Summary from Barclays Capital inst sales:
1) At this point, it seems Italy is now mathematically beyond point of no return
2) While reforms are necessary, in and of itself not be enough to prevent crisis
3) Reason? Simple math--growth and austerity not enough to offset cost of debt
4) On our ests, yields above 5.5% is inflection point where game is over
5) The danger:high rates reinforce stability concerns, leading to higher rates
6) and deeper conviction of a self sustaining credit event and eventual default
7) We think decisions at eurozone summit is step forward but EFSF not adequate
8) Time has run out--policy reforms not sufficient to break neg mkt dynamics
9) Investors do not have the patience to wait for austerity, growth to work
10) And rate of change in negatives not enuff to offset slow drip of positives
11) Conclusion: We think ECB needs to step up to the plate, print and buy bonds
12) At the moment ECB remains unwilling to be lender last resort on scale needed
13) But frankly will have hand forced by market given massive systemic risk
All seem to be missing the point! I have been warning since early 2010 Pan-European sovereign debt crisis! I warned of BNP in June, with very accurate reseach reports and models available to subscribers - BNP, the Fastest Running Bank In Europe? Banque BNP Exécuter. Despite all this, I fear the greater picture is being missed by most.
At the risk of sounding overbearing, Italy heard the fat lady acapella last year, it's just that no one was listening. BoomBustBlog Subscribers should reference Italy public finances projection from March of 2010. The killer is that France is inexoriably leveraged into Italy through its banks. If Italy defaults (and it will) it literally breaks the French banking system. All BoomBustBlog followers have read this - Wednesday, 03 August 2011 - France, As Most Susceptble To Contagion, Will See Its Banks Suffer
Now when (and not if, but when) French banks fail, France will both get downgraded and be forced to bail out - once again. They will have to choose between bailing out Greece, Portugal and Ireland - or themselves. I'll leave it up to you which is the most probable path.
Once the inevitable happens, then the Faux Caucus-Franco bailout mechanism that was suppose to support the unsupportable collapses in throught as it had already collapsed in reality. The result? Everybody should then realize that those risk free Bunds are risky as hell because they are backed by a net export nation (Germany) that will have nobody to export to, and spend much of its economic output bailing out the unbailable, or running from said entities.Things are much, much worse than many are making it out to be.
Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding
Thursday, 28 July 2011 The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.
Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer
In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.
I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!
- French Bank Run Forensic Thoughts - Retail Valuation Note - For retail subscribers
- Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers