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The Next Shoe To Drop: European Insurance Companies - Assicurazioni Generali CDS Explodes
As the idiot market relishes in yet another day of foolish self-delusion that the most globalized market in history can simply decouple between the two largest economies in the world (Europe as a whole is far larger than China), things are starting to stir beneath the surface in Europe. While it is now given that no state will be allowed to default, no market will be allowed to trade down, and no bank will ever be impaired as long until the current flawed economic fundamentalist religion is violently overthrown, the question now becomes (just like it did in the America in late 2008) how far down the foodchain with the global Bernanke put stretch? Case in point: Italian insurance company Assicurazioni Generali (CDS ticker: ASSGEN). The proximal reason - today the company's CDS spread has gone vertical, wider by 34 bps on the day, or about 20%, to 184 bps. Why is this happening? Simple: ASSGEN has total assets of €423 billion, and more worrisome, a fixed income portfolio of €262 billion, of which 93% is European-bond based (Italy 28%, France 22%, Germany 25%). We all know what has happened to Italian bond prices in the past weeks: as of today, Bund spreads have just hit a fresh all time high. But all this is irrelevant since the bank must have a capital buffer to accommodate the losses. After all, what idiot would run a company with almost €300 billion in Euro-facing bond exposure and not factor for deterioration in risk after the events of May... Well the ASSGEN CEO may be just such an idiot. The company's balance sheet as of 9/30 discloses that the firm had a mere €10 billion in tangible capital (excluding €10.7 billion in intangible assets). So let's recap: €262 billion in Euro bonds on.... €10 billion in tangible equity! A 26x leverage on what is promptly becoming the most impaired asset class in the world. We are amazed that it has taken the market so long to realize that European insurers are the next shoe to drop, and doubly amaze that instead of trading points up, ASSGEN is only 184 bps. We give it a week.
Some charts.
ASSGEN's CDS:
Next, a focus of ASSGEN's most recent asset exposure:
A more focused look at the geographic distribution of the company's fixed income portfolio:
Most importantly: the tangible common of ASSGEN: from member equity subtract intangible assets. You are left with €10 billion, or a 42x TCE total asset leverage, and a 26x fixed income leverage.
In other words, it would take just a 4% impairment on the value of the held bonds for the tangible common to be wiped out. Or, looked at another way, assuming 28% of the FI portfolio is in Italy, if the €73 billion in implied Italian bond holdings were to decline by 14%, all else equal, the same end result would be achieved. This is precisely what the market is starting to realize. Keep in mind ASSGEN is only one tens if not hundreds of comparable insurance companies, the bulk of whose assets are invested in sovereign debt, and confirming just why even the smallest dip in Euro bond price levels will set off a contagion across Europe that will make the Lehman bankruptcy like a walk in the park, and why very soon Europe will have to reach out and rescue not just banks, but insurance companies, then reinsurance, then all feeder companies, and so on, until all of Europe has to be backstopped by the ECB, and thus the Fed.
The Lehman unwind has started, only everyone is so busy pretending America is ok, they are doing all they can to ignore the facts. We give this exercise a few days once the bond vigilantes rip ASSGEN a new one.
With Geoffrey Batt
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ASSGEN. Ticker says it all.
The question is who will take it in the ass over this? ASSGEN, Bond Holders, of the serf tax payers of Europe?
My money's on the serfs, both taxpayers and other Euro holders.
I just findthis whole charade so amusing at the end of the day. So the Irish banks are bankrupt because they don't have enough debt based money. They go to a group of bankers that have no debt based money and ask for more debt based money in order to cure the problem that was created by debt based money? Insert USA, Portugal, Greece, Italy, Psain, etc into Ireland's spot. Wash, rinse, repeat.
I wish there was a way to explain this to the Black Friday crowd who trample over their fellow human beings for a fucking coffee maker. Or perhaps a way to explain this to the 40 year old male that leaves his family to drink beer all day, removing his shirt, and painting his body to go cheer for HIS football team.
I see stupid people.
I sometimes consider going on to a MMA forum and trying to explain things to the people there. But then when I think how people's eyes will gloss over, and my concern will be interpreted as 'weakness', you begin to reconsider. I am still going to give it a shot, but preaching to the choir is really more productive, at this point. Steel sharpening steel, instead of steel getting worn down against rusted blades!
More debt based money to solve our debt problems! We can't pay back our debts, so we must borrow MORE!!!! History will not be kind to the present era.
http://psychonews.site90.net
PsychoNews: Exposing the Oligarchy, one Psycho at a time.
Joe Rogan gets this very well. In fact, if you search some of his podcasts, perhaps you can point the MMA fans to a podcast which encapsulates it. I would search it for you, but have been swamped with end of the year jack.
http://blog.joerogan.net/#
I have tried explaining the bailout situation to my neighbors back in 2008 and have been summarily dismissed as a conspiracy theory crank. Oh well, fuck em.
Not to get all "Bible-y" on you, but you're right.
Mark 6:11
11 And whosoever shall not receive you, nor hear you, when ye depart thence, shake off the dust under your feet for a testimony against them. Verily I say unto you, It shall be more tolerable for Sodom and Gomorrha in the day of judgment, than for that city.
Paul's way of saying "Fuck 'em!"
Nothing wrong with getting all Bible-y on me. The passage brings me some comfort as such. Does that make a fundamentalist? Oh shit. They put me on the list again I guess.
We need a zerohedge living community to be amongst friends. Wanger is even welcome, but he has to plow the fields.
LOL :)
http://psychonews.site90.net
Just reposting, the url didn't hyperlink last time.
Back 40.
24/7/465.25
I was actually referred to this site through an mma forum... Save your time saying anything on sherdog... some of the other fora get it though. Trust me.
^Word to the rogan board.
This of course is the point. The market has already priced in (while you were sleeping) ECB $2 trillion in loan/loan guarantee/direct purchase/whatever.
Now however, the market wants to price in ECB $15 trillion, and it needs to know RIGHT NOW that that is there RIGHT NOW.
Trichet, is it? Do be a lambkin and let me know ASAP.
print bitches.. Rudolf Havenstein style.
Sinclair has said for years it will be QE to Infinity. I do not see any political will to do otherwise.
Cut government spending? Not going to happen.
P.S. It's that DAMNED $1.8 quadrillion of off the books bets. I was WONDERING where that was. Well (as Reagan would say), a little bit of it is under the rug, a little bit of it is at the back of the drawer. Well....
This is an isolated event.
Oh darling, and is this also an isolated event? Are YOU an isolated event? Let's hope so.
"Nov. 30 (Bloomberg) -- The cost to protect U.S. bank debt from default jumped as yields on Italian and Spanish bonds rose relative to those of Germany on concern the region’s crisis is worsening.
Contracts on Goldman Sachs Group Inc. and Bank of America Corp. climbed amid concern the sovereign-debt crisis will spread to southern Europe and spill over to the U.S."
How tiresome! You thought I was joking about the $60 trillion. But there's just one thing. You see, I never, EVAH joke. Now, we're gonna take the beginning of this song....
Relaxo Ricardo, twas funny.
This is an isolated event.
LMAO!!! Best joke I've heard so far this week...
Yes, isolated to planet earth only.
This time it is different.... (LOLOLOLOLOL)
'This is an unexpected, isolated event'
'This is an UNPRECEDENTED, unexpected, isolated event'
This is an "unusually uncertain" isolated event! :>D
I guess my sarcasm didn't come through huh?
Some of you are way too fucking wound up!!
LOL!!!
Relax, he understood the irony the moment he hit "save"
SO bad they kick their OWN ASSESS....twice a day!
So, is this the AIG of Europe?
Somebody had better drag out Hank Greenberg then for a little song and dance with his hat in his hand.
The suggestion is that this is one of a few dozen AIGs in europe
I just wanna know who it is that keeps chucking the sticks of dynamite into the bank(s) WITHOUT lighting the fuses! Ready, fire, AIM! :>D
O/T & I didn't really know where to put this:
http://www.reuters.com/article/idUSTRE6AT40520101130
(Reuters) - WikiLeaks has several gigabytes of data from a Bank of America Corp executive's hard drive, the organization's founder Julian Assange said in a published interview in 2009.
the way whistle blowers are growing (green shoots comes to mind), i wouldn't be suprised if Assange has more gigabites on almost all of the TBTF
Assange is making a lot of enemies. Just saw over at Drudgereport that Ecuador has offered to let him stay there.
I generally think of anyone stealing private data like this to be a scumbag but since it's BAC I can make an exception.
I WOULD think that, if media was independent, and actually ran the news. But they don't. They're all trying as hard as they can to suck off TPTB. Media is there in part to keep power in check, to keep it under control by keeping it honest. But they don't.
I heard someone on the MSM asking why doesn't WikiLeaks go after some other corrupt govts, like Iran, this morning. To which I can only say: Why move out of a target-rich environment? Bitch and moan all you want MSM, but someone's gotta do your job, ya lazy pukes!
And please, let's add the bets made with the proceeds of bonds by every bond-issuing entity on planet earth.
Now that we've priced in, right in this comment chain, the $15 trillion, the market wants to know RIGHT NOW if there is the $45 trillion it needs RIGHT NOW.
Again, Trichy baby, please rub your nose to let us know that the entire $60 trillion has been spent RIGHT NOW.
Considering the size of the POMO's over the past 2 weeks that are being used to counteract all this bad news, it's amazing the markets aren't higher. We are essentially getting fresh stock market cash infusions on a daily basis and all they can do is keep the bottom under the market.
This can't be good from the Ponzi point of view.
I concur,
They are mopping the floors while the tap keeps on running.
LMAO
Like Mickey Mouse in the Sorcerers Apprentice mop scene.
The market is developing "POMO tolerance".
Like any opiate, more is eventually required.
Hopium in this case.
CD 'the markets' have reached max bailout POMO saturation, everyone knows theres nothing there to begin with, and unfortunately for The Bernank everything he touches now turns to shit.
Well that explains our equities ramp up. Nothing says a better time to buy buy buy in Bizarro World than 2 year highs on global financial meltdown.
last call!
Get em while theyre HOT! Radioactive nuclear melt down hot!
LOL!
Indeed...mania phase now engaged. Will she end laughing or crying. Um, if oil is any indication, tears in the pillow tonight.
What a freak show!
it seems TBTF to me - what's another 9 zeros among friends?
And really, darling, it is no joke. They're pricing in $70 trillion of purchases. If you only knew how much dead debt there was, you'd be in...well, you'd be in California!
which is the lalalahhh land...everything will be ok - dont worry be happy!
I couldn't resist posting this from Jesse' Cafe:
Gold is still struggling with the option expiration and a large overhang of potential orders that could stand for delivery at the Comex. Gold is a political metal, feared by the Central Banks of the developed nations, so the outcome is a little less predictable than might be otherwise.
Silver on the other hand is a dreadnought that takes no prisoners. Why is it able to shake off the kind of paper manipulation that seems to plague gold so often? It is because the central banks do not own any to lend on the cheap to their friends.
It seems only a matter of time until the exchange suspends trading and manages (forces) a cash settlement to bailout the big short interest held by the TBTF-who-must-not-be-maimed. That still will not resolve the artificial shortage that has been developing over the past twenty years or so. It requires time and effort to build mining capacity, and it appears that the preoccupation of the capital allocation has been slanted away from the production of real things, towards the development of better and faster systems of perception management, crowd control if you will, and wealth transference, from the many to the few.
This reminds of the famous anecdote that Boswell recorded, in which Samuel Johnson reacts to Bishop Berkeley's 'ingenious sophistry:'
Many will obtain a similar object lesson for themselves the hard way over the next few years, of the essential difference between the paper money that primarily has come to serve the bloated frauds and sordid schemes of a decaying financial elite that no longer represents accountability, equity, or sustainability, and the enduring value of real money that exists of its own accord, standing firm as the passing constructs and vain devices of men founder against it. There will doubtless be more ebb and flow, but in sum the resulting clash will be nothing short of epic, indeed.
To bad Johnson didn't kick Bishop.
I cant believe Robo missed THAT boner chart post!
Got Dollars ???
Insurance, such a shady business. At least what it has morphed into (more like banks here in India and predatory ones at that).
Bad sign though, like someone said upthread, if this is Europe's AIG (it cannot by Loyd's that is the JP Morgan of Insurance), it could start the domino dance that leads to $/Euro parity.here Whither then the PM complex? In real terms maybe price finally disconnects.
ORI
http://aadivaahan.wordpress.com/2010/06/12/collateral-damage/
long dollar and silver...bitchez.
Smell another bailout in the making? Depends on who the counter parties are now doesn't it?
You have their new motto.
ASSGEN. Something Smells.
ROFL --> ASSGEN
Face...asss....shut up...I'm trying to watch Ow my balls.
That is amazing though, 14 percent decline in one of the holdings will wipe out a multi hundred billion dollar insurance company reserves.
Phew, now no one will notice it'll be illegal to sell food from your garden, DHS (since when the fuck does U.S.A. have a homeland????) style. That's right, DHS will be on you infinitely more than they are on OBL or the Queen/Saudi/Mossad/Al-Yamamah/Banksters that caused 9/11...and you didn't have to implode a building or three and hijack a few planes. You just had to....grow some carrots.
This is bad governance, not big governance.
And the ASS stock:
http://www.bloomberg.com/apps/quote?ticker=G:IM
Short
Allianz
Axa
Aegon
Hannover Re
Mapfre
Zurich Re
Or short KIE ETF better directly [MET,PRU,AET,HIG ] Travelers, Genworth.... Easy no?
Dillution is here, Deflation is my surname...)
The SHAZAAM Trade?
"Short
Hannover Re
Allianz
Zurich Re
Axa
Aegon
Mapfre"
+1000 nice spot!
Unrelated, Huff Post just put this up re BAC:
http://www.huffingtonpost.com/2010/11/30/wikileaks-targeting-bank-of-america_n_789804.html
This article contains a curious passage:
'and no bank will ever be impaired as long until the current flawed economic fundamentalist religion is violently overthrown'
Even making allowances for purple prose, why must the current economic regime's fall be described as violent?
Because I insist.
"Violently" could also describe the speed of the phase change.
I think the phrase is: lurk moar.
Management claimed at their analyst meeting the other day that their gross exposure to Ireland, Greece, Portugal and Spain is just Euro 12 billion.
If they go bust, so will other big insurance companies.
What is their exposure to Italy? That's the point: this is a non bailout (for now) trade on dropping Italy bonds.
Tyler: I take your point and I understood the thrust of your post.
The point of my response is that most European insurers will be bust on a mark-to-market basis if Generali is bust. The question is: will their funding costs rise above the pathetic yields of their asset portfolios? This would trigger a liquidity crisis, not just a "mark-to-market" crisis.
Cheers
CW
Got Gold ?
VGGCF
I bust' a lot on gold but I do own this ( at .635)
Sure its risky but ... Somethings up today. 6 month chart ...
+0.119 (17.33%)
>>>>>So this is what the end game looks like.....people on here talking about how they are going to front run POMO, POMO desparation from the FED trying to save the whole system from collapse, everyday is a POMO day. With each day that passes, it shocks the hell out of me how Ireland basically gave up their freedom with such a short period of time, Greece rioting, France oil logistics mess, etc.....
<<<<<WOW, the end game basically constitutes ending all currencies and the whole world working off one system. This is how they accomplish such a feet. Live it up until the system collapses and then everyone for themselves.
Yep, they will try to devalue all fiat in an orderly fashion, if possible. The collapse comes inevitably, at which point they give it a go to install another global Fiat, and SDR or Bancor, which will hopefully fail immediately upon suggestion, and then world trade is backed by gold again, as it was in the late 19th century.
Mining and Security are two surefire winners. Quality of living is one of the big losers.
http://psychonews.site90.net
PsychoNews: Exposing the Oligarchy, one Psycho at a time.
Tyler,
Surely one smart apple from the 411 employees knows a thing or two about hedging?
Although, they ARE an Italian company...
America! Fu** yeah!
The madness of a lost society - http://www.youtube.com/watch?v=fOshw4kIGR4
You want to know what made me cry from that whole video? The little inocent child with his shirt off in the Airport being patted down. I am ashamed and saddend, as a father of two boys, to see such insanity. When will it all end???
It will only end when the American people end it. Until then, these fascists will continue on with their tyranny.
The founding fathers warned Americans that something like this would/could happen. The American people, in the main, have chosen not to listen.
I should say none of what was in the video was a surprise to me. I guess just seeing that little boy being stripped searched brought it home. I am tired and angry at the madness, which seems to grow daily. Not knowing what is true or fabricated to cover the truth. Politicians pretending they are honest and out for the good will of all. Seeing Americans talk about leaving the country to escape. Others trying to play the failure for every dollar that can be squeezed before the storm. Some (including myself) pretending to fight in a system that was conceived by the villains who are perpetrating the crimes. I think I will go, and play with my kids, and forget about the evil for an hour or two. Take care Horatio!
I find myself spending more time with my wife and children as well -- something more precious than Gold even!
Assicurazioni Generali is told to front run the POMO and problem is solved. Miricale of miracles the company makes a few dollars with the oustanding trades and brings their capital structures back in line. tic.
Hmmmmm.....Greetings friends
... Sounds like the perfect time to blame the Muslims.
Decades ago it was, blame the Jews, but now, Arabs control the oil and are over populating Europe.
I can get things started by going on a State Visit w/Parade in a European City of your choice.
Please, not Sarajevo, been there done that.
hrh ADF
Have you ever visited Jerusalem? *insert joke about Jerusalem being nice this time of year here*
Dealy Plaza awaits you! We even have one of them new-fangled Chebby Volts to shuttle you around -- just ignore the bare wires...
Chart is a beauty.. pure risk being priced in.
Tyler you better look to Chubb and Travelers. In particular their Muni exposure (> 130% tangible book value). 90% of net income comes from the fixed income portfolio. Only 10% from operations. That's a big fixed income bag loaded with Muni risk...
Seems to me that virtually everywhere one really looks, there is going to be that had "just had the fish for dinner" look... watching the first of the same keel over.
So yer sayin' it was a bad idea to eat that dollar? I was a lil' constipated from drinking all dat kool aide and Bernanke convinced me to let him force feed me. He said the dollar would do the trick on getting the poop out.
Well, well...what do you know. Someone has FINALLY decided to call the perma bull HFTs daily bluff to naked short sell the VIX into oblivion every single day at this time. A buyer! The algo finally sold into BUYERS of VIX.
That is going to be a problem for this ridiculous, hyper traded, fake, bullshit, criminally influenced US stock market. I wonder how they will pull this one out? Yesterday, the syndicate clearly used oil to save the broader S&P. That move has now been revealed as absurd.
What, pray tell, will they use today? Cloud? Cramer? [nope, he is ranting about Ugs and Crocs] Groupon? POMO? [nope, those SPY dollars are already under water] Netflix? [with gates and all...don't think so] Black Friday shopping...day 4? What? No last minute save today as the Euro prepares to tank after the bell?
Something tells me it is time to short the "popular kids."
Cdad,
what makes you think they need an alibi? Winners write the history books (or the after market reports). "Facts" will be aligned to the reality of another "broad market recovery on reviving confidence and robust consumer spending".
"They" cannot win IF Average Joe does not return to the markets. While what you say is true in war, it is not so in financial markets. Those need participants...capital formation...in order to maintain a positive direction. We are talking about credibility here. And there is none...this market has no credibility and neither does Wall Street. [Consequently, this will remain until the perp walks and the prosecutions happen]
Oh, and by the way, and for a brief moment, "Groupon" was the correct answer...as they floated it across the propoganda waves, showed the popping Goog chart...before it faded away. Weird. I was only kidding with that one.
VIX opens at $24 tomorrow...IMO
Cdad,
not to quibble (I think we're on the same team) but I think the markets are much more easily "directed" the fewer participants engage. If only 1% or .5% of stocks outstanding are trading, it gets easier and easier for the POMO's to levitate the markets.
All the new capital is supplied via the POMO and various and sundry pass throughs to PD's, et al.
I think if you are looking for the market to regain sanity and price things based on what you or I (or math) believe they are worth, I'm afraid you will be very frustrated (I know I am). Only thing that could put a wrench in the works is if there were a massive sell off (some real confidence crushing event leaving PD's and Fed to purchase and hold everything).
Could not disagree with you more. Indeed, the market levitated. However, that starts to be a lonely feeling, staying long in a very thin market. The risk is too high. Your partners in crime [HFT market fixers] start to become a liability. There is no trust among theives.
You are looking in the rear view mirror to set your forward course, hambone. QE2 is a tired story. QE2 will not work. Markets need investors. Markets need BUYERS...These last five months or so, despite the parade of sick, smarmy investment bankers and their perma bull calls on the propaganda blow horn of CNBC...nothing but outflows every single week. This is not bullish beyond the contrary indicator...which I believe is a very tired thesis. This is a loss of credibility. If you think I am so wrong on this, why do these bankers and traders court my dollars every single day on CNBC?
Today's buyers are of VIX. This instrument has been utterly violated time and time again...and it overcame today. I think we both know this three month rally is one of the worst in US stock market history. Check the SPY gaps...they are everywhere...and watch Europe implode in the coming weeks. Just try to stay long on the failed thesis of "decoupling."
I have been wrong before...but I don't think so at this juncture.
Cdad,
don't get me wrong, I'm not invested in this joke. In fact I'm short some and in cash w/ most w/ a little PM's. However, I really don't think the collapse of our financial system (w/ all social side effects) is a particularly good money making venture.
All I'm trying to do is be prepared for what comes my families way.
I don't think the market cares any longer if more retail money comes their way...as every ZH'er knows the MF outflows in the face of market gains. The market is manipulated, controlled, and the lower the trading the easier to push prices further. And so long as the political / financial structure is maintained there will be no cut off from the mothers milk of QE (1,2,3...).
The real fear for these folks would be a delay or denial of the debt ceiling or some other obstacle between free money and oligarchs. But for now, I don't see any bounds "they" will not cross nor do I see any popular uprising regarding this.
Hope I'm wrong and will be glad if you are right.
What if you decided to throw a war and NO ONE showed up?
Maybe European politicians will finally understand that while they can blame speculators, they can't fool gravity......
Gravity: Not just a suggestion, it's the LAW!!
1 Euro = 1 Dollar = ?
Who cares.
On a long enough time line, the survival rate for a Bernanke put drops to zero. The FIAT ponzi that lasted between 40 and 100 years (depending if you start with the Fed or the closure of the gold window) is dead. Weekend at Bernie's this is! The gold swan is descending upon the world. This brilliant bird leads a wedge into reality; her whiteness will land with the utmost of authority; Respect.
Not really. Until middle class underemployment reaches 50%, there will be no haircuts and no defaults. Instead, there will be $70 trillion of ECB purchases.
delete
Get you Ass Gin right here ---> http://www.6lyrics.com/ass_gin_and_cunt_juice-lyrics-xxx_maniak.aspx
Now let's put our thinking caps on and think if we were BB, and he's just said improving employment is his top priority, what would we do?
Since Ben only controls the "money" or "more money" buttons, I'll think he'll go for the "more money" button.
But I don't think he'll give it to the consumers because that would be inflationary cause they'd actually spend it. No, I think he'll support more asset prices (and the 20% of America who happen to own 80% of all the assets). Perhaps via purchasing ownership of everything he can show that everything is backstopped and nothing can fail. CDS spreads go down cause Fed is backing it...no point insuring against a failure beyond the Fed cause there is no currency left to be paid off in.
There...solved.
(except I and BB kinda forgot about unemployment again...oh well)
I totally forgot about the insurance companies on the bonds and such. Your right, no wonder they can't get a break. The buyers of the debt have to know the score and are finally seeing the problem and wanting out and out fast. I have a feeling that tomorrow we are going to hear more rumors (which in the EU is fact in regard to their economy) coming out about other EU countries that are having problems.
Im sorry we need a "bond 101" here.
Insurance companies (and other investors) only have a problem if the debt is restructured ie they are forced to take a haircut.
This hasnt happened and its not on the horizon yet either. If you have a crystal ball that some of the peripheral countries will restructure their debt forget selling just insurance companies - sell the whole market.