Could Sweden or Finland be the scene of the next European financial crisis? It is actually far likelier than most people realize. While the world has been laser-focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place. Nordic and Western European countries such as Norway and Switzerland have attracted strong investment inflows due to their perceived economic safe-haven statuses, serving to further inflate these countries’ preexisting property bubbles that had expanded from the mid-1990s until 2008. With their overheated economies and ballooning property bubbles, today’s safe-haven European countries may very well be tomorrow’s Greeces and Italys.
A lesson to be learnt from the individuals who continue to buy European Debt
$6 Trillion In US Bonds Seized In Zurich, Said To Pose "Severe Threats To International Financial Stability"Submitted by Tyler Durden on 02/17/2012 09:50 -0500
Back in the summer of 2009, a peculiar story circulated when two Japanese individuals were arrested trying to smuggle $134 billion in US bonds into Switzerland from Italy. The story quickly died down after it was subsequently reported that the bonds were merely fake bearer bonds. Nobody heard much about it since then. Until today, when out of the blue we get a new story which blows that one out of the water. According to Bloomberg, "Italian anti-mafia prosecutors said they seized a record $6 trillion of allegedly fake U.S. Treasury bonds, an amount that’s almost half of the U.S.’s public debt." From here the story just gets weirder: "The bonds were found hidden in makeshift compartments of three safety deposit boxes in Zurich, the prosecutors from the southern city of Potenza said in an e-mailed statement. The Italian authorities arrested eight people in connection with the probe, dubbed “Operation Vulcanica,” the prosecutors said. The U.S. embassy in Rome has examined the securities dated 1934, which had a nominal value of $1 billion apiece, they said in the statement. Officials for the embassy didn’t have an immediate comment." ...And weirder: "The individuals involved were planning to buy plutonium from Nigerian sources, according to phone conversations monitored by the police." ...And really, really weird: "The fraud posed “severe threats” to international financial stability, the prosecutors said in the statement." Ok great, however one thing we don't get is just how can $6 trillion in glaringly fake bombs be a "threat to international financial stability."
Ok, I exaggerate. But that’s my cynical first impression after finding the following diagram in the briefing book for the gathering of the good and the great at the World Economic Forum in Davos, Switzerland. As you can see “Severe income disparity” is #1 on the Top 5 risks list this year, after having failed to make the short list for the preceding 5 years. Now it’s not as though the attendees of Davos were completely inattentive to the economic plight of the less fortunate all this time. “Economic disparities” was on last year’s laundry list of risks and was featured prominently in the executive summary of 2011's report. But the urgency has been ratcheted up quite a bit this year: note the new modifier “severe” and the use of the more specific “income” rather than “economic”. But wait, there’s more.
First Buffet, now Mitt Romney. Via Bloomberg:
- ROMNEY SAYS HIS EFFECTIVE TAX RATE CLOSER TO 15%
- ROMNEY SPEAKS TO REPORTERS IN FLORENCE, SOUTH CAROLINA
- ROMNEY SAYS MUCH OF HIS INCOME COMES FROM INVESTMENTS
Next thing you know he too will offer all Republicans a one for one match on all US sovereign debt repayments, and will demand that all millionaires generously hand over their income. As for us, we quietly wonder whether the account clerks at Zurich banks are sweating already?
Just one headline from Bloomberg, which says it all:
- HILDEBRAND RESIGNS
It is unclear which FX trading company he will join next. As expected, the entire politically charged campaign against Philipp was set to culminate with his departure. And now that the scapegoat is official, it may be time to revisit the EURCHF floor which will likely be the next to go.
This is the question of the hour. Which way was it?
A few weeks ago we discussed the pressure the Greeks were under to source their energy needs from Iran since no one else would extend them credit. The European credit strain contagion now appears to be spreading rapidly as Europe's largest independent refiner by capacity, Petroplus Holdings AG, is suspending operations at three plants as banks freeze a $1bn revolving loan facility. S&P cut its rating from B to CCC+ citing a sharp deterioration in the firm's liquidity position. As a pure play refiner, meaning it needs to buy all of its crude supplies (on credit obviously) to feed its plants, it seems evident that both vendor- and bank-financing mechansims are starting to clog up very seriously. Bloomberg notes that refining margins are down considerably and we suspect that the closure of the Petroplus plants will help margins implicitly but as headlines show:
- *PETROPLUS SAYS TEMPORARY ECONOMIC SHUTDOWNS IN JAN. '12
- *PETROPLUS SAYS RESTART DEPENDS ON ECONOMIC CONDITIONS, CREDIT AVAILABLE
Even as Eurozone leaders attempted to instill some meager sense of accomplishment following the latest (but certainly not last) Euro summit culminating with yet another 7-page term sheet which achieved absolutely nothing, and in fact succeeded in alienating the UK even more, the real game continues behind the scenes. And it is a game which the euro looks set to lose. As Bloomberg reports, in the aftermath of the Telegraph's latest report confirming what has been said here all about the collateral crunch in Europe, Europe's CEO are now actively preparing for the worst case outcome: the end of the Euro (despite UBS' and other banks' repeated calls that such an event would result in an end of the world). To wit: "Grupo Gowex (GOW), a Spanish provider of Wi-Fi wireless services, is moving funds to Germany because it expects Spain to exit the euro. German machinery maker GEA Group AG is setting maximum amounts held at any one bank. “I don’t trust Spain will remain in the euro zone,” said Jenaro Garcia, founder and chief executive officer of Madrid- based Grupo Gowex, which provides Wi-Fi access in 15 countries. “We moved our cash and deposits to Germany because Spain will come back to the peseta"... Contingency planning for an unraveling of the currency involves cutting investment, moving money to Germany, transferring headquarters to northern Europe from southern, and even going out of business." And to all the chatterboxes on CNBC repeating ad inf that a Eurozone collapse would be "manageable" here is a person who actually knows what he is talking about: "“How do you control an explosion in a controlled way?” Fiat SpA (F) Chief Executive Officer Sergio Marchionne told reporters in Brussels on Dec. 2. “That’s a contradiction in terms. This will be an implosion of some size with potentially disastrous consequences." He is right, and while the outcome is certain, it will not stop Europe's financial leader Germany from intervening in an attempt to prevent a surge in Deutsche Marks once the currency returns, and will likely set up capital control measures - that last bastion to every failing monetary system - to halt what is sure to be a record inflow of post-collapse DEM appreciating capital.
Gold Bullion International Interview Part 2, Discusses Their Tradable Physical Model vs Sprott Physcial Gold TrustSubmitted by Reggie Middleton on 12/04/2011 09:59 -0500
Now, Gold is getting interesting...
Trading Physical Gold As Easily As You Trade Stocks: Is Gold Becoming A Tradable Currency After All?Submitted by Reggie Middleton on 12/03/2011 10:41 -0500
Not many know that you can trade physical gold & precious metals OTC through your brokerage account, and take physical delivery on demand. This is the first of several interviews that explores this model.
It is 17:03 in Zurich...and it appears that rumors of an SNB intervention have been once again greatly exaggerated. Either that or Hildebrand has pulled an Obama and is stuck in the sandtrap on the 18th. Immediate result: EURCHF down 40 pips on the lack of news, and will continue dropping to the 1.2250 level with every minute which confirms the SNB floor hike rumor was just that.
There's so many ways this could go wrong.
The UBShank Redemption Update: No EURCHF Was Harmed In The Scapegoating Of UBS' $2.3 Billion Loss On A 31 Year Old TraderSubmitted by Tyler Durden on 09/18/2011 09:29 -0500
For those wondering just how UBS is planning on scapegoating its horrible quarterly loss on one, single, solitary trader, here is the update, and contrary to rumors and speculation, no EURCHF trades were harmed in the creation of this farce. To wit: "The loss resulted from unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months. The positions taken were within the normal business flow of a large global equity trading house as part of a properly hedged portfolio. However, the true magnitude of the risk exposure was distorted because the positions had been offset in our systems with fictitious, forward-settling, cash ETF positions, allegedly executed by the trader. These fictitious trades concealed the fact that the index futures trades violated UBS's risk limits." Basically this is nothing but Kerviel 102, only this time with the added benefit of it being a non-recurring item to pretend that UBS will actually have had a profit instead of a loss in the quarter. We wonder just what the deposit account "offset" in an offshore Cayman account for Kabuki Owed Lo (obviously an anagram of the beneficiary) will be when he gets out of prison in 18-24 months?