that Italy was a “Core” country. Mine was a PIGS; it was not a PIIGS. It’s looking like I was wrong all along. The following slides tell the story. (Note: all prices have deteriorated since I got these graphs a few hours ago.)
This is the current 10-year. It was issued in February with a 4.75%
coupon. It’s now pushing 94, so a year and a half’s worth of interest is
thrown out the window. Can you say dog?
This is a seasoned bond. Notice that it lost 6% of its value since July
1. This is death to a global bond fund manager. They have to mark this
dreck to market. (The banks don’t; ha ha!)
You might say, “Who cares about the stupid bondholders”. The problems are much deeper than that. Italy is being forced out of the Short Term
capital markets as well. Look what has happened to six-month yields. If
we are not at the crisis point, we are very close, based on this:
Italian equities have just collapsed of late. Down 23% in the past sixty days. How would you feel if the S&P took a dump like that? Answer: Your confidence would fall and that would bring about a recession. That is exactly what is happening in Italy today. It's happening at lightening speed:
If you are an Italian equity investor (and believe in the buy and hold)
then this chart will really hurt. In the past few days we have taken
out multi-year lows.
The very rapid pace of this proves one thing. I was not alone in thinking that Italy was an “insider”.
A huge amount of money is being forced to rethink what is “safe” and
what is not. That this is all happening in the middle of July is not
helpful either. The whole country is about to go on holiday.
This last slide shows the pricing for all maturities of Italian debt.
Note that there is only one issue trading above par. This is all credit
spread deterioration. We are just a week or two before Italy gets locked
out of the capital market. I’m not sure than any of the global markets
are priced for that event.
Ambrose Evans-Pritchard at the Telegraph wrote about this today. I think he’s got it right.
Once again Europe's debt crisis has metastasized, and once again the financial authorities face systemic contagion unless they take immediate and dramatic action.
“Metastasized” is a horrible word. It’s fitting. I (now) doubt that the "immediate and drastic" action he suggests is needed is, in fact, going to happen. Gulp!
Looks like the 'fix' is in again so closed out short trades at 4:30AM. Flat, and looking for higher entry prices.
Very impressive pinbar forming for the Dow on an 8 hour chart as of 8:30 on a bounce off the 12,400 area.
Great post, Bruce.
Saved a nice article a while back on the Italian equity index followed by Spain's IBEX as leading indicators for the DAX.......it was a John Maulden referral.
Both looked out ahead of the curve trading sharply lower in front of the recent S&P, Dow, DAX and FTSE runnups.......can't put much stock (no pun intended into the Nikki with the BOJ).
Shorted the FTSE 100 right off the NFP and then again for an average price of 5975........looks like the next weak link in the chain.
If it rallies will short it again just like IBEX......the jig looks to be pretty much up with brutal US employment numbers, and a tsunami of European debt about to rollover the continent.......almost forgot to mention the incredible incompetence of the Troika public relations fiasco over Greece.
Short selling is back in season.
I think a lot of people are overlooking the fact that the bulk of Italy's woes have been kicking off because of skirmishes between Tremonti and the hornball PM, everything else has been the same for months now - that means that everything could revert to the way it was very easily.
"Purely coincidental" i suppose is the matter of Italy needing the bulk of its funding in the next couple of weeks (now thats a theme i have noticed);
14 JUL 11:00 ITALY 5 Y E4.000B
14 JUL 11:00 ITALY 15/30Y E4.000B
28 JUL 11:00 ITALY 3 Y E6.000B
28 JUL 11:00 ITALY 10Y E6.000B
I give it until the auctions go through then we start hearing about how the market over reacted and everything will be ok because Giulio will manage to get his way on the austerity package etc, for now.
No worries, Bruce. Just try flipping all those charts upside down and things look much better.
I saw the evil speculators, and they are us.
Cornelius: Well Taylor, we're all fugitives now.George Taylor: Do you have any weapons, any guns?
Cornelius: The best, but we won't need them.
George Taylor: I'm glad to hear it. I want one anyway.
Bruce,
I think Italy is a bit different. A lot of their debt is domestically owned and their maturity is longer (5yrs+)... so the dynamics are different. Not to say that this doesn't have its own problems, but I don't see it being as severe as Greece or Spain.
On another note, you're a breath of fresh air compared to Leo K. Keep up the great writing and commentary.
Once again...it's the "evil speculators"! damn them! Italy Orders Short Sale Disclosures After Market Falls
So the panjandra are dumb.
I'd just like to know who the stupid assholes are who bought all this debt. If they were rich stupid assholes before, not so much now.
So nice to know that some rich, shall we say, in-sufficiently informed assholes, will now be switching over to Gold and Silver from Bonds. More nice profits on the way for me.
It's "mea" culpa, but I appreciate the attempt at a Latin reference in a post on Italy (and a frightening post, at that).
it's a subtle play on language.
That means the joke's on you.
declension, declension, declension...never enough declension.
"Lasciate ogne speranza, voi ch'intrate"
Mama Mia!
Virtually everyone in every government works for the international ganster banksters, and is perfectly willing to destroy the entire human population of earth to assure the banksters prevail over everyone and everything on earth.
If that isn't certain proof that fiat-debt-fraud and ALL fractional reserve practices must end, then I don't know what would be.
To the morons in government: The solution for your is clear. You must reduce government spending to be lower than revenues. Otherwise you will eventually find yourselves being chased by crowds with torches and pitchforks, then hung from trees and lampposts as you richly deserve.
WHY IS THIS NEWS?
We all knew this day was around the corner...and coming soon. Is it just the markets machines attempt to create more volitility to take my coin?
Now what would Berlusconi do...
Well, the French socialists got their Euro, and they got their ECB; now all they have to do is figure out what to do with it. Another example in human history of ,"be careful what you wish for, you might get it".
I'll bet some bright, shiny .999 he's doin it right now.
Good mornin lil schoolgirl/
can I come a home wid you/
tell yo momma and yo poppa, baby/
I'm a lil schoolboy, too/
come on now pretty baby/
i just can't, I just can't a help myself/
...
I don't care if your only sixteen years of age!
(bob weir singing for the ole on-board crooner, SILVIO)
Pigpen, then after 1972 Weir.
naturally.
Bob, I think we may be friends.
I was born in a desert, raised in a Lion's den
Doubled up on CEF today.
Got my mind right, per Strother Martin line.
Cash in reserve will later add to DBA and DBC shares held.
I get dibs on Lake Como !
I work on Lake Como. You can have it. It was humid as stink today. I'll take Sicily or the Dolomites instead.
Italy is ok. The debt subsidized government in Rome will collapse but life will go on. These people are resourceful. A lot more than Americans at this point I'd guess.
they say I shot a man named Grey/
and took his wife to Italy/
she inherited a million bucks/
and when she died it came to me/
I can't help it if I'm lucky/
...
(in what follows, Mr. Krasting, you are not the Idiot...and it's not a Dostoevsky kind of Idiot either)
...
Idiot wind/
blowin like a circle around my skull/
from the great coolie dam to the capital/
...
We are idiots, babe/
it's a wonder we can even feed ourselves
(Dylan, who else?)
I always loved those lyrics; Dylan is a great hero to me.
I can say dog. Can you say eurobond?
Eurozone only need to establish a common debt agency and start financing its 4% agregate budget deficit via eurobond. US/UK/Japan, on the other hand, all run 10% budget deficits with no solution in sight.
EUR long
http://tinyurl.com/58sxj4 Physical gold in EUR (Belgian site)
3% move intraday to new all-time high.
I think ECB will inject at some point 1,5 trillion into the market, for starters. Furthermore I think it will be synchronized with the USA raising its debt ceiling by $2T, which is roughly the same as EUR 1,5T. This will wipe out COMEX physical settle. Central bankers hate gold, always have and always will. For staying power you have to become your own central bank.
Relevance to this thread? Look at stated Italian gold reserves and reduce by 80-99%. If a country steals everything, what are the odds the gold reserve is there?
Bini-Smaghi just received G-Pap's denial manual and started reading it in public.
07-11 13:15: ECB's Bini-Smaghi says Italy will never default because it is a rich country, it is clearly able to pay back its debtHow predictable, bond vigilantes moving into Italy now. Who's making the money? American investment banks and global hedgies. And here comes Germany 4.0...
No one's making money. This was not hedged. Net net the market was very long Italy.
So who's getting pummeled Leo? The banks are not. But your pension fund boys are taking it in the ear.
I beg your pardon; I'm making money. Short the DJA from 12,700; long Si at $33.75 basis December.
My "pension fund boys" are making bonuses based on 4-year rolling returns that are based on flimsy benchmarks. Don't worry about them, they're fine. Their contributors on the other hand are getting reamed good (in some cases at least).
The problems that the world faces now are too complex for almost everybody to understand.
Each time an action is taken to deal with one problem, that action creates new problems.
Just one hasty decision could set off a chain of events that would end in world crisis. As the
rate of problems arising is rapidly increasing, giving world leaders less time contemplate on the
collateral damages of their actions, it seems inevitable that a major mistake will be made.
REPLY; well, my reply is; then it's a good time to have your savings in Silver Bullion, isn't it. Because Silver gets bid up in times of "stress", and built in problems coming to the fore.
Fighting debt with more debt was THE major mistake.
It's a DISASTER!
Wait - errr - I own Gold and Silver.
Disregard earlier remark.
I thought Italy was the main trading partner with North Africa. How much of this deterioration can be traced to the lingering effects of Egypt, Libya and the rest?
The US has started a global war, all out war against everyone else.
Lybia's and all other North African recent "rebellions" are CIA manufactured and a way to implode the North African leaderships who made commitments to trade all their oil, all their goods and services in Euro at least internationally and with the EU community.
The US rating agencies are just as much part of this US strike against the EU and the Euro as the US manufactured propaganda media effort around the world.
It is becoming more and more obvious and at one point, the answer to a declaration of war will be met with a response. Once again, it is the US that is provoking the world into a great war. History has taught some lessons. The only chance the US has of winning one more time is to play everyone else against each other, divide and conquer - again. Yawn. Hopefully the Chinese understand the *bait* and *switch* strategy.
Dear walkure,
You are correct in all except your assumption that the rest of the world will take the bait.
The rest of the world went on its own way and the US was left behind after revelations of the torture in Cuba and Iraq in about 2003/04. They have played the diplomatic game since that time in order to stave off the nuclear option of the wackos we have had as leaders.
I could offer many examples of this, i.e. globalwarming, differences in economic policy(seemingly slight but still differences), shifting of alliances, etc., but I won't insult anyone's intelligence. Too many examples exist for the brainpower at ZH and are child's play if we take the time to focus on these differences as just another nation in trouble rather than assume a pre-eminance that the rest of the world has already stepped away from.
Steeped away and gone on without the US.
Thanks for the thoughtful post, walkure
respectfully, oldman
Well it certainly doesn't help that Libya is Italy's primary supplier of oil...
http://www.arabnews.com/economy/article398179.ece
The roof, the roof, the roof is on fire.
The roof, the roof, the roof is on fire.
We don't need no water, let the mothaphucka burn
Burn mothaphucka, burn.
Respect for owning up to a mistake.
I also learnt something today regarding Italy; black economy is counted in GDP. Here's the explanation (in German):
Ferner ist zu bemerken, dass die Schattenwirtschaft in Italien traditionell sehr hoch ist. Die Agentur der Einnahmen schätzt ihren Anteil am BIP auf zwischen 17 % und 18,1 %, andere Beobachter gehen von bis zu 30 % aus. Tatsache ist, dass bei der Ermittlung des BIP die Schattenwirtschaft auf Basis von Schätzungen mitberücksichtigt wird.
Whole article http://tinyurl.com/pmqla and go to heading "Wirtschaft" (h/t Psar)
Google translation:
"It should also be noted that the shadow economy in Italy is traditionally very high. The agency estimates its revenue share of GDP going to between 17% and 18.1%, other observers of up to 30%. The fact is taken into account when calculating the GDP, the economy is based on estimates."
"the economy is based on estimates---"; I just hate it when that happens. no, seriously; I mean it always is. Our GDP is only a guess.
Babylon is burning!
Italian 10 yr almost at 5.7% !!
Spanish 10 yr over 6.0% !!
This is spectacular! More popcorn!
April 2010: "We are confident that as contagion fears grip Portugal, Italy is sure to be next."
But yes, timing these things is tough. Find the lowest theta, highest upside hedge and wait for the show to start.
One thing you can say for Italy, for sure; they've seen this whole movie before. In the middle ages a farmer in Italy ran into a huge bronze plaque originally set up in 77ad or thereabouts, as a public anouncement that your wonderful central government would now be issuing everyone free money every month. I'm not making this up. Inflation followed. Big, significant inflation. As for the timing; that's been amazing me all my life; it turns out these un-workable socialist monetary games continue for much much longer than seems possible. I think they may still be having debates about what rule or regulation to violate next in the Euro zone five years from now.
Mr. Durden,
I need your help...well, it's more a case of, 'help me help y'all'.
Before I joined, I carefully read The Manifesto; and I find myself agreeing absolutely. But I don't recall any prohibitions on you contacting me per my request. And though I realize that you are a busy man, I am no less so...quid quo pro.
Please send me some blank email -- annonymous as you please -- so I can reply with an image that will make you fall to your knees in reverent worship. I donate the image to you and all of Zero Hedge, as a token of my great esteem and friendship.