Thursday, 15 September 2011 14:56

The BoomBustBlog BNP Paribas "Run On The Bank" Model Available for Download Featured

Does anyone truly wonder why so many seemingly smart people in such high places of power fail to see the obvious difference between a lack of liquidity and true insolvency? I don't! Everyone knows what time it is, they just don't want to admit that they looked at their watch! Its_a_liquidity-trap

It appears that we have successfully hit another home run with out BNP short call in the beginning of the third quarter (Bank Run Liquidity Candidate Forensic Opinion, over 50% decrease in price), and apparently timed the bull run with underpriced call options to the upside as well (Trading Opinion and Analysis 9-14-2011) as BNP rallies on nonsense news adding puff and premium to those cheap calls. This post is a constructive followup to the quite popular piece earier this week wherein I took the wraps off of our prime French bank run candidate. If you haven't read it yet, I strongly suggest you peruseThis Is Why BoomBustBlog Is THE Place To Go For Hard Hitting Research: BoomBust BNP Paribas?

The media has been awaken to the BNP situation a little more than a quarter after we prepped BoomBustBlog subscribers, as is exemplified by the following:

  1. BNP Launches Restructuring Plan‎ Wall Street Journal
  2. BNP Paribas Bonds Tumble Amid U.S. Money Market Funding Concerns‎ San Francisco Chronicle
  3. BNP Paribas Bonds Tumble Amid Concerns Over Funding in U.S. Money ...‎ Bloomberg

Now, that the perception of panacea is being traded upon, that is panacea in the form of liquidty attempting to solve solvency issues, we will now attempt to illustate the folly of such...

Stocks Jump as ECB Offers Loans to Banks [Bloomberg]

Stocks and the euro rose, while Treasuries slid, as the European Central Bank and international policy makers coordinated to lend dollars to banks to help tame the credit crisis. Energy and metals led commodities higher.

... The ECB said it coordinated with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year. The announcement added to optimism that policy makers were containing the European sovereign debt crisis after the leaders of France and Germany yesterday confirmed they will support Greece’s continued participation in the shared euro currency.

“It is about protecting the liquidity of the European banks,” Howard Ward, a money manager who helps oversee about $36.1 billion for Gamco Investors Inc. in Rye, New York, wrote in an e-mail. “The private sector has pulled back from funding these banks. So central banks are stepping in to make that dollar funding available. Good news is the banks get their dollar funding. Bad news is that the situation has gotten this dire.”

... The Stoxx 600 advanced for a third day, climbing 2 percent, as banks led gains in all 19 industry groups. BNP Paribas SA surged 12 percent in Paris and Italy’s Intesa Sanpaolo jumped 8.4 percent.

May I take this time to congratulate resident trader Eurocalypse on a most wonderful call, referencing the trading opinion from9/13 and 9/14 - Trading Opinion and Analysis 9-14-2011



A very, very well timed call indeed. Now, back to the Bloomberg article...

“It’s nice to see that the risk factors coming out of Europe are abating somewhat,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “That addresses the liquidity issue that would be threatening the European banking system.”

... The cost of insuring European sovereign and corporate debt extended declines after the ECB announcement and as the prospect of default by Greece receded. The Markit iTraxx SovX Western Europe Index of swaps tied to 15 governments dropped 13 basis points to 330 as of 2:45 p.m. in London, the lowest since Sept. 9 and signaling an improvement in perceptions of credit quality. Swaps on France fell 10 basis points to 171, contracts on Italy dropped 29 basis points to 442 and Spain fell 22 basis points to 370, CMA prices show.

Cheap dollar funding is not going to help BNP anymore than it helped Lehman. I have prepared several models to illustrate such, and are designed to go hand in hand with both our illustrative trading supplements and our forensic research on BNP - namely:

The first model (all are cast in Excel 2010 format [.xlsx]), File Icon BNP Exposures - Free Public Download Version, is available to the public free of charge and is designed to spark the discussion of Whether Another Banking Crisis Is Inevitable? I will be discussing this model, and its ramifications on Max Keiser, Russian Television - to be televised Tuesday. It should be interesting. Here are some screen shots.

The Impairment Scenarios: a very important concept that practically the entire European banking systm has somehow forgotten to address.


Trading and HTM inventory at Level 1,2,3 or fantastical fanstasy?


For those not familiar with the banking book vs trading book markdown game, I urge you to review this keynote presentation given in Amsterdam which predicted this very scenario, and reference the blog post and research of the same - and then revisit this free model and reapply your assumptions:

The next nugget of knowledge is the File Icon BNP Exposures - Retail Subscriber Download Version. It enables users to simulate an anecdotal bank run - for retail subscribers only of course. In addition to those above, it sports...


 For those professional investors and institutions, namely hedge funds, asset managers, regulators, high net worth individuals with ties to BNP and family offices, heres to you. This is not a toy, but a tool that can truly communicate why you feel BNP may, or may not be a candidate for a bank run - contingent upon your inputs: File Icon BNP Exposures - Professional Subscriber Download Version. Additional screenshots above and beyond that included above...

Income statement implications of a true bank run...






Let's recap the BoomBustBlog perspective before I offer my opinion for the upcoming week...

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!

For those who claim I may be Euro bashing, rest assured - I am not. Just a week or two later, I released research on a big US bank that will quite possibly catch Franco-Italiano Ponzi Collapse fever, with the pro document contianing all types of juicy details...

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