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Thursday, 11 August 2011 12:12

The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely ^Featured

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The professional level subscription document detailing the likely causes of a run on our primary bank run candidate is now available for download (Bank Run Liquidity Candidate Forensic Opinion, the retail version containing valuation available here - French Bank Run Forensic Thoughts - Retail Valuation Note). It is presented at a timely fashion for much of the core EU has just implemented short bans on financial companies - exactly as I anticipated several days ago. If history repeats itself (and it usually does), this action will serve as a precursor to the bank run that I have anticipated and warned about over the last few weeks. For those who don't subscribe to the professional BoomBustBlog analysis, yet want an inkling of what is going on in French banking, I have redacted the aforelinked document as a free public preview: French Bank Run Forensic Thoughts - pubic preview for Blog

You know, if it wasn't so damn destructive, it would actually be funny how regulators appear to find it genetically impossible to learn from mistakes - whether it be theirs or somebody elses. In 2008, when the US foolhardedly decided to allow banks to misreport their long term toxic assets bought with excessive, short term leverage, said banks collapsed. It was not as if this was unforeseen. France is anxious to repeat that exercise with its banks and sovereign debt. In 2008, when the US foolhardedly decided to ban shorts on insolvent financial companies, I made a small fortune constructing synthetic short positions with options that skyrocketed in value because regulators dabbled in markets in which they really had no clue. ZeroHedge reminds us that the short ban in the US ended in a 48% drop in financial company share prices.

It should be obvious to anyone who can remember at least 3 years ago that short bans are not good ideas. They spread more panic and uncertainty than they cure - and the banks' business models are based upon faith and full credit. It appears that the French think they can make ths mistake better than the Americans, as CNBC reports SocGen CEO Dismisses Rumors, Says France Is Not US. Of course not, they just act that way when there is an opportunity to efficiently repeat a boneheaded error. Exactly as I warned just TWO days ago in the post "Time To Load Up On Bank Puts? The Futile Attempt To Make The Insolvent Appear Solvent By Interefering With Market Pricing - Short Ban Has Started", I now bring you this afternoon's news - France, Italy, Belgium and Spain Ban Short Sales

France, Italy, Spain and Belgium plan to enact bans on short selling or on short positions, the European Securities and Markets Authority said today.

“Some authorities have decided to impose or extend existing short-selling bans in their respective countries,” ESMA said in a statement on its website. “They have done so either to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets.”

The most false rumor is what is represented as many of these bank's balance sheets. I warned all BoomBustBloggers last year that this European bank collapse was coming.

It started as:

a keynote speach in Amsterdam,

then a research note to subscribers, The Inevitability of Another Bank Crisis,
followed by blog posts on the same, see Is Another Banking Crisis Inevitable?
then a full fledged, step by step tutorial on exactly how it will happen....

Over the next few days I will offer advanced trading techniques to allow BoomBustBlog subscribers to monetize their view via the market, despite the attempts by those who do not see to manipulate free markets. In the mean time I will excerpt portions of the Pro/Institutional report on the French bank most at risk for a run, available for download right now - File Icon

Bank Run Liquidity Candidate Forensic Opinion.

Here are a few screen shots from the free public abridged version ( File Icon French Bank Run Forensic Thoughts - pubic preview for Blog), that easily demonstrates the problem with the French banks cannot be solved by banning short selling. The problem is inherent in the banks themselves. Please click to enlarge to printer quality...

French_Bank_Run_Forensic_Thoughts_-_pubic_preview_for_Blog_Page_02_copy