Wednesday, 28 April 2010 13:10

The Daisy Chain Effect That I Anticipated Appears To Have Commenced!

The Pan-European Sovereign Debt Dominoes start to fall "precisely" as anticipated...

From the Wall Street Journal:

Standard & Poor’s downgraded Spain’s long-term credit-rating to double-A with a negative outlook just one day after roiling global markets with downgrades for both Greece and Portugal.

“We now believe that the Spanish economy’s shift away from credit-fueled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed,” S&P credit analyst Marko Mrsnik said.

The move sent the euro to a fresh one-year low against the dollar of $1.3129; the 16-nation currency had briefly bounced higher as fears about Greek debt contagion eased. Spain’s IBEX index extended earlier losses, oil prices fell and U.S. stocks briefly turned negative.

This follows a downgrade of Portgual and Greece (to one of junk). The Actionable Intelligence Note of last week was quite timely. Up until a few days ago the options on many of these banks were quite cheap, on relative basis (even the Greek banks, at least on a relative basis though IV was high). Notice the explosion in both implied volatility and intrinsic value leading to a 100% to 200% gain...

Banco Santandar since research

bbva 1month since research

nbg opt since research

For some odd reason, perceived risk is still nowhere hear where I believe it should be. Methinks the equity markets are still underestimating the risk attached to the Pan-European (at least thus far) Sovereign Debt Crisis.

The pressure on bank portfolios requisite risk to sovereign governments should not be underestimated, reference, How Greece Killed Its Own Banks! I will be posting what I see as explicit potential pathways for the contagion to develop, but in the meantime, I urge subscribers to review the following:

Non-subscribers should not attempt to read into the titles of subscription content. I believe that much of the whispering and pontification that I hear in the pop media is not necessarily very accurate. I have made my opinion of the entire debt debacle crystal clear, in explicit detail and in particular of the aforementioned countries, in the public domain. Please review:

  • Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!
  • As I Explicitly Forwarned, Greece Is Well On Its Way To Default, and Previously Published Numbers Were Waaaayyy Too Optimistic!
  • The Pan-European Sovereign Debt Crisis, to date:

    1.      The Coming Pan-European Sovereign Debt Crisis – introduces the crisis and identified it as a pan-European problem, not a localized one.

    2.      What Country is Next in the Coming Pan-European Sovereign Debt Crisis? – illustrates the potential for the domino effect

    3.      The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. – attempts to illustrate the highly interdependent weaknesses in Europe’s sovereign nations can effect even the perceived “stronger” nations.

    4.      The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries

    5.      The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

    6.      The Beginning of the Endgame is Coming???

    7.      I Think It’s Confirmed, Greece Will Be the First Domino to Fall

    8.      Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

    9.      Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?

    10.   Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!

    11.   Germany Finally Comes Out and Says, “We’re Not Touching Greece” – Well, Sort of…

    12.   The Greece and the Greek Banks Get the Word “First” Etched on the Side of Their Domino

    13.   As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis

    14.   Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?

    15.   Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

    16.   Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe

    17.   Moody’s Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks

    18.   The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!

    19.   How BoomBustBlog Research Intersects with That of the IMF: Greece in the Spotlight

    20.   Grecian News and its Relevance to My Analysis

    21.   A Summary and Related Thoughts on the IMF’s “Strategies for Fiscal Consolidation in the Post-Crisis

    22.   Euro-Gossip Debunked, Courtesy of Trichet and the IMF!

    23.   Greek Soap Opera Update: Back to the Bailout That Was Never Needed?

    24.   Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!

    25.   As I Explicitly Forwarned, Greece Is Well On Its Way To Default, and Previously Published Numbers Were Waaaayyy Too Optimistic!

    26.   LTTP (Late to the Party), Euro Style: Goldman Recommends Betting On Contagion Risk In Portuguese, Spanish And Italian Banks 3 Months After BoomBustBlog

    Latest Pan-European Sovereign Risk Subscription Research – The Good Stuff!!!

    Actionable Intelligence Note For All Paying Subscribers on European Bank Research – This was certainly one very timely call!!!
    A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf

    A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

    Ireland public finances projections_040710

    Spain public finances projections_033010

    UK Public Finances March 2010

    Italy public finances projection

    Greece Public Finances Projections

    Banks exposed to Central and Eastern Europe

    Greek Banking Fundamental Tear Sheet

    Italian Banking Macro-Fundamental Discussion Note
    Spanish Banking Macro Discussion Note

  • Last modified on Thursday, 29 April 2010 05:07