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European Stress Tests Confimed To Be A Farce: Will Not Include Discussion Of Sovereign Risks
Morgan Stanley's Huw van Steenis has confirmed that the European Stress Tests will be nothing more than a dud and a farce: the primary risk consideration that is enveloping Europe, i.e. sovereign risk, will not even be discussed at all in the stress tests. With this bit of information everyone can now effectively discount the "Stress" test for what truly are: a Geithner-inspired propaganda tool, which has zero credibility, and which will only seek to persuade the idiot money to buy at least a few Spanish bonds, alongside the ECB, which is now buying up about €10 billion (and rising) in toxic sovereign debt both in the primary and secondary market, each week.
From Morgan Stanley:
Will stress tests include haircuts on peripheral Sovereign debt?
Our take: The guidance we have been given is the tests were not going to include any discussion of sovereign risks for all sorts of obvious reasons, not least the massive EU/IMF support plan for Greece and back-up for other countries. We think that some investors will be disappointed by this. To be clear, one does not have to have a strong view on the outcome of the peripheral bonds either way to realize that a bank with a large concentration of Greek bonds as % of tangible equity may act in a far more risk averse fashion in extending credit than one with a much lower %, given the uncertainty on how this will play out over the coming years – see the exhibit below. This surely is an issue which macro-prudential policy should weigh up, independent of taking a view on what will happen on the debt itself. As we argued in our last note, the vast majority of banks which hold Greek bonds in their held to maturity books have not sold their Greek debt. However, it appears that this is a keen debating point. Madame Lagarde told Reuters today: “We will stress the system a little more to make the results more credible.”
For us this is the definitive "credibility breaker."Any readers who are not quite as convinced, and wish to read Huw's full take on this latest farce, can read the full note below.
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so its ten billion deflated from actual economy and inflated into commodity, stock and worthless sovereign paper prices per week. awesome, get the pitchforks out.
fool me once shame on you fool me twice shame on the investors
Architect Ben: Lets give this bridge a stress test.
Engineer Tim: OK, how.
Architect Ben: Lets run a hamster over it.
Engineer Tim: OK.
Both: Wow, the bridge held up. Tell the media to report to the people that all is well.
Who would put any credence into these 'stress tests' is beyond imagination - is Moody's in charge?
No, it's BP's public relations experts.
But STD is reportedly spending billion to buy US based M&T along with branches in the UK from RBS. This as rumors swirl it may spin out the UK operation partially to free up capital for more acquisitions. Diversified I'd say - to all the right Central bank windows.
First you decide what result you want. Then you design the test to suit. Easy peasy.
Shocking...simply shocking.
I would assume this would spur massive insider buying of their equities then. I expect that to happen any moment.
Yes, except for the "dodgy bits", the banks are all A-OK.
Glad you could clear that up for us.
Although the tests are a sham I don't believe anything that MS has to say on the subject. As such, we can probably expect sovereign 'haircut' estimates to be included in the final report.
Spain may need a bowl cut. Greece is going for the Mr. T look. Portugal is going to keep it long in the back and short on the top and sides. Italy just needs to have their split ends trimmed a bit. Finally, Ireland just needs to get their roots bleached. No big issues....
I assume Morgan Stanley reserves the future right to have fucked up massively in the evaluation and analysis. You know, kind of a 'shit happened' scenario.
DOGS OF THE EURO (SARKY):
http://williambanzai7.blogspot.com/2010/06/dogs-of-euro-sarky.html
ANGIE:
http://williambanzai7.blogspot.com/2010/06/dogs-of-euro-angie.html
Smells like Timmay shit his pants again.
2009 Redux
Never underestimate those cleaver Elves
Just like commercial real estate wasn't included in the US versions. Nothing to worry about, since it's not like there's any CRE in their portfolios, though.
"Yeah. I wouldn't worry about it though, Boston's not a big college town. "
Is there something we're being fed that isn't a propaganda tool?
Did you expect Timmy Geithner's-like "stress test" to be like? Same old smoke & mirrors, extend and pretend, print and spend, until... well, until the bottom falls out!
EURO bullish signals I warned of during the past few weeks - has resulted in the recent rally and the daily chart remains bullish.
The DOW/SP500 counter trend rally suggested on June 13 continues, however ...
http://stockmarket618.wordpress.com/about
Stress testing is defined as a useful method for determining how a portfolio will fare during a period of financial crisis.
...I guess half of europe defaulting on sovereign debt is not a financial crisis.
check out my blog @ http://wallstreettobaystreet.blogspot.com/
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