Full Retard Rumormill Goes For The Trifecta As Brazil Joins China And Russia In Bailing Out The European PonziSubmitted by Tyler Durden on 09/13/2011 15:09 -0400
Add this from Reuters to today's rumor trifecta to make the day RDA allowance of crazy pills complete:
- BRICS COUNTRIES IN "VERY PRELIMINARY" TALKS TO COORDINATE PURCHASES OF EURO ZONE SOVEREIGN DEBT - BRAZIL GOV'T SOURCE
And so in one day we have heard rumors of China, Russia and Brazil (in this case"citing a monetary official"... sure beats "unidentified Italian government sources" ahem FT) all bail out Europe, none of which will inevitably happen mind you because these countries aren't governed by idiots, although "idiots" is precisely who trades this market. See the attached chart for the kneejerk reaction to this latest headline.
Even though it has since provoked a firestorm of denials and refutations, the reality is that Dutch media RTLZ probably had some very good sources (certainly better than the FT's yesterday when China was supposed to LBO Italy for the 4th time in 2011) to release the following information, namely that according to the Finance Ministry, the bankruptcy of Greece is inevitable, and that the "question is no longer whether but how Greece goes bankrupt." Additionally, Reuters added that according to Jan Kees de Jager, "We are studying scenarios in secret together with the Dutch central bank (DNB) and also with other countries. We are looking at our own economy, our government finances, the financial sector and consequences for Europe," De Telegraaf added that the "other countries" also included Germany and Deutsche Bank. He said it was difficult to let a country go bankrupt in a controlled way. "Always, if something goes wrong there are effects on other countries, on central banks. So you will have to take into account side-effects. That is precisely the reason why we are looking at different scenarios behind closed doors." A ministry source later confirmed a report on Dutch broadcaster RTL that the scenarios being studied included default by Greece. Of course, in keeping with the European M.O. of spreading a rumor, gauging the market response, and if response is unpleasant, to immediately refute it, Dow Jones and everyone else has since reported that the Dutch were only kidding and were not calling for an orderly default for Greece. Sure. Just preparing for one. Huge semantic difference there...
Tim Geithner, in his third third annual pilgrimage to Europe, the first two of which concluded with one after another more discredited stress tests (because in Mark-To-Unicorn America they worked sooooo well), has a slightly different message to the locals on how to run their failed monetary union. From Reuters: "Treasury Secretary Timothy Geithner is likely to urge euro zone finance ministers on Friday to speed up ratification of changes to their bailout fund and consider boosting its size, an EU source said on Tuesday. The official said Washington was worried that the euro zone was not acting fast enough to enhance the EFSF fund and that the stability of the global financial system was at stake. He is likely to tell the ministers that they should consider increasing the size of the EFSF to equip it better for the needs of potential bank recapitalization. "He will probably tell Germany to give up its resistance to an increase in the size of the EFSF," the source said. A well connected fund source told Reuters Geithner had been pushing for a solution for European banks along the lines of the TARP program in the United States, but had not made much headway." Translation: Germany has to immediately throw billions more of taxpayer money into the insolvent bank pit (just like America did), or else Tiny Tim will get angry. Well, if Germany's ruling class was against pledging over 100% of its GDP to bailout Greece and the other insolvents, it will surely be persuaded to commit political suicide after the last man standing from Obama's administration, who still inexplicably has not been fired for gross incompetence (and also prosecuted for tax evasion), has his say. And just as the short selling ban lasted all of one week before Europe's banks tumbled, even a favorable uptake of the idiot's proposals will at best lead to a 24 hour spike in prices followed by what will likely be the terminal tumble into the abyss of failed Keynesian-Bernankian experimentation.
Update: Italy Hasn’t Asked for Any Help From China, Deputy Min Says... Yeah. Full Retard
Wondering why stocks are soaring and the EURUSD is above 1.37 again? Why, nothing short of the latest rumor, this time that Russia will bail out Europe. Bloomberg reports that Russia may use its international reserves to buy common euro-area bonds if European policy makers back joint debt issuance, Reuters reported, citing an interview with Finance Minister Alexei Kudrin... Sorry, we just report them. Time for the trader diary to get its latest update. The only problem we see with this strategy of rolling daily bailouts is that after China and Russia, who would be far smarter to participate in a stalking horse bid of European assets than to invest general unsecured pre-petition claims, there will be nobody left to "rescue" Europe: after all who else is out there? Zimbabwe? Japan? Argentina? Iceland? We doubt even the 80286's will buy that...
Just when we thought Europe was fresh out of rumor ideas, they prove us wrong once again. From Reuters: "Greek Prime Minister George Papandreou will hold a conference call on Wednesday with French President Nicolas Sarkozy and German Chancellor Angela Merkel, Greek state television NET said on Tuesday. NET did not cite any sources and there was no immediate, official confirmation of the call." Judging by the market reaction, which is a big fat yawn, Europe will have to come up with something much better than this. And we are sure they will oblige: look for the rumor mill to work overtime spewing furious gibberish all day, until something finally sticks to the wall. The end goal is insight: must prevent the unwind of the Eurozone for just 3 more hours when the market closes. And in the meantime, making sure she shoots herself in the foot once again, Merkel said she’s "very optimistic" that Finland’s demands for special collateral as part of the Greek bailout package "will be met within the parameters of measures agreed by euro-area leaders." Funny, because this is 100% backtracking on the official German position as of a few short days ago which was that no collateral would be granted to anyone. Sigh.
Well, the China rumor came and went... So it's time for more "Magic From a 'Mergency Merkozy Meeting." From Reuters:
- FRENCH GOVERNMENT SOURCEE SAYS SARKOZY AND MERKEL WILL MAKE AN ANNOUNCEMENT ON GREECE TODAY
- GERMAN BUND FUTURES <FGBLc1> HIT SESSION LOW AT 137.68 AFTER MERKEL-SARKOZY NEWS
Bottom line: either they file Greece, or they don't, and the vigilantes realize that "emergency" meetings become not monthly (remember Zero Hedge's question how long until the next Merkozy "date" following the last one?), not weekly, but daily, and German and French CDS soar to record highs... Which will likely happen today.
Europe Imploding (Again) Following Another Ugly Italian Bond Auction, WSJ Article Discussing French Bank NationalizationSubmitted by Tyler Durden on 09/13/2011 07:18 -0400
Despite another round of unsubstantiated rumormongering by the FT yesterday (more on this in a second), investors in this morning's critical round of Italian bond issuance were nonplussed and demanded 10 pounds of flash with every bond, which in turn sent 5 year BTP yields to the highest since the introduction of the zEURo. If the purpose of the planted Debtwire/FT story was to make this auction attractive, one can only conclude that it failed. The result is yet another"Europe is Open" type market session, where everything is tumbling on Greek default and contagion fear, further stoked by a front-page WSJ story which says what we have been warning about every single day for the past 3 weeks (those pretty Libor charts that go from the lower left to the upper right are not just there to make the place pretty): namely that banks, in this case French mega institution BNP, no longer have access to dollar funding markets. The result: yet another increase in the actual 3M USD Libor rate, nearly the 40th day in a row, which in turn makes the dollar lock out even more painful. From the WSJ: ""We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore," a bank executive for BNP Paribas, who declines to be named, told me last week. "Since we don't have access to dollars anymore, we're creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore. He's not the only one worried. Société Générale has lost 22.5% of its value since the beginning of the summer. In early September, BNP released a statement—in English, which is highly unusual—explaining that it has abundant dollar liquidity and that BNP has nothing to worry about, unlike other banks. France's three biggest banks have been the subject of whisper campaigns about their solvency throughout the summer." It gets worse: "Now that the situation is bordering on catastrophe, analysts are suggesting that the government is set to start nationalizing France's banks. The banks have remained silent on the matter, and the government denies this talk." Well, whatever good will the FT tried to create with its rumors,the WSJ destroyed with its facts.
While the Raiders may have succeeded against Denver tonight, Silver-and-Black Gold (and real gold) are leaking lower as macro data and European/Chinese leader chatter is trumping any more unidentifed-rumor-mongers (URMs). Aussie business confidence fell to its lowest since APR09 and fell its most MoM since OCT08, French CPI came a little hot, and Merkel warned everyone to keep their mouths shut (our rough translation/interpretation) for fear of more uncertainty in financial markets and an "uncontrolled insolvency" in Greece.
On one hand we have FT "reporting" about Chinese Italian bond purchasing ambitions citing "unidentified Italian officials" one day ahead of a major Italian bond auction (wink wink nudge nudge). On the other hand, we have Reuters, citing a real live Italian Finance Minister (though not for long) Giulio Tremonti, who tells us a slightly different story, which, gasp, cites real live people: "Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank."
Update: NO CONTAMINATION FROM EXPLOSION AT FRENCH MARCOULE NUCLEAR SITE - FRENCH POLICE: RTRS... hopefully the accuracy here is better than at Fukushima
The following story is very fluid and we are following closely. Minutes earlier shares of french EDF have come under selling pressure following broad headlines of a explosion at a French nuclear power plant. Here is what we have found so far...
There has been a sharp increase in risk aversion with the euro and stocks internationally falling sharply due to concerns about the coming Greek default and the real risk of contagion in the Eurozone. The euro got off to a rocky start in Asia, falling to fresh six-month lows against the dollar and a 10 year low on the yen as downside momentum picked up after several key technical levels gave way recently. Gold could see weakness today due to dollar strength and the possibility of margin calls for leveraged players on the COMEX. However, bargain hunting bullion buyers are present at these price levels and gold is likely to be supported above $1,800/oz. While dollar strength would normally result in gold weakness it is very possible that both the dollar and gold could rise together in the short term. This would result in gold making sharper gains in pounds, Swiss francs, euros and other fiat currencies. France’s largest banks by market value, BNP Paribas SA, Societe Generale SA and Credit Agricole SA, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings. Officials in Merkel’s government are debating how to shore up German banks in the event that Greece defaults. Merkel is due to hold talks on the debt crisis with European Commission President Jose Manuel Barroso today. The risk of contagion in the Eurozone sovereign, banking and entire financial system is very real and will result in continuing safe haven demand.
The uptick in credit spending is entirely attributable to subprime auto loans and government-backed student loans, both of which are a mere extension of the same Ponzi-finance scam that put the global economy into cardiac arrest.
Ten days ago Zero Hedge presented the idea of applying an Asbestos-type settlement to the neverending lawsuits against Bank of America which if continue at the current rate will result in the swift and brutal end of the massively undercapitalized bank by a thousand Rep and Warranty litigation cuts. Yesterday, we were happy to see that the idea has received far broader billing, and is being taken up by non other than Reuters: "When some look at all of the litigation arising from Bank of America's big role in the U.S. mortgage mess, they start thinking of asbestos and how thousands of lawsuits arising from that cancer-causing product brought down many manufacturers more than a decade ago. The solution back then to dealing with claims filed by more than 750,000 workers exposed to asbestos was the creation of dozens of "asbestos settlement trusts," which have paid out tens of billions dollars in damages. Some of them are still going strong today. The asbestos trusts were seen as an innovative approach to deal with seemingly endless litigation and provide a measure of compensation to sick workers and their families. The system for dealing with claims also allowed some of the hobbled manufacturers to emerge from bankruptcy largely free of the crushing weight of lawsuits." In other words, the choices for Bank of America are now two: either it prepares for a slow, painful, insolvency as all of its cash is bled out in litigation fees and "one-time" lawsuit charges, or, almost just as bad, it funds a massive trust, ringfencing all past, current, and future claims, and which is funded...by nearly all of Bank of America's equity. Yes, the end result will be a near wipe out of the existing Bank of America stock, but it will not be bankruptcy! In essence, what BAC will do is a bankruptcy remote "prepackaged bankruptcy" in which it spins off its contingent liabilities, with an equity buffer of whatever the litigants choose (most likely up to about 95% of the firm's current equity value), and proceeds to grow as a simple bank (with or without Merrill) and fund itself through retained earnings, in the process shedding off the "cancer" that are $1.2 trillion in toxic mortgages. The result of this would be a BAC share price of under $1 but that is inevitable. The alternative: freefall chapter 11 and technically 7 (which will never be allowed by the administration, sorry Chris Whalen), means BAC trades to $0.00, and the status quo system of crony communism is finished.