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Monday, 11 June 2012 14:02

European Insurer Needs Insurance As $6B Of Its Bonds Are Instantly Subordinated Due To "Spain's Pain" ^Featured

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So, Spain finally gets a bailout, as I pretty much guaranteed in The Economic Bloodstain From Spain's Pain Will Cause European Tears To Rain and The Spain Pain Will Not Wane: Continuing the Contagion Saga. I'd like to draw attention to an excerpt from the aforelinked article:

Subscribers, be ready. When/if Spain cracks, these two short positions will explode:

- Report_122511 - Professional/Institutional edition (Insurers, Insurance & Risk Management)
- Report_122511 -Retail edition (Insurers, Insurance & Risk Management)

On the banking perspective:

Bank Haircuts, Derivative Risks and Valuation10/20/2011

Of course, in today's environ of mega banks, mega marketing, mega investment returns, white hot IPOs, it may be hard for many to appreciate the words of an entrepreneurial investor and blogger. Then again, just remember that this also coming from the same man that called Bear Stearns, Lehman, GGP, CRE, RIM, housing, the entire Pan-European Debt crisis, etc. See Who is Reggie Middleton for more.

So, I have set up the play, now let's take a look at how its rolling out, as excerpted from ZeroHedge's morning posts via Market News:

Any aid that might come from the European Stability Mechanism, which is expected to start work next month, would enjoy a preferred creditor status second-only to the IMF, the spokesman confirmed.

Whoa! Of course, we've broached this topic in the past, over two years ago actually- How the US Has Perfected the Use of Economic Imperialism Through the European Union! Long story, short - there is no free lunch. Bailout's of indebted nations using more debt is NOT a NET POSITIVE! Anyway, back to the bailout that subordinates existing senior bondholders, guess who some of those largest bondholders are? Here's a hint, F.I.R.E.!!!. As duly predicted in BoomBustBlog published research dated 12/11...

AXA_Report_122511_unlocked_Page_02_copy

As you can see below, Spain and Greece have already taken big shots. Greece has already defaulted and is about to default again - exactly as we predicted...

And not only has Spain performed as expected (The Spain Pain Will Not Wane: Continuing the Contagion Saga), the CDS market is pushing it along at breakneck speeds - reference Zerohedge's Spanish CDS Storms Above 600bps

Spanish 5Y CDS broke back above 600bps (just shy of their record 603bps level) and 35bps wider of their intrday low spread from 5 hours ago. Spanish 10Y yields are over 50bps wider/higher than their intraday lows just after the open in Europe. Italy also just broke 550bps. EURUSD is almost unch now.

Next up in the bond vigilanted shooting gallery is Italy - Italy Moves Into Debt-Crisis Crosshairs. I will dive into this in detail in my next post on this topic, but for now we should all see what this means for those insurers on F.I.R.E.?

Untitled_-__euro_insurere