Reuters

It is rather amazing what one finds when a company which previously had allegedly posted a profit of €41 million, somehow becomes insolvent, needs a nationalization to avoid a full out liquidation, and gets bailed out by the state. One of the first things one finds is that the profit pitched to that particular class of gullible idiots, known as shareholders, was an outright lie. And yes, on that one very rare occasion when an auditor refuses to sign off on a bank's financials, in this case Deloitte, run far, and run fast. Instead what one finds is a massive loss. From Reuters: "BFA, the parent group of nationalized Spanish bank Bankia said on Monday it had restated its 2011 results to reflect a 3.3 billion euro loss, rather than a 41 million euro profit, following a bailout from the state. In a statement to the stock exchange regulator, BFA said the restated loss reflected a review of its loan portfolios and capital needs after a new audit and as part of the clean-up plan implemented by the government." Well, duh, something "new" better be reflected, or else the general public may just get the impression that banks are merely pulling numbers out of their glutes, that the entire balance sheet, income and cash flow statements are just a jumble of utter BS, and that keeping one's deposits in a system predicated on lies and fraud may not be the smartest thing. But no: that would imply one is inciting a bank run, and that is frowned upon by the very same government which does everything in its power to facilitate just the data manipulation that magically results in a profitable bank being on the verge of liquidation. But that's not all. According to Spain's Expansion, the total loss could be far worse, more than double the just reported, to a total of €7 billion. Indicatively, the move from a profit to a €7 billion loss, in a US context, is roughly the same as if US bank holding company X were to go from being profitable to posting a nearly $100 billion loss.

Back in 2007, BP sold its Coryton refinery, one of the largest in the UK, to Swiss refiner PetroPlus for $1.4 billion. Fast forward 5 years later where we find that shortly after PetroPlus filed for bankruptcy, and was forced to proceed with a firesale of its assets, the European end demand market is so abysmal that a buyer could not be found for even a 30% off firesale. As Reuters reports, following a failure to sell Coryton for the low, low, price of $1 billion, the refinery, in dire need of CapEx investments, will be shutting down, and taking about 10% of UK refining capacity with it. "Insolvent Swiss refiner Petroplus' Coryton refinery in the UK is likely to close after its administrator PricewaterhouseCoopers (PwC) said on Monday that it had failed to find a buyer that could pay $1 billion for the site. Petroplus filed for insolvency in December after it could not meet its debt obligations. "The current economic environment, the challenge of raising $1 billion (£625 million) of funding for the refinery, including the $150 million capital expenditure 'turnaround' project ultimately proved prohibitive in the face of an over supplied European refinery market for both buyers and investors." The Coryton refinery has a capacity to process about 175,000 barrels of crude oil per day and additional 65,000 barrels per day of feedstock. Richard Howitt, the local member of the European Parliament said: "It's a bitter blow for the workforce...I think the process was flawed and that the government should have stepped in." It will be an even more bitter blow to the island nation's motorists who will suddenly find themselves facing with other spiking prices, a shortage of gasoline, or some combination of both.

A reminder of the sharp increase in demand for gold and silver, particularly store of wealth demand, in recent years was seen in the figures released by the China Nonferrous Metals Industry Association in Shanghai today. China’s gold consumption rose 33% to 761 tons in 2011 and China’s silver consumption rose 6.8% to 6,088 tons last year. China’s gold consumption rose 190 metric tons last year to 761 tons, Wang Shengbin, China Gold Association Vice Chairman, said in a speech in Shanghai as reported by Bloomberg. China’s jewelry consumption jumped 28 % to 456.7 tons last year, gold bar consumption surged 51% to 213.9 tons and gold coin consumption gained 25% to 20.8 tons, Wang said. China’s silver consumption, including industrial use, jewelry and coins, rose 6.8% to 6,088 metric tons last year, the vice chairman said. The amount shows a surplus given China’s output of 12,348 tons last year, which gained 6.3%, Wang said.

• Merkel Prepares to Strike Back Against Hollande (Spiegel)
• China to subsidise vehicle buyers in rural areas (Reuters) - what could possibly go wrong
• Bankia’s Writedowns Cast Doubts on Spain’s Bank Estimates (Bloomberg) - unpossible, they never lie
• Shares in Spain's Bankia plunge on bailout plan (AP) - oh so that's what happens when a bank is bailed out.
• SNB’s Jordan Says Capital Controls Among Possible Moves (Bloomberg)
• Greeks Furious Over Harsh Words from IMF and Germany (Spiegel)
• Tehran defiant on nuclear programme (FT)
• Finally they are getting it: Greece needs to go to the brink (Breaking Views) - of course, Citi said it a week ago, but it is the MSM...
• OTC derivatives frontloading raises stability concerns (IFRE)
• Wall Street Titans Outearned by Media Czars (Bloomberg)

The US may be closed today but Europe sure is open. And while the general sentiment may be one of modest optimism in light of four highly meaningless Greek polls which fluctuate with a ferocious error rate on a daily basis, now showing New Democracy in the lead (and soon to show something totally different - after all Syriza had a 4 point leads as recently as Friday according to one of the polls), pushing equity futures higher, Spain has so far failed to benefit from either this transitory spike in optimism driven by record number of EUR shorts forced to cover (more below), with its yields touching a fresh record overnight, the 10 year hitting 6.50% and 450 bps in the spread to bunds, while re-re-nationalized Bankia, now with explicit ECB support plunging nearly 30% only to make up some of the losses and trade down 20% at last check. An earlier 2 year bond auction out of Italy did not help: the country raised the maximum €3.5 billion in zero coupon bonds, however the OID was high enough to send the yield soaring to 4.037% average compared to 3.355% just a month ago, while the Bid to Cover dropped from 1.80 to 1.66. In summary: Europe is walking on the edge right now, and the only thing preventing it from imploding this morning is some short covering as well as a furious statement out of Germany, which has to understand that its precious ECB is now directly funding nationalized banks: something Merkel and BUBA's Weidmann have said in the past is dealbreaker.

All you need to read.

A "failed state" — but Germany is still trying to save the euro, up to a point....

Yesterday, when looking at recent naval developments in the Arabian Sea, we suggested that things involving Iran had gotten quiet. Too quiet. It appears that it may indeed have been the lull before the storm. Just out from Bloomberg and Reuters:

• IAEA SAYS URANIUM PARTICLES ENRICHED UP TO 27% AT FORDOW SITE, HIGHER THAN REPORTED LEVEL
• IRAN DOUBLED 20% URANIUM OUTPUT IN QUARTER, IAEA SAYS
• IAEA INSPECTORS SAY NO GUARANTEE ALL NUCLEAR MATERIAL PEACEFUL
• IRAN TELLS INSPECTORS THAT 27% URANIUM A TECHNICAL GLITCH

As a reminder, Uranium enriched over 20% is considered "Highly Enriched." The only question we have is whether the enrichment level will increase the closer we get to the November presidential election, and whether there is a threshold rating in someone's popularity, pardon, in the enrichment level, which will trigger the Iranian invasion by one or more powers, now that WTI is safely in 9X handle territory and sliding.

Today, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold on the domestic market in order to diversify their foreign exchange reserves.   "Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters on the sidelines of a financial conference in Milan. Russia's gold and foreign exchange reserves fell to $514.3 billion in the week ending May 18, from $518.8 billion a week earlier. However, they have risen from the $498.6 billion seen at the end of 2011. Yesterday, Shvetsov said that Greece has plans for a parallel currency and that it is a “necessity” for Greece to leave the euro.

Yesterday we mocked the fact that the Bankia's bailout costs are doubling with each passing day. Today, things just got "Messi-er":

SPAIN'S CATALONIA REGION NEEDS GOVERNMENT HELP, RUNNING OUT OF DEBT FINANCING OPTIONS-CATALAN PRESIDENT - RTRS

So... if broke Bankia can rehypothecate Ronaldo, can Barcelona demand delivery of Messi and pledge him as ECB collateral too? Or was he nationalized by the government in retaliation for that whole "Argentina" thing?

• This is the solution? - Germany Writing Six-Point Plan for Europe Growth, Spiegel Says (Bloomberg)
• JPMorgan Gave Risk Oversight to Museum Head Who Sat on AIG Board (Bloomberg)
• Vatican bank president Gotti Tedeschi ousted -statement (Reuters)
• Bribery, crime and stupidity pays. From this: SEC Staff Ends Probe of Lehman Without Finding Fraud (Bloomberg)
• To this: Lehman to buy remaining Archstone stake for $1.58 billion (Reuters)
• Governments must restore faith in debt sustainability: ECB's Praet (Reuters) - by issuing more debt
• IMF Helping EU Explore Alternatives to Euro Bonds (WSJ)... such as US-funded bailout bonds?
• China Banks May Miss Loan Target for 2012, Officials Say (Bloomberg)
• Facebook market makers' losses total at least $100 million (Reuters)
• World Bank’s Sri Mulyani Says Asean Is Resilient to Europe Woes (Bloomberg)
• Time to flip "The Scream" - Tiffany Cuts Full-Year Profit Forecast (Bloomberg)
• Definitely Maybe: Italy's Monti says Greece will probably keep euro (Reuters)

All yu need to read.

We have spent a considerable amount of time in the last week or two explaining just why depositor withdrawals (or bank runs) are the death knell for the Euro experiment. We first described the 'run on banks and governments' on the basis of the potential for overnight loss of 'fungibility' back in December but the escalation last week in Greece (and the contagion to Spain's Bankia) signals things are shifting to 11 on the amplifier of Euro-Fail. This evening brings new information from The Guardian that 'Police are urging Greeks to keep their money in bank accounts rather than putting it at risk of theft, amid further uncertainty about whether the austerity-struck country will remain in the eurozone.' Greece's national police spokesman, Thanassis Kokkalakis, told Reuters: "Many people have withdrawn their money from the banks fearing a financial crash, and they either carry it on them, find a hideout at home or in storage rooms. We urge people to trust the banking system, leave their money there, or at least in a safe place, not hide it at home" Is anyone picturing Cramer and his 'Bear Stearns' call? Speculation of a Euro-wide deposit guarantee scheme was quashed somewhat by yesterday's dismally predictable non-event summit - especially given the only three-week span to the next elections. That leaves Greek citizens juggling the possibility of having their home robbed against the probability that the government, via GEURO-isation, will do it for them in the bank.

Note the following sequence of events, bolded numbers, and dates:

• Bank Of Spain Formally Nationalizes Bankia, Says Insolvent Bank Is "Solvent", Adds There Is No Cause For Concern, Zero Hedge, May 9
• Spain is taking over Bankia by converting its 4.5 billion euros of preferred shares in the group’s parent company into ordinary shares, BusinessWeek, May 21
• Spain said on Wednesday its rescue of problem lender Bankia would cost at least 9 billion euros ($11 billion), as the government tries to clean up a banking system that threatens  to drag the country deeper into the euro zone crisis, Reuters, May 23   
• Bankia SA will have to ask the Spanish government for more than 15 billion euros as part of its effort to restore its financial health, state-owned news agency EFE reported Thursday, citing financial sources, Dow Jones, May 24

Hopefully we aren't the only ones to notice how the bailout cost has oddly doubled almost on a daily basis.