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Here Is Who The Next Bottleneck In The Euro Bailout Will Be...

Europe must be hoping that the Dutch aren't sensitive people.  We are all waiting for the outcome of a conference call between Germany, France and Greece.  Holland isn't on the call, yet they are the 3rd largest AAA country in Europe and are responsible for 10% of EFSF's AAA rating.  Germany has taken the time to mention Finland's demand for collateral.  Finland is only 3% of the AAA portion of EFSF, but everyone is paying attention to them, yet Holland seems to be taken for granted.  Holland has their own problem bank, ING, and came out yesterday with a statement that the Dutch government considers a Greek default as unavoidable. Today the Ministry is saying they are making all possible efforts, but didn't say that they still think the efforts will fail and a default is inevitable.  Look for the next snag in the bailout to come from growing opposition in Holland.  If I was them, I would be annoyed that their invaluable contribution seems to be taken for granted and that no one is reaching out to them in spite of their importance.



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‘Perfect Storm’ Of Global Banking and Sovereign Debt Crisis To Lead to Global Currency Crisis

Volatility and wild gyrations in all financial markets continues due to a confluence of negative data, news and fundamentals. French banks have been downgraded and Chinese Premier Wen’s call that Europe get its own house in order quashed the unsubstantiated and unsourced rumors regarding massive Chinese intervention to solve the Eurozone debt crisis. European banks are hemorrhaging deposits as savers and money funds pile into other perceived havens such sterling, dollar and Swiss franc deposit accounts. Retail and institutional deposits at Greek banks fell 19 percent in the past year and almost 40 percent at Irish lenders in 18 months.  A tiny fraction of these European deposits has gone into gold with the majority going into other fiat currency deposits. It is not just the saver of periphery nations who are opening non euro deposit accounts - many German savers are opening up deposit accounts in Switzerland. Greece’s inevitable default is being prepared for despite the usual denials. A conference call among Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel is set for 16:00 GMT.



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Fed Swap Line Tapped Again - Eurobank Funding Concerns Surge After Two Banks Borrow Dollars From ECB

About a month ago, European USD funding concerns came to the fore with a bang after one bank had borrowed $500 million dollars from the ECB in a 7 day operation, indicating that, as had been documented before and after courtesy of a rise in Libor that has yet to see a down day in the last 40, dollar funding is becoming a threshold factor (for at least one bank). Well, today we learn that 3M USD Libor, which just rose yet again to 0.349% from 0.347% (full breakdown of who is getting locked out shortly) has become a prohibitive funding mechanism yet again, after the ECB just announced that following 3 weeks of quiet, not one but two banks were "forced" to borrow $575 million from the ECB  (the most since June 2010) which in turn had to resort to using the Fed's swap line - expect to see the appropriate number in the FRBNY's swap line ledger with the ECB and the Fed's H.4.1 next Thursday when this data is updated on the US side. Basically despite the market rallying on news that the Moody's downgrade of French banks was "better than expected" the truth is that the situation continues to get step wise worse.



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Not Quite 3 For 3 As BNP Outlines Rapid Deleveraging While Moodys Maintains Review

It seems at the first whiff of downgrades from Moody's, BNP were forced into action announcing a series of asset disposals as Moody's announces no downgrade but maintains review for downgrade...



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Credit Agricole, Expectedly, Joins SocGen On The Moody's Downgrade Path

...as expected from the previous post. Now, BNP downgrade a matter of seconds.



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SO IT BEGINS: SOCGEN DEBT, DEPOSIT RATINGS CUT BY ONE NOTCH TO Aa3 BY MOODY'S, OUTLOOK NEGATIVE

Ladies and gents, it starts. Credit Agricole and BNP downgrades imminent.



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Jefferies Describes The Endgame: Europe Is Finished

The most scathing report describing in exquisite detail the coming financial apocalypse in Europe comes not from some fringe blogger or soundbite striving politician, but from perpetual bulge bracket wannabe, Jefferies and specifically its chief market strategist David Zervos. "The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system - with many WAMUs, Wachovias, AIGs and IndyMacs along the way. The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers....Expect a massive policy response in Europe and a move towards financial market nationlaization that will make the US experience look like a walk in the park. " Must read for anyone who wants a glimpse of the endgame. Oh, good luck China. You'll need it.



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Market Snapshot - Reaction To Wen's Ultimatum

An hour after Chinese Premier Wen Jiabao dropped all pretense of working together for the greater good, markets around the world are reacting more notably than many would have expected. With most talking heads still clinging to the line about 'helping the Europeans' and missing the quid-pro-quo of it all that we so clearly intimated from his speech, expectations of a risk-on 'we-are-all-saved' reaction have been dashed on a beach of the-trade-wars-have-begun. ES is -13pts from the day session close (and almost 20pts from intraday highs), having taken out intraday swing support levels around 1154.



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"High Frequency Minutes": HFT Explained In 6 Short Video Clips

After over two years of over 200 posts discussing the dangers of High Frequency Trading on Zero Hedge, the mainstream media (and its comedy-finance fusion Comcast offshoot) has finally made its goal in life to destroy HFT. The only reason for that, of course, is that HFT, by definition, tends to accentuate moves. And while it did so to the upside, nobody but Zero Hedge and a very few other blogs, most notably Themis Trading, cared (and a whole lot of other "experts" ridiculed our views of HFT as liquidity extracting, because yes they are, rebate chasing, sub penny frontrunning parasites). Now that the tables have turned, everyone, up to and including that caricature Jim Cramer can't get enough of bashing it. Which is why for anyone still relatively new, and thus unjaded, to the topic, we present this informative and succinct six-part videoclip series just released by Securities Technology Monitor titled "High Frequency Minutes" discussing all the latest paradigms in the world of modern cutthroat, nanosecond trading.



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Guest Post: The Coming Currency Crisis

Poor Ben Bernanke. The greatest financial train wreck in history is going to happen on his watch, and it will be mostly his predecessor’s doing. But not the work of Alan Greenspan alone. The Washington elite and their compulsively clever counterparts around the world have set the US (and global) economy up for a currency crisis of gargantuan proportions.

When?

Soon.



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Wen Jiabao Says China Willing To Extend Help To Europe... For A Price

When in doubt, recycle... In this case the rumor that China would bail out Europe is about to get second billing. From Bloomberg, quoting Wen Jiabao at the Dalian World Economic Forum:

  • WEN SAYS CHINA WILL CONTINUE TO INCREASE INVESTMENT IN EUROPE
  • WEN SAYS CHINA IS WILLING TO EXTEND HELP TO EUROPE

Granted, nothing new here, and it simply means that China will be happy to buy European assets at firesale prices and invest in 20%+ IRR projects, but the algos, which have not yet seen this news, are expected to kneejerk higher, regardless of how short the latest intervention halflife will be (recall that China already has sizable investment in Greece, Portugal, the EFSF and the EUR). Call it what it is - doubling down, all over again. That said, the bailout for Europe will not come free, and once that realization hits the market, this may have a completely opposite reaction that the one intended...



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Blast From Paul Krugman's Past: "Social Security Is A Ponzi Scheme And Will Soon Be Over"

It is one thing (what thing that is we are not sure, but we have heard others say it, so like all good lemmings we will say it too) for Rick Perry to call Social Security a ponzi scheme. After all he is some crazy, foaming in the mouth conservative, as uber-Keynesian liberal Paul Krugman may call him. And that's fine. What confuses us, however, is why Social Security would be called a ponzi by the same liberal noted previously: none other than Paul Krugman himself.



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Tiger's Robertson "Europe In State Of Financial Collapse"

In a moment of clarity, Tiger's Julian Robertson educates the money-honey on just how bad things are. Robertson started by trumpeting how bad macro is everywhere, moved on to Europe being in a 'state of financial collapse', likes shorting weak European currencies (Hungarian Forint) and warns of the possibility of a rapid rise in interest rates in the US. He is positive on NOK, thinks Canada is a 'very well run country', is a buyer of US large cap tech (citing GOOG and AAPL specifically), and sees Visa/Mastercard growing at 20%+ per year for some time.



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NYSE Short Interest Soars To Highest Since July 2009; Is An Epic Squeeze Forming In Bank Of America Shares?

While two weeks ago the notable feature in the NYSE short interest update was that it had grown by a whopping 1 billion shares, or the most in over two years, this week's highlighted feature is that in the second half of August evil "speculators" did not relent in their negative bias, and brought the total NYSE Group short interest to a two year high or 14.9 billion shares, a 484 million share increase from the prior week, and the highest since July 2009 when the market still was unaware that central planning was the name of the game, and being short actually meant taking on the Chief Printing Officer head on (and fewer still realized that being long gold was the only effective way to "fight the Fed"). And just like last week when we speculated that we can "expect some even more furious short covering sprees to send the S&P much higher on an intraday basis" courtesy of this massive short interest overhang (which will without doubt be used by stock custodians to create a rally if and when needed, just like back in March of 2009, by making recalling shorts in every name), the probability of a massive "face off" rally grows as more and more join the ranks of those believing that the US capital market still plays by the rules. Newsflash: it does not. And anyone trading stocks, on either the long or short side, is guaranteed to lose.



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