Phoenix Capital Research's blog

The reason I am so pessimistic is because the bond markets, credit markets and interbank liquidity indicate that the situation in Europe is now into “2008 mode”. Indeed, Treasuries have already exceeded their 2008/2009 peak. Tell me, what do you make of a situation in which the bond markets (which are far larger than stocks) are acting as though we’re in a Crisis worse than 2008… which stocks are rallying?

This will NOT be permanent, nor will we enter some kind of Mad Max apocalypse. But there will be temporary shutdowns of the banking system as they work through this mess. And given that most folks rely almost entirely on their credit cards to survive and haven’t prepared at all, things could indeed get very messy at times

The IMF move is just a backdoor bailout that the Powers That Be are hoping the public won’t notice. None of the IMF backers were willing to commit money at the G20 meeting last month… so why are they willing to do so via the IMF now?

This is a holiday week so trading volume will be light. However, recall that it was during Thanksgiving 2009 that the sovereign defaults first started when Dubai asked for an extension on $60 billion in debt it owed. Will we get a European version of the Thanksgiving day collapse this time around with Italy? 

There are now only two REAL outcomes: 1)   The ECB prints (and Germany walks) resulting in the Euro losing at the minimum 30-40% of its value, or...2)   Massive defaults and debt restructuring accompanied by systemic failure in Europe.

We have been getting MAJOR warning signs of a collapse for months now. No less than the Bank of England, the IMF, and legendary asset management firm Franklin Templeton have warned that we are facing an epic, hellish crisis. We got the first taste of this in August when the S&P 500 literally wiped out a year's worth of gains in two weeks The only thing that brought us back from the brink at that time was the belief that the EU mess might be solvable and a coordinated intervention from the world Central Banks.

Based on its debt maturation cycle I expect we’ll see an Italian default within the next six months. Indeed, no matter what happens with Greece, Italy will make sure that the EU in its current form no longer exists within the next year.

Even by a quick back of the envelope analysis, we find ourselves in an environment in which a single corporation such as Exxon is actually more trustworthy (from an investment perspective) than US Treasuries.

The NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed granted MF Global primary dealer status a mere nine months before the latter went bankrupt?

It is clear as day that the EU in its current form is finished. I’ve been saying this for months, but now even the mainstream media is picking up on rumblings that Germany wants to exit the Euro or at least restructure the entire EU.

As far back as May 2011, Bernanke admitted the benefits of QE were less attractive. Now he’s not only admitting that asset bubbles exist (something Greenspan never admitted) but that Central Banks may even need to “burst” them!?!? In plain terms, the Fed will NOT be launching another round of QE or major policy changes until the next round of the Great Crisis hits in full force. And by that time it will be pointless anyway as once the defaults begin, the leverage in the global banking system will implode rapidly.

To put US household debt levels into a historical perspective, in order for US households to return to their long-term average for leverage ratios and their historic relationship to GDP growth we’d need to write off between $4-4.5 TRILLION in household debt (an amount equal to about 30% of total household debt outstanding).

Europe has now gone from a relatively small problem (Greece) to a HUGE problem (Italy). Greece is the 11^th largest economy in Europe. Worldwide exposure to Greece's debt is roughly $280 billion. In contrast, Italy is the third largest economy in Europe and the third largest bond market in the WORLD. Global exposure to Italy’s debt is north of $800 billion. It’s already taken down one firm (MF Global), others are coming too.

Europe is finished. The region’s entire banking system is insolvent (with few exceptions). European non-financial corporations are running massive debt to equity ratios. And even EU sovereign states require intervention from the ECB just to meet current debt issuance, to say nothing of the huge amount of sovereign debt roll over that is due over the next 14 months.

So the EFSF is supposedly going to raise 1 trillion Euros… in an environment in which it struggles to even stage a five billion Euro bond offering?  Give me a break.