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If CDS Traders Are Right, France Is Next Up For A Sovereign Shakedown (As Are Spain And Portugal); Greece Long Forgotten
CDS traders were prescient in snapping up Greek and Dubai CDS long before anyone else realized the risk these countries are in (well, more like Goldman selling CDS to some very close clients, wink wink). In exchange for figuring out what it took cash bond holders months to understand, these 'speculators' made a lot of money and in the process got branded as quasi-sovereign terrorists. Well, Greece can sleep well: according to the latest DTCC CDS data (for the week ended April 9), CDS specs have completely deserted Greece, which saw the single biggest amount of Net Notional CDS decrease, to just over $8 billion, a reduction of $367 million in the prior week (which means all the widening in Greek spreads is now, and has been, just cash bond sales, precisely what Zero Hedge has claimed all along). CDS traders are now focusing their attention on the one country which has so far slipped under everyone's radar, yet which we disclosed is more on the hook in terms of Southern European exposure than even Germany: France, with $781 billion in total claims. Should Greece topple the PIIGS dominoes, France will implode. And this is precisely what CDS traders are betting on now, taking advantage of absurdly tight France CDS levels. Also, just in case they are wrong on France, Spain and Portugal, not surprisingly, round out the top three names in which Net Notional saw the largest increase. Also not surprisingly, Japan rounds out the top 5 deriskers.
Top 10 deriskers:
Greece, and Dubai, are both among the top 10 reriskers, indicating that any profits to be made from widening in Greece and Dubai have already been taken. At this point residual hedging and unwinds is all that remains. We are confident that very little new Greece CDS exposure will be put on as nobody wants to hedge primary market positions as alas the GGB issuance market is now done.
Source: DTCC
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I wonder why we don't hear much about Austria, either. I was under the impression that they made a whole slew of bad loans to apartment developers on the Black Sea.
Belief that Austria won't sacrifice their AAA rating and instead nationalize their banks.
Shorting bank equity might be a tastier schnitzel.
jm, I believe you've hit a home run. I think they will nationalize and/or conceive mergers of convenience with their German brethren. But Austrian investments in Eastern Europe and the PIIGS will cause an implosion at some point sooner, rather than later.
The French may falter but they won't collapse before Ireland or Italy, IMHO.
There is a new soap show on the boob tube. It is called, "As 'Merca Burns". Ratings will be minimal, as it is a little depressing, and it is such that ruins the alpha state that is inherent in 'tuning in'.
So what is the acronym now? FIPIGS? GIIPFS? IF PIGS COULD FLY? IF PIGS works for me. If we add in Austria, then AS IF, PIG?, with an undertone from the movie Clueless.
Then we have GASP IF--very hard and authoritative with the gasp if you have a last breath. But we could also get GAFIGS, with the A from Austria in the ahh category, almost close enough to GOFIGS but not quite.
I'd like to spin the wheel, Pat. No more vowels, Vanna. Romania would give us GROFIGS--Ahrnold could us it as a California slogan.
F(ing) PIIGS
UK
Not much inspiration from the anagram machine.
Obvious
FUK PIGS !
(No Italy. With over 2500 tons of gold it is not a bad credit risk, cf UK which now only has 400)
United Mexican States? Is that me?
Are you as state named Mexico? If not then its not you.
Probably. Get a load of this little bombshell buried in the Obamacare bill...
http://www.nypost.com/p/news/opinion/opedcolumnists/amnesty_poison_pill_...
Immediate access to all welfare programs for green card holders -- no five year ban anymore, and no need to wait for actual citizenship. Cross the border, collect free stuff. Same day service.
United Mexican (and everybody else) States of America... courtesy of the Democrat party and Obama the Destroyer.
you think thats bad? get a load of this:
http://www.youtube.com/results?search_type=search_playlists&search_query=tatum+chronicles&uni=1
http://www.youtube.com/results?search_type=search_playlists&search_query=beau+abbott&uni=1
the closer that ties it all in for ya':
http://www.scribd.com/full/23098198?access_key=key-gfuw42onruwfrrhw413
It's all pervasive. If you owned a huge chunk of the wealth of America, you would (a) be very arrogant and want to own the rest and (b) then want to own the world. It's a big criminal syndicate and was also reponsible for 9/11.
Impossible to get rid of ?
Are you sure this is all due to France's bank exposure to the PIGS? It wouldn't surprise me if France has been under-reporting its deficits, much like Greece, and some insiders figured it out. Perhaps France is getting ready to reveal a few "accounting irregularities" as well?
Just speculation on my part...
Follow the Dexia.
If it was almost certain that France would implode because Greece would certainly default, why is anyone taking the other side of these 'bets'? If that scenario were to materialize, why would anyone be so stupid to write the CDS. Doing so is a sure loss.
That CDSs are still written just means it is all speculation which doesn't reflect reality. The CDS market doesn't tell you anything more than the current mindset of the speculator.
GGB issuance market may be dead but the Credit Foncier de France launched a $2 billion three-year dollar covered bond Thursday. with Bank of America Merrill Lynch, Barclays PLC, Citigroup Inc., HSBC Holdings PLC and J.P. Morgan Chase & Co. as the joint lead-managers.
Apparently they're the the first European issuer to try to tap the U.S. market since the financial crisis began.
More EU deals to follow...
Another reason for the U.S. "Bonar" to rally once again?
Allowing the "O-Team" to finance another trillion in deficits?
Imagine new new government finance schemes being cooked up now, as foreign investors will be voraciously consuming new freshly-flug fiat produced by the USA.
could this have anything to do with Bernanke 'giving' 1/2 trillion worthless American dollars to the IMF. Saving European butts before ours? So the Fed is cuttting our the middlemen...the banks and saving the taxpayers money, right?
It's a convienent distraction to have the world focused on countries in the Eurozone. It gives us time here in the States to prepare for the problems that people with massive debt have: higher interest rates and a lower standard of living.
What do you guys think? Should I use this time to build a cash hoard (in case the banks collapse), or is a precious metals hoard the way to go? Both? Do you think money market funds will freeze up again (I was caught in one of the Reserve Funds for a few months).
I still maintain that like 2008, during periods of banking turmoil, there is deflation (cash is king), all the other times, like pre- and post 2008, cash is trash and inflation is king. Somehow this simple observation seems to have eluded people.
So the next time the financial system semi-implodes, buy some silver at a discount, or some oil. Otherwise, its inflation and currency debasement as ususal.
Watch your banking agreement changes. It starts to look like they are reserving rights to delay availability of deposits and amounts withdrawn checking accounts. There will be no need to declare a banking holiday this time around. They will just flash that agreement at you when you come for your money, a stealth banking holiday. I'd say hold a nice stash in the mattress.
I believe that Citi imposed a $300 daily cash withdrawl limit. This happened about 3-4 months ago along with amending the withdrawl rights of checking accounts. I knew some older people who kept a great deal of money in checking so as to have access in a time of crisis. Citi has now closed this loophole. Checking doesn't have any special priority in claims. This issue showed up on ZH sometime in January/February I think.
I don't know if this applies to the other TBTF banks.
Instant Karma, no offense here, but your assets were frozen in the reserve fund and you have questions? If it weren't for fed backing, all those MM would be zilch now. Think they can pull that trick off again??? As it turns out, those MM funds were not back stopped by the fed, but the promise was enough to stop a complete financial collapase.
And this little phiigy went oui! oui! oui! all the way home.
Putting France in focus is the right move.
Clearly it would be reasonable for France to accept greater financial risks (related to this financial crisis) as they attempt to shape opinion during this crisis. France's goal is EU political integration. They don't want to waste this opportunity to promote their vision of the future. Influence does not come cheap.
I think everyone understands that France is swinging over their weight. That attracts counterpunching. If France wants to ensure that this crisis results in EU political integration, they will pay a price. I suspects their CDS spread climbs to such a point that attempting to bully other EU nations into tighter political integration becomes a non-starter. That would be the end of the French dream for the EU.
Great in depth reporting as usual, but I suspect some of this is an artifact of liquidity. If you know all of these puppies are hurting, it has to be easier to short France than Latvia or Portugal. Hard to argue the frogs have the weakest hand in all of this.
Today is a good time to remember our longsuffering friends and allies.
POLAND IS NOT LOST!
(their phrase, through the ages)
Maybe it would explain why Sarcose was very involved in the Greek bailouts, he's afraid of panic spreading home.
Too bad about that ash cloud, lots of people didn't make it to pay their respects, triple bad luck. Jeszcze Polska Nie Zginela!
+1000 to both posts
... and just who are these CDS traders?
Hi, I'm from Goldman/Merrill/Morgan/JPM/Citi/the U.S. Government, er AIG, and I'm here to help you.
Is there an easy way fr the average investor to buy or sell CDS's on countries such as France or Ireland ?
The answer is yes. Buy a pile of French debt then go to AIG and ask them to insure that debt. Or if AIG permits just call them and tell them that you want them to insure $50 million of French debt for you (naked, not you the swap). Pay the premiums and you're in the game.
Nobody I have talked with here in Italy is worried about squat (other than fewer tourists and the volcano in Iceland).
La vita e bella qui!
Laissez les bon temps roulez!
...
I.K., I would be hoarding gold AND FRN$. I will just have to wait until I am back to hoard more.
Does anybody want to tell me why Venezuela doesn't top the list with more CDS than every other country on there combined? I would expect the UK to be a close second as well.
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