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Impact Imminent?
Zero Hedge has the latest Cyprus update - There is no parliamentary support in Cyprus for any bail-in deal. Tyler Durden begs the question:
Neither we, nor anyone else, has any idea what comes now.
The folks at FTAlphaville have some thoughts on the state of play:
A bank run spreading to Spain looks a non-starter in the short term.
The risk of any wider bank run looks pretty small so far, with market reaction relatively benign.
I've been following the Press coverage of Cyprus, the talking heads are saying that Cyprus is a manageable issue. Nothing to worry about at all.
I'm going to disagree with FTA and the TV folks. The chances of a bank run have never been higher. Tyler's right. We're looking at a black hole.
The "Other" scenario for Cyprus is a shell shocker. Forget the shareholders or the senior bond guys - they will end up with Dick's hat band. Those Russians who were at risk of losing as much as 15% of their deposits - They get zip too. At best, they are getting an IOU. That IOU will have a value of 10 cents on the dollar.
Those small depositors that were going to get hit for an unfair loss of 6% now face a vacuum. Their bank statements may not reflect a loss of principal, but they won't be able to withdraw a dime from those accounts. The local banks will remain closed, when they do reopen those deposits will be converted to some new currency. It's possible that the new currency will be the Turkish Lira. You thought the poor folks in Cyprus were getting a bad deal on Monday? Wait till Friday before you pass judgement.
What happens if Cyprus does a "drop out" of the EU? That result immediately makes a lie of Mario Draghi's words that the Euro was Uber-Ales. This is precisely what Super Mario said "would never happen".
If Cyprus goes turtle and leaves the Euro, the credit spreads on peripherals will widen. This sets up a market "call" on the ECB. But remember, for Mario Draghi to give the market the "put" that it will demand, the government's of Spain and Italy will be forced to get down on their knees and beg the gods in Brussels and Berlin for a helping hand. To do that means that they would have to have very harsh terms imposed on them. An IMF team would run the finances of the countries involved.
Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi "put" is now zero.
There is a chance that something can be done to stop what looks like a slide into an abyss. Those chance are now well below 50-50. The markets/seers are calling for a soft landing, while at the same time that outcome is looking less and less likely. The markets seem poorly positioned for what could result in a crisis. And this story is running at hyper speed. That' a very bad combo of events. Seat belts on - Impact Imminent!
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LOL...Bruce sounds a little miffed that the Cypriots aren't playing nice with the world's banking cunts. Bring on the abyss...
I've been waiting. Don't understand why we haven't been seeing national asset sales like a fucking blue light special. Condos in Yellowstone anyone? Gazprom will be the big winner here.
Do you think that it is possible Putin is a major stockholder of Gazprom?
This is nothing but Putin and Merkle playing chicken. Right now I'd say Merkle has him by the balls and the ruskies will blink first. They already own one of those tits up banks. Look for a gas trade/equity deal to preserve 100 cents on the dollar for all concerned.
Will the Germans and European officials agree to re-negotiate the bail-out deal?
If yes, they will look like pussies and no one will take their demands seriously in the future.
If not, Cyprus will default and exit the EU (something that Cypriots have to do anyway to save their banking industry and tax haven status).
https://pbs.twimg.com/media/BFwP5JbCcAAtyJ5.jpg
Addendum:
* SCHAEUBLE SAYS CYPRUS WILL GET NO MONEY IF THEY DONT ACCEPT OUR OFFERS
You are missing the forest through the trees, the same way many did with the greece situation. The issue isn't whether or not the banks are insolvent, or whether cyrpus is solvent. The interest only payments on their debt, as well as the debt paid by the financial institutions are small enough that the ECB can simply monetize them, the actual bailout amounts here are miniscule compared to even a single american bank. The purpose of this exercise was (1) to gauge world reaction to a policy where the customers of a given bank could be forced into bailing it out through the conversion of liquid assets into common stock. If the reaction was minor, this policy could be used on much larger financial institutions and (2) To continue the chirade that the banking 'problem' was fixed by political means. If the USA or EU is forced to admit that their policies over the last 5 years were all a failure, some very uncomfortable questions may start to arise about why they didn't work.
And the same ZH readers who cite Infowars give 16 thumbs up.
This was a small test to see if they can directly pass the DEBT to the "citizens". They don't like it, the sheep aren't going for it, so we will be fleeced thru devaluation. There is no immediate "political" solution, politicians and progressive central planners have created this. It's been cooking for decades, we're all indirectly responsible, we're mostly cowardly and selfish by nature. The DEBT is real, math is real, the truth is inescapable and real, God bitchez!!, that's what makes Kings live or die. Justice will be served.
"some very uncomfortable questions may start to arise about why they didn't work."
Bingo! Thank you for that. These questions are already being asked.
And Carl below, thank you too for the five second report on the lame stream dribble. Nuff said. Now, back to the quest for truth.
Yippie-ki-yay!!
Thank you, whizbang.
You get it. All the while, the talking heads on CNBC are just blabbing away today about the obvious, yet without even thinking the matter through. (which begs the question...why would anyone pay attention if it is "the obvious")
The Cyprus charade is simply a cheap methods test for political response, and it really has little to do with Cyprus' own problems.
It has everything to do with testing reaction before the real and very big problems in mainland Europe's banks and economies must be faced, because the powers of compounding interest, arising maturity dates, and shrinking economies does ultimately limit the ability to kick a can down the road.
The only problem with this Cyprus litmus test is the potential, unexpected consequence of starting bank runs at select European weak points.
Really? If I'd suggested this option to you, last Friday, would you not have told me that it would run the real risk of triggering a massive bank run in Europe and global contagion?
So it is therefore an expected outcome.
How could it not be expected if there was any serious discussions, analysis and planning prior, as to the merits and dangers of doing this? Does that sound credible?
Because alternatively, if the EU leadership clique is that out-of-touch with reality, that they didn't think this was a particualar area of serious danger, then we all have a bigger problem than just this grand miscalulation (presuming it was not deliberate). There would be worse to come.
In the Indian Nations on Turtle Island...we know the songs of Peace are greater than those of war. Both are danced to in pride...and respect.
http://www.youtube.com/watch?v=DIaPIy4Mddg
Must be. Why is the question? What purpose does a bank run serve to the elite? The system exposed, the confidence game down the drain. All in shambles. Who would benefit? Few in the elite are positioned securely to reap the benefits of such a game changer.
Begs the question, who is Schaeuble and what are his real ambitions? Is he the EUR worst enemy and a stealth agent of the return to a DM?
What was he/ were they REALLY thinking?
All good questions. We need to keep this in mind, because it's all too easy to ignore and forget how this went down, and the questions it raises. Given it was the German Finance Minister doing it, and he will be acting after conferring with his Boss, Merkel, then I can only take this to mean the German Govt wanted to bring this banking problem to a head now, so deliberately chose to use Cyprus to do it, knowing it would lead to bank closure and banking system impairment and collapse.
The Germans at the very least seem intent on finally precipitating a reset in the EU.
But every one still presumes Merkel wants stabeeleetee in a pre-election cycle.
But the events so far indicates she's playing to the beat of a different drum.
So why now? What are they hoping to be the outcomes?
Because both their actions and the inactions, both expected and unexpected, are what's going to reveal where they're going with it all.
Is it about political Federalism? Or a re-nationalizing of sovereignty and currency? At the moment Merkel has some power and control beyond Germany. Does she want to lop that off? I really doubt that.
But are they prepared to have a Federal system? I'd say yes.
If so, who do they want in it? And who do they want out of it? So how do they get rid of the dead weight?
You see? It looks like a North and Central Europe federal state may be the aim, because the arrangement they have now as the "Eurozone", is not worth it to them, and it can not work as it is. The Big-Three powers are not happy with it, Germans and Brits especially.
But with a smaller more viable Federal state they can work on an alliance relationship with the rest of Europe, rather than political and economic integration with it.
i.e. the ideal of a unitary supra-national Europe is over.
--
That's one explanation.
"A trial balloon"; "run it up the flagpole and see who salutes"; could be. I like the way you think. It's very reality oriented.
And don't forget that the Cypriots now believe that if they stay in the Eurozone they know for sure that more of the same is coming. this was just the beginning. And this is also the end of it, because there's no way they can stay in, in that case, as the EU will completely ruin what's left via bail-ins, even if the banks did survive, which they won't, and the economy will be totally destroyed. They can't go with that.
So I'm calling this.
It's over.
"It's over."
Brother, it's over for the banksters.
It is a beginning for the people who CHOOSE to be free of the beast that controls all out comes using this tool money to stir up so much fear of loss. They count on the rush of the experience of the energies that are created in that fear of loss mass-mind mental mode. Seze we all, here, take it away from them. Let there be an honest path found that is peaceful and slow in transition away from the beast that has caused all this for a testing 1...2...3 on the worlds reaction.
Well, they got it!
Banksters - 0
The People + 1
How's the weather in Russia now?
Not to worry. Bernanke will transfer the funds from US citizens accounts pronto. Chase banks accounts in SoCal all went to zero for a while yesterday. The electrons are ready for shipping.
Panic now, beat the rush....
This seems like a good place to repeat John Pierpont Morgans famous drollery as to why he wasn't concerned about the Stock Market crash in 1929; "I sold too soon". Always a good idea; and particularly right now; did you close out your stock market portfolio yet? You should have. You still can. Too early looks really clever when its too late.
"What happens if Cyprus does a "drop out" of the EU? That result immediately makes a lie of Mario Draghi's words that the Euro was Uber-Ales. This is precisely what Super Mario said "would never happen"."
Eh? What? Why? Seriously don't get it, this is not continental thought at all.
The EUR project would PROFIT from more leavers & joiners, the more, the merrier
Folks, the Cyprus affair has little to do with currency and trade zones and a lot with banking systems. they too have wars, and Bruce should know that
So why don't the Cypriots leverage the natural gas reserves and their strategic location by working out a potential deal with Russia and Gazprom along with potential bases for Russia in Cyprus vs. EU money, NATO. It seems like its headed this way anyway and NATO wants the existing British bases. They still have some assets that could be used wisely in negotiating themselves out of this situation. Why not take advantage of their strong points, Ports, Strategic Location, Huge Natural Gas Reserves, Nice Climate, Location vs Natural Gas Customers?
Or would that just get the leaders killed? Still if done right it could solve the stalemate.
Bruce, you left out the most probable outcome. The EU will come up with the complete amount needed for the bailout. There will be a lot of yelling and screaming first, and the EU will have to have a way that saves face to bring it about, but that is the most probable outcome.
Still, this may be the stall spin that cannot be recovered from (pilot talk). This could be the beginning of the dreaded FINANCIAL COLLAPSE!!
But remember, they can always print more money.
LOL, we're all gonna die.
Possibly, but Italy and Spain are watching. If Cyprus gets away with it, then they know they don't need to bother with austerity. I think it's more likely Germany will make an example out of Cyprus.
Yes, I guess it is possible that Berlin and Belgium could get spooked and just write a check. It's only $7.5b, so who cares these days.
I say that is not in the cards. These eggs have been scrambled. No way to put them back in the shell.
If that is the way it plays out - Then Merkel is a dead duck. If Merkel is a dead duck, then so is the entire EU system. Which door do you choose?
LOL. Well, yeah, we are all going to die. But we knew that going in. But maybe we're going to die with a lot of money! Personally, I'm waiting to see if they succeed in "re-inflating"; I'm trying to live long enough to see Union Carpenters that get 2500$/day; I think by that time, everybody will "get it".
Good job Bruce.
The ECB trying to steal depositor's money gives Cyprus incentive to leave the Euro, maybe even with Russia's help.
The sticky part will be the division between the Greek and Turkish factions of the island.
Could they go to the Russian Ruble?
Go to Drachmas in conjunction with Greece?
Go to the British Pound?
I would be surprised if there aren't bank runs in other parts of Europe.
Get the fuck out of the EU. Now or later when it collapses.
So let me guess ... the Cypriat banks gave the Russian billions to JP Morgan as collateral?!?
Where is Corzine?
Bruce, I think it was last Friday you told us you thought the Ponzi had four or five years before the Uber SHTF. I know those pesky black swans are hard to see before they land on you but SOMETHING had to happen before four or five years. This thing craters before the end of the year and short term puts are still cheap.
DeadFred - Which puts exactly are you referring to? Thanks
Options; PUTS and CALLS; are not appropriate for the small investor. they tell you that your losses are limited; which sounds good; it's certainly good salesmanship; but you need to look into it a little closer. If you simply short a Euro Contract on the Futures Exchange, and by all means, open an actual account with a brokerage, and go short an actual CME contract; never mind the internet bucket shops for mom and pop FX traders; you can maintain this short position by "rolling over" the contract; buying back your short and simultaneously selling short a new later month contract, when June, the current high volume month gets ripe; about the third week of June, for instance. In this way you can keep your short position alive and active until September or October, or December and it costs you practically nothing. Options on the other hand require that you have the market call correct; the Euro is going down; and the timing correct; because the value of the option declines with the remaining time to expiration; almost all retail purchased optons expire worthless. The reason this is worth doing is that the Euro is going down; it's a 100% lock. That's why you want an active position on the short side; but the cheap and easy way to maintain that position; because the timing of a real "fall down the stairs" kind of decline that you want is basically impossible. I can easily imagine a December Option expiring worthless; but it won't bother me at all; by that time I'll have a brand new February '14 short contract. rolling over only costs an exchange commission fee; which might be something like 39$. You need about 8-10K in your account to be secure with one short contract.
Thanks for the response.
A little question ... was your 800 SAT in Math or English ... or was it the combination of both?
You mean something like 400 each? :-)
Mine was in math. Verbal was a sucky 760. :(
I imagine all of them but I usually look at the S&P because of the (supposed) Fed suppression of VIX. April monthlies slightly in the money break even with a 1.5% decline. If and when things get exciting again we will likely see 5% days once again and the break even is 1 1/2% for a month away? Clearly no one is willing to fight the Fed. Out of the money puts is much more of a gamble but what is life for? In 2011 the S&P dropped 15% in three weeks which would put today's SPY under 132. Puts at 145 for MAY go for $1 and would pay out 13:1 for 15% drop. I won't be buying until the short, short terms look good. The only reason I can justify putting money in this market is for talking points. You get more points for a 100;1 payout than for the more sane at-the-money hedges. I'm waiting for the market to hang on the edge. I see the first edge at about S&P 1520 and the next at the beginning of the year gap at 1460. those 60 points could be gone in a blink. Below 1460 is lots of air.
It's free input and worth every penny.
Willie Mays, I believe said that major league ball was not about home runs, it was about averages. It's better to think of trading for months at a time with one contract short on the S&P; and not much effective margin; what you want is a profit every year that you can pay taxes on; if you want excitement; go to a movie.
Willie also said:
"When they throw it, I hit it
When they hit it, I catch it."
It's always good to be able to play both offense and defense
Sept 2015 for the next tranche in God's judgment ... until we/they repent. This is most likely just a sideshow.
To stop it, the bankers and their criminal cronies need to figure out how to have a global jubilee.
The Troika offered a bailout plan where insured Cyprus accounts would suffer no loss and amounts above the insurance limit would suffer a modest haircut of around 15%. (Considering that some of these accounts have been paying interest rates of more than 10%, a 15% haircut isn't really that bad.)
The Cypriots have rejected the Troika's plan. So if their banking system collapses, it will be viewed as the Cypriots' fault rather than the Troika's.
At least that is what the Troika is hoping. In any case, the Troika cannot afford to blink now. If they give in to Cyprus now, then Greece, Spain, Italy, and all the other countries that are in trouble will start dictating their own terms to the Troika. Terms that the Troika cannot afford.
My best guess is that Cyprus will not be the straw that breaks the camel's back. I think bank failure in Cyprus will increase general nervousness throughout southern Europe and possibly trigger some minor bank runs. But I'm not 100% sure about this and I've been wrong before. It is very difficult to predict the exact point at which nervousness turns into panic.
Considering that some of these accounts have been paying interest rates of more than 10%,
no one is talking about this. is this true? they've been paying 10% when most everyone else in the world is paying ZIRP?
@tip e. canoe
http://cyprusbank.org.ua/index/0-7
Hot Offer !!! For customers from Israel.Place deposit and get free air ticket.
classic
that chart right there should be the clawback for residents & non-residents.
no principal is lost, and they earn what every other depositor in the world does.
ZIRP
seems fair to me.
And for damn good reason, as we've all seen.
If Cypress needs a sugar daddy and if Russia is the cockled party in the deposit romance, why can’t Russia “buy” Cypress, or “invest”, or do a derivative, or have Cypress create a special Russian Bond? In that Russia will want to protect its money with or without a hair cut, it makes sense that Russia will take some sort of measure to keep Cypress in a usable currency and keep the banks functional.
Russia can't buy Cyprus because that's where British army boys do their manouveres and training excercises in anticipation of their next sovereign invasions. come tae grips man which planet you living on?
Pip pip!
http://en.wikipedia.org/wiki/Sovereign_Base_Areas
The SBA covers an area of 98 square miles (250 km2) of Cyprus (47.5 at Akrotiri and 50.5 at Dhekelia). However, the British Government does not own all of the land. The British Ministry of Defence owns only 20 percent of the land, with 60 percent privately owned (farmland) and the remaining 20 percent of the land being SBA Crown land, including forests, roads, rivers, and the Akrotiri Salt Lake.
Fuckin' CROWN LAND, so piss off Putin!
That's so Imperial sounding it gives me the regal 'orn.
But they've freed Libya now, they can go there and play, they'll be greeted with garlands and kisses.