Here are condensed notes from my conversation with some of the trading community of BoomBustBlog along with my own thoughts centered around the fundamentals and the forensics. I have a little more to explore in the European banking system, then we parse the ugly situation that will be real estate (unbelievably, the thing that is nearly guaranteed to sink most sinkable banks has yet to get much media attention). At the same time, it will be time to revisit the US and the ponzi scheme bear market rally in treasuries and equities, particularly our FIRE sector institutions. Oh, what a workload do we have ahead of us.

Unsurprisingly CAC had a plunge yesterday, one of the worst performers in all of the European markets - exactly as we have warned, reference Observations Of French Markets From A Trader's Perspective and excerpts from European Bank Run Trading Supplement Available for Download:

The Monthly chart, with only one more trading day left tomorrow [Friday] shows we are breaking the monthly trendline at 3910 THIS month (July), even though on a weekly basis, there were a few weeks this month where it was below already.

That’s a quite NEGATIVE new development, with the 1st natural target being around 3600 (high above the trendline was 4200, break point  3900 - so a 300 point range) that 3600 level is the Nov10 low.

Leading the way down were the institutions that we explicitly warned about in the European bank run series subscriber docs (see the historical links below). It appears some of our heavier hitting subscribers are taking advantage of the systemic contangion trade.

When one reads about DB drastically cutting its BTP exposure and French banks having done [relatively] NOTHING its quite scary. Subscribers, simply referenceThe Inevitability of Another Bank Crisis for reasons to be concerned! I believe this time (as so loquaciously espoused by late the brother Gil Scott-Heron, "The Revolution Will Not Be Televised". As a matter of fact, it may move so quickly, it probably won't be webcast or blogged about in time either. Non-believers, I strongly suggest you reference the writing not commonly found on the web or mainstream media outlets - The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!.

FT reports DB would have sold its entire 8bn holdings of Italian govt debt: Deutsche Bank hedges Italian risk

Deutsche Bank cut its net exposure to Italian government debt by 88 per cent in the first six months of the year in a dramatic sign of international investors backing away from the eurozone’s third-largest economy.

Germany’s biggest lender disclosed with its second-quarter results that it had cut its net Italian sovereign exposure from €8bn at the end of 2010 to €997m by the start of July. Its overall exposure to what it called the “PIIGS” – Portugal, Ireland, Italy, Greece and Spain – fell 70 per cent to €3.7bn over the same period.

... Stefan Krause, Deutsche’s chief financial officer, linked the dramatic reduction in Italy to the first-time consolidation in December of Postbank, a German retail bank that had large Italian holdings. He added that Deutsche had bought credit default swaps – a form of insurance for investors – to hedge its Italian exposure in its trading book.

We went through this scenario for subscribers in detail, last year. Reference

• • Deutsche Bank vs Postbank Review & Summary Analysis - Pro & Institutional
  • Deutsche Bank vs Postbank Review & Summary Analysis - Retail

The Deutsche Bank drop was foretold by one of the members of BoomBustBlog's trading community who quite accurately parsed the Deutsche Bank CEO's sanskrypt warnings quite well, posting gains with a strategy shared with BoomBustBlog subscribers (More On Trading with BoomBustBlog Research and the results after the face, BoomBustBlog Traders Armed With BoomBustBlog Research Caught ~10% Deutsche Bank Fall).

... 10Y Italy over 6% with the spread to Bunds & CDS at all time highs.... The potential situation there really (really) sucks and politicians are on holidays...
Many Europeans and BoomBustBloggers think they should wake up and see whats happening!!! Unless, of course, they have all given up and just pretend to have meetings when they KNOW its going to be over anyway. Hopefully, that's not the case.

French bonds, however are trading slightly down in yield at 2011 lowest yields (highest prices) but still underperforming bunds on this move. A member of our trading community still thinks there is a chance for a short squeeze from here but if not, it can go down quickly...

Related links:

1. On Your Mark, Get Set, (Bank) Run! The D…

2. The Mechanics Behind Setting Up A Potential European Bank Run Trade

3. What Happens When That Juggler Gets Clumsy?
4. Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
5. Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year
6. The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
7. The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
8. Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run
9. Eighteen Percent of the EU is Literally Junk, Carried As Risk Free Assets at Par Using 30x+ Leverage: Bank Collapse is Inevitable!!!