget-2010-britain-s-debt-levels-rising-faster-than-expected-obr-forecast-will-show-tele-31580b4a1ae9.html;_ylt=AikFpGyoR8Gc5fxTJwNTNF7BXGwF;_ylu=X3oDMTE2dnJza2Q0BHBvcwMxNwRzZWMDdG9wc3RvcmllcwRzbGsDYnVkZ2V0MjAxMGJy?x=0

Britain's

debt levels are mounting faster than previously thought,

a forecast by George Osborne's new Office for Budget Responsibility will show.

So Sterling is buoyant (don't you hate that EA word?) because of lower public borrowing despite debt levels being worse than previously thought. So we have less debt o pay off and higher debt than forecast. The market may be in worse shape than any think as it appears to have become schizophrenic. Or the ministry of propaganda are spinning contrary news to keep the market off balance and confused. Are we slipping back into Brown's world where bad (debt) was good?

[Realistbear]

http://finance.yahoo.com/news/Lots-of-Bears-a-Reason-to-Buy-cnbc-2347012692.html;_ylt=AkSV0NsEtzAMmRy18b9Yaiy7YWsA;_ylu=X3oDMTE1dWhsNWdvBHBvcwM0BHNlYwN0b3BTdG9yaWVzBHNsawNsb3Rzb2ZiZWFyc2E-?x=0&sec=topStories&pos=2&asset=&ccode=

Lots of Bears a Reason to Buy? No, Says Strategist

Buzz up! 0

Print

On Monday June 14, 2010, 10:34 am EDT

There are so many bearish calls and

so much negative sentiment that now is the time to buy stocks

, some analysts and strategists have advised.

Might explain the very recent euphoria in the SMs and for Sterling. The recession would seem to be over even before the austerity measures start to bite. Dire news is a buy signal and good news is run like hell.

[plummet expert]

Agree.

I think we may have to wait until Autumn comes before any visible signs of the consequences of the financial collapse filter down to the real world. At the moment its all theoretical and swirling around the banking sector as they scramble to massage data and figure to maximize bonuses for next year (said to be about twice to three times this year's bonuses as they are doing several hundred percent better than the days when they were effectively bankrupt but for taxpayer bailouts--and the bailout income is counted in the bonus calculations).

Autumn is the most likely time for the 2nd leg down. The graphs on Long Term Treasuries has risen to above the critical 122/3 point now at 124.96. This is following the 2008 example pre crash and broadly the 1907,1929,1987, 2000 moments. The flight to safety is in progress. But in, I believe all these cases the graphs show a hiccup in april-June, followed by an upsurge in markets during summer. Then September the volatility strengthens and then comes the Plummet. I still can't see how the crisis can play out without another severe correction, from which there will be no quick rise of 60% in stock markets. Watch the Vix (VXX) during the summer. If you see it below15/16 then its a big buy. It went over 80 during 2008/9.

[ralphmalph]

The issue is that they are not sorting the problem. Everyone and his dog knows that the German banks are stuffed full of crap loans to PIGGY governments and PIGGY consumers with their loverly BMW, MERC, AUDI balloon payment loan, that they can not pay and the value of the car if they gave it back is now so low the liability is on the german banks. Then they have a load of US sub prime mortgages (Germany was the largest buyer), then they have all those Eastern European loans. The German banking system is massive compared to Greek debts, talk about triple whammy.

Merkel needs to step up to the plate. Let Greece default, stress test the German banks, put in the 100's of billions that are needed and then publish the results of the stress tests. As long as the market believes the German banks are bust then they will just keep pushing and pushing and pushing.

[interestrateripoff]

The only option they have is to deleverage but no one wants to admit that, they keep pumping the system, it's on life support at some it's going to give way.

Once that happens all hell will break loose, but everyone is in the same boat.

Fiat is dead, trust is leaving the building.