Archive - Apr 19, 2012 - Blog entry

And does this mean anything for the stock market?

While Germans work longer hours and retire later....

It is curious how people hang on the day to day detail of European debt auctions when logical analysis of the situation tells you quite clearly that the plight of Europe is hopeless.

Rooting for Europe is worse than being a Chicago Cubs fan. The Cubs might win the pennant.

We know that LTRO is creating a great moral hazard by tempting each peripheral euro-nation's banks to buy its own country's bills, bonds and notes. And when they do that the world seems good. But after they have done that the world seems more at risk. And when they do some more things seem fine again, and so on and so on. But step back from the day-to-day grind and ponder how it's going to end. LTRO is buying time so the crisis can get worse and banks can double up on their exposure to increasingly indebted sovereign lenders. How can this be good or end well regardless of 'how the auctions seemed to go today?'

beware and read on...

In simple terms, Spain is like Greece, only bigger and worse. According to the Bank of International Settlements worldwide exposure to Spain is north of $1 TRILLION with Great Britain on the hook for $51 billion, the US on the hook for $187 billion, France on the hook for $224 billion and Germany on the hook for a whopping $244 billion.

No win situation. 

The Apple trade works until it doesn't. The exit door may get quite crowded!

What do you get for $50 billion? Happy Talk...

Case in point, if the Spanish auction went so well, why are Spanish Credit Default Swaps widening? Ditto for Spanish yields (the ten year is back closing in on 6%)? However, ultimately this auction means next to nothing. Spain is an absolute disaster on a level that few if any analysts can even grasp.

"You have your fear which might become reality; and you have Godzilla which IS reality..."

When liquitidy burns, or too much of a good thing is really bad...

This strange event happened this past Tuesday in the COMEX New York markets but I didn't have time to post it until now. Not much to add here in the commentary that the pictures don't say themselves, except that market prices of two different assets do not plunge in tandem by 1.2% within a matter of half-an-hour or so at precisely the same time and then gain everything back in the next two hours if their prices are set by free and fair markets.

I'm still quite bearish on banks/sovereigns, but as history dictates the greatest wealth has been created during the greatest dislocations, not during the greatest bullmarkets as popular opinion would lead many to believe. Think of the robber barons after the Great Depression...