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Do Europe’s Banks Not Remember How 2008 Played out for Wall Street?!?
Haven’t we
seen all of this before?
Back in the
Spring of 2008, US financial institutions posted their sham of a “stress test”
then started proclaiming that the results guaranteed that they were solvent and
secure.
After this
obvious farce, Wall Street CEOs began a tightrope act of desperately trying to
raise capital while asserting that “all is well and the worst is over.”
Looking back
on it, it’s amazing that investors didn’t start fleeing financial stocks
earlier that year. Indeed, the need to raise capital is one of the most obvious
Red Flags that a particular institution is not nearly as solvent as it might be
publicly claim.
I’m sure
everyone remembers how this played out: all of these frauds were exposed for
what they were and the US financial system teetered on the brink of collapse in
the Fall of 2008.
I mention
all of this, because the European banking system seems to be repeating the
exact same policies today, only two years later.
We’ve
already seen the phony “stress test” charade along with the “all is well”
proclamations. Now, the largest, most venerable European banks are starting
their own version of the “we need
capital, but all is well” tightrope act.
Deutsche Bank
has already announced it will be raising $10 billion (an amount equal to 20% of
its total equity), while its CEO repeats time and again that the bank won’t need fresh capital to meet regulatory
standards.
Deutsche
Bank is hardly alone on this. The Association of German Banks says the top ten
German banks will need to raise $134 billion to meet capital requirements,
while Swiss newspaper NZZ am Sontag
reports that UBS and Credit Suisse might have to raise nearly $20 billion too.
The alleged
reason for all of these capital raises is that European financial regulators
want the banks to double their capital… but are giving them a whopping eight
years to do it.
Anyone with
a functioning brain can read between the lines and see what’s going on here.
The European banking system is clearly undercapitalized. The regulators know
this, which is why they’re providing the cover of the issuing capital reform as
though it’s a simple matter of strengthening the banking system. The fact that
they’ve giving the banks eight years
to do this gives it all away.
Seriously,
if the banks were great investments at today’s levels why would it take that
long? Even two years is ample time to raise capital if your institution is
indeed financially sound. Giving eight years to raise capital while claiming
that all is well is like a 300 lb. guy giving himself eight years to lose 150
pounds without admitting he’s got a weight problem.
Was Europe
not paying attention back in 2008? The US tried this same strategy then and
failed miserably. Are investors so forgetful that this might work for Europe
today? Who knows?
Currency
investors certainly seem to have bought into the “all is well” view to some
degree. The Euro rallying strongly off is supportive trend line to test its
50-DMA yesterday.
The issue
now is whether this rally to the 50-DMA is a “kiss” before the collapse, or the
start of something larger. There’s strong overhead resistance at 129 so the
odds favor the “kiss” scenario. But given what’s at stake here (confidence in the
currency and banking system as a whole), there’s no telling what charades the
powers that be will perform to maintain the illusion that all is well over
there.
Long-term,
we all know how this play ends: badly. The main question is whether we’re about
to move into the Third and final act now, or if the Second act has some more
prep work to set things up.
Either way,
traders looking to play this slow motion train wreck are going to need to stay
nimble, moving in and out quickly as the system breaks down, then is propped up
again over and over.
Good
Investing!
Graham
Simmers
PS. If
you’re worried about the future of the stock market and have yet to take steps
to prepare for the Second Round of the Financial Crisis… I highly suggest you
download my FREE Special Report specifying exactly how to prepare for what’s to
come.
I call it The Financial Crisis “Round Two” Survival
Kit. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
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Whatever the sham of the stress tests "the money was real." I agree in that sense the premise of this article is flawed. Having said that "in Europe the money wasn't real." Now we have "the all clear" being sounded in Europe. Leo vacationing in Cypr...Crete, sorry, CRETE...aside we do as he so ably started "pension issues." Well, actually that's called PAY issues since in Europe all Europe has are pensions generally speaking. More to the point, however, is "are there banking issues"? This was the whole problem with "Greece." When Germany made the "rescue offer" six months before "the issue was at hand" none of these "issues" supposedly existed. Then when "they did" the issues "got real bad real fast." And now we have "this." I would simply leave it at that. In other words "if Turkey invades Greece and took it out in the week it would take them...would anybody care?" Tis true, "we might have to say something"--but as an American unless it's improving the bottom line immediately why give a rat's keister?
Given that the fundamental premise of this article is an obvious anachronism, containing an obvious factual flaw - one has to wonder if Tyler, or anyone does any editorial review - or is the only requirement a prediction of calamity?
Does one?
One does. It's called "you." Indeed, "how do you do the voodoo that you do?"
"...Shares crash! hopes are dashed! PEOPLE FORGET!....forget their hiding!"
Such a classic!
"It's a put on, a put on yeah, yeah, yeah"
"...Drinks flow....people forget....FORGET THEIR HIDING!"
Is it possible this report was written by a robot?
Beyond fiction. And (almost) everyone laps this shit up like pudding. I am so fucking sick of all this stupid shit.
You want stupid? I got stuck on this line.
You mean like the exposure when GS got bailed out by pretending to bail out AIG, and JPM getting bailed out by pretending to bail out Bear Stearns?
I might start watching cable news if they start exposing frauds. Not going to bother looking for the remote just yet, though.
"Back in the Spring of 2008, US financial institutions posted their sham of a “stress test” ... I’m sure everyone remembers how this played out: all of these frauds were exposed for what they were and the US financial system teetered on the brink of collapse in the Fall of 2008"
OK, well the US bank stress test was in the Spring of 2009, not 2008, and it is clear from the "logic" in this writting that this was not a typographical error, rather it is a critical factual error.
enough said.
Spot on
Our sham test propelled a fucking rally, DOW was at 8 grand.
Sham-Dow!
yeah...I caught that too, but I am willing to give him the heat of the moment arguement....
my thoughts exactly. I seem to remember the stress tests coming long after the crash.
It appears the author of this post needs to respond or eat crow
Remember these things?:
6% on a simple saving accounts?
Just before the big crash when every bank was trying to get cash?
Keytrade in Europe is doing it again. There are also other that offer arround 5.65%.
It's just a matter of time.
An Australian bank is offering 5.6% on full account balance, at call:
http://www.membersequity.com.au/
EURUSD rallied a bit yes, Zoo (sic) not withstanding. But EURCHF ? It's not only a problem w/ Hungary. Lots of Germans and other wealthy Europeans are selling their beloved currency and buying the land of chocolate and watches, and though not convertible to gold, a currency whose reserves are about 30% gold ...