Does Anyone See This Emergency As An Emergency, Or Is A Half Trillion Euro Pay Day Loan Bullish?
Today's big headline from Bloomberg: Euro-Area Banks Tap ECB for Record Amount of Three-Year Cash
Euro-area banks tapped the European Central Bank for a record amount of three-year cash in an operation that may boost bond and equity markets.
The Frankfurt-based ECB said today it will lend 800 financial institutions 529.5 billion euros ($712.2 billion) for 1,092 days. Economists predicted an allotment of 470 billion euros, according to the median of 28 estimates in a Bloomberg News survey. In the ECB’s first three-year operation in December, 523 banks borrowed 489 billion euros.
So, basically, nearly twice as many banks are in trouble now as compared to just three months ago. This is bullish, right???!!!
“The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy Barclays Capital in London, who estimates about 300 billion euros of the total is new lending. “So the impact may be bigger than with the first one.”
I'm not familiar with the quality and/or strength of the shit they smoke over there in London, but from the looks of things it appears to be potent enough. Let's take this bloke's comment to heart, "it is likely they will pass it on to the economy,” . Okay, now where do I begin? Exactly how much of first LTRO made it into the actual economy versus being hoarded by the banks? Is the "pass[ing] it on the the economy" the reason why there is now so much liquidity in European CRE? Here's a quick reminder of where I stand on this...
So, it's safe to say that all of those European REITs and real estate concerns with property mortgages coming up for renewal while underwater will definitively see most of that LTRO 2 money, right? Let's all take a deep breath and hold it as we wait for that one to happen. Ready? One... Two... Three... What do you think, pray tell, happens when the liquidity starved, capital deprived, over leveraged banks fail to roll over all of that underwater Eu mortgage debt?
Investors seeking safety in Germany, the UK and France may truly be in for a rude awakening!
Reggie Middleton Featured in Property EU, one of Europes leading real estate publicatios
Those who wish to download the full article in PDF format can do so here: Reggie Middleton on Stagflation, Sovereign Debt and the Potential for bank Failure at the ING ACADEMY-v2.
'Nuff said! Subscribers, as (not if, but as) this breaks, these are
the companies trading at the valuations that are most
shortable/profitable in my opinion...
- US REIT Fire Sale Scenario Analysis
US REIT Foreclosure Scenario Analysis
- US REIT Sample Property Valuation
- US REIT Cashflows and Debt Preliminary Analysis