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And The Next Stop On The European Bank Flu Express Is

Reggie Middleton's picture





 

As global equity markets gap downward the trading day after I suggested Watch The Pandemic Bank Flu Spread,
can kicking will get progressively harder from this point on. As I have
said in my many interviews, the only way out of this is debt
destruction, which will crush big European banks leveraged up on debt
marked at par of close enough to it.

Having
made clear that default was the only way out, Iceland has once again
proven me correct. And just to jog the memory, I made it clear that
default was the only way out nearly two years ago...

Online Spreadsheets (professional and institutional subscribers only)

Bloomberg reports: Iceland May Hold Krona Auctions Within Weeks

The
island, whose banks defaulted on $85 billion in 2008, is moving into
the final stages of its resurrection plan as the last vestiges of crisis
management are gradually removed. Iceland’s decision, taken together
with the International Monetary Fund, to impose capital controls three
years ago was key to surviving the bleakest moments of the crisis and
helped prevent an all-out run on the island’s assets, Gudmundsson said.

“Without
the capital controls it would have been much more difficult to ensure
stability in the exchange rate, calling for much higher interest rates
and an inability to shelter the domestic economy as well as we did,” he
said. “With the turbulence in the international markets lately, the
capital controls have sheltered Iceland considerably, since there’s no
way of doing a run on the financing of the Icelandic state or the
financing of the Icelandic banks.”

It
is clear that capital controls are coming to the EU, and I'm sure there
already in place in some form or fashion. It is quite ironic how the
so-called "in the know" pundits alleged that Iceland would be osctrazied
from the captial markets for defaulting when they are the ones actually
returning to the markets as the TPTB in the EU are being shunned. Just
default already and get it over with, or you just may find yourself
working for an Icelandic boss momentarily... You can try to save all of
your banks and end up saving no banks at all, or you can go the logical
route - the route that Iceland democratically allowed their populace to
choose, which also so happened to be the right way. Hmmm... Democaracy!
Capitalism! We just don't seem to be seeing those concepts in the Euro
area much these days...

Outperforming Euro Area

Iceland’s
economy will grow faster than the euro-area average this year and next,
the IMF estimated in September. The cost of insuring against an
Icelandic default, using credit default swaps, is lower than the average
for the euro area.

Iceland’s
economy will grow 2.5 percent this year and next, versus 1.6 percent in
the euro area this year and 1.1 percent in 2012, the IMF said Sept. 20.
Next year, Iceland’s current account surplus will widen to 3.2 percent
of the economy and unemployment will be 6 percent, versus 9.9 percent
joblessness in the euro area, the fund said.

The
stabilization of the island’s economy has allowed the central bank to
press ahead with capital liberalizations that the government estimates
won't be fully dropped until 2013. The approach allows foreign investors
eager to offload their krona holdings to transfer them to foreign or
local investors willing to commit long-term to the island, according to
the central bank.

'Nuff
said. Now, on to my other premonitions, predilections and predictions
for which my subscribers pay me so dearly for... CNBC reports Moody's Warns On French Rating Outlook

A
rise in interest rates on French government debt and weaker growth
prospects could be negative for the outlook on France's credit rating,
Moody's warned in a report on Monday, adding to pressure on European
debt markets.

Worries
that France has the weakest economic fundamentals among the euro's six
AAA-rated countries have drawn the euro zone's second largest economy
into the firing line in the debt crisis this month.

The
rating agency said the deteriorating market climate was a threat to the
country's credit outlook, though not at this stage to its actual
rating.

"Elevated
borrowing costs persisting for an extended period would amplify the
fiscal challenges the French government faces amid a deteriorating
growth outlook, with negative credit implications," Senior Credit
Officer Alexander Kockerbeck said in Moody's Weekly Credit Outlook dated
Nov.21.

"As
we noted in recent publications, the deterioration in debt metrics and
the potential for further liabilities to emerge are exerting pressure on
France's creditworthiness and the stable outlook (though not at this
stage the level) of the government's Aaa debt rating," the Moody's note
read.

The
yield differential between French and German 10-year government bonds
rose above 200 basis points last week, a new euro-era high.

Moody's
said that at that spread level, France pays nearly twice as much as
Germany for long-term funding, adding that a 100 basis point increase in
yields roughly equates to an additional three billion euros in yearly
funding costs.

In
early Monday trade, the French 10-year spread was up about 20 basis
points at 167 bps following publication of Moody's report but remained
well short of the 202 bps hit last week.

The CAC 40 index, which was down 1.7 percent in opening trade, was down 2.2 percent after an hour of trade.

"With
the government's forecast for real GDP growth of a mere one percent in
2012, a higher interest burden will make achieving targeted fiscal
deficit reduction more difficult," Moody's said.

On
Oct 17, Moody's said it could place France on negative outlook in the
next three months if the costs for helping to bail out banks and other
euro zone members overstretched its budget.

"The French social model cannot be financed if the French economy's potential is not preserved.

...
The stress on banks' balance sheets can lead to further increases of
liabilities on the government's balance sheet when further state support
to banks is needed, it added.

The events are unfolding like clockwork. Just go back a few months - or a year - or two years - in the BoomBustBlog archives for the Eurozone topic...

Italy’s Woes Spell ‘Nightmare’ for BNP - Just As I Predicted But Everybody Is Missing The Point!!!

BNP, the Fastest Running Bank In Europe? Banque BNP Exécuter

When French bankers gorge on roasting PIIGS - OR - Can You Fool Everybody All Of The Time?

So, does BNP have a funding problem, or is it at risk of the same?

BoomBustBlog
subscribers know full well the answer to this question. I'm also going
to be unusually generous this morning being that our prime French bank
run candidate has approached my "crisis" scenario valuation band. So, as
to answer the question as to BNP, let's reference File Icon Bank Run Liquidity Candidate Forensic Opinion - A full forensic note for professional and institutional subscribers, and otherwise known as BNP Paribas, First Thoughts...

The WSJ article excerpted above quotes BNP management as saying: "The bank has €135 billion in "unencumbered assets after haircuts" that are eligible to central banks."

OK, I'll bite. Excactly how did BNP get to this €135 billion figure? Was it by using Lehman math? Methinks so, as clearly delineated in my resarch report on the very first page:

BNP_Paribus_First_Thoughts_4_Page_01 

The
following two pages of this report go on to reveal the games being
played to potentially come up with a figure such as the 135 billion
quoted above. Boys and girls, I fear those may be Lehman bucks! 

For
those not familiar with the banking book vs trading book markdown game,
I urge you to review this keynote presentation given in Amsterdam which
predicted this very scenario, and reference the blog post and research
of the same:

CNBC and Bloomberg report S&P to Update Bank Credit Ratings Within 3 Weeks. You know that means (or at least should mean)... Next stop of the bank flu express... Germany!

I may post an update on German banks in a week, but I want subscribers to remember that if when things really kick off, this is going to be an explosion that no one said they expected but will blow everybody's ears out - posted behind the paywall well over a month ago and still priced inexpensively relative to those other banks: Blowup Bank - Haircuts, Derivative Risks and Valuation

 


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Mon, 11/21/2011 - 16:13 | Link to Comment Windemup
Windemup's picture

My My My. She does have great legs.

 

Mon, 11/21/2011 - 16:07 | Link to Comment hooligan2009
hooligan2009's picture

ponders a few gold related questions

a) if someone steals your gold did you really have it in the first place?

b) if a banker steals your gold does he get promoted?

c) if a non-banker steals your gold and you shoot them but dont kill them, do they go to jail?

d) if a non-banker steals your gold and you shoot them and kill them, do you go to jail?

I hate Mondays!

Mon, 11/21/2011 - 15:56 | Link to Comment Shizzmoney
Shizzmoney's picture

Off topic: Lauren Lyster is just simply delicious. 

Mon, 11/21/2011 - 14:52 | Link to Comment Franken_Stein
Franken_Stein's picture

So you announce for 3 years now that the collapse is imminent, basically cluelessly clutching at straws, and NOW with the 33rd announcement you hope to be right ?

 

Yawn.

 

Greetings from Germany, but there's no collapse here, as far as the eye can see.

Maybe next time.

That would then be announcement #34.

 

Mon, 11/21/2011 - 16:19 | Link to Comment walküre
walküre's picture

Reggie Middleton is 7 years behind my curve ball. I've known that problems in Europe would eventually come to a crisis point when they introduced the Euro. So did about 75% of the financial world.

I can't stand these clowns that constantly brag about how right they've been in their predictions.

Who gives a shit?

Pray, tell Reggie the Great how can this crisis be fixed is what I'd like to know from you!

Get back to us and offer some solutions instead of being bashful about the obvious mistakes that have been made.

But that blue tie sure does look good on ya!

Mon, 11/21/2011 - 17:32 | Link to Comment taraxias
taraxias's picture

Here's a solution for you. 

 

I've been shorting euroland financials on Reggie's calls and converting my profits to physical gold.

 

The fact that now I'm getting deep discounts on the metal is a bonus.

 

Try it, you'll like it. 

 

 

Mon, 11/21/2011 - 18:33 | Link to Comment walküre
walküre's picture

That's your solution? It's a trading reco. Fine. I get that. FYI you could short the main market since July and make money.

But what is the solution to unsustainable global debt? Other than printing money?

 

Mon, 11/21/2011 - 15:14 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

Imminent in financial terms usually means inside of 24 mos. Reggie has never given dates, just observations. His work is stuff that you cannot get anywhere else.

Perhaps he has misjudged the one factor outside his realm of expertise: the stubborness of the willful ignorance. Western civilization has swallowed every lie and distraction that the banksters have used to delay onset of the hard-reset process because they cannot bear to consider the pain of the reality. The Wizard of Oz lives!

It will happen, Reggie is just trying to wake more people up so they can look for a lifeboat (or maybe build one). I hope you have prepared for the eventuality.

Mon, 11/21/2011 - 16:24 | Link to Comment walküre
walküre's picture

Lifeboats?

There are NO lifeboats. The elite will either accept to share their wealth or they will loose it in coming wars and revolutions.

Of course the elite knows that and to some degree is preparing and securing themselves a seat among the revolutionaries.

The more things change, the more things stay the same!

Mon, 11/21/2011 - 15:58 | Link to Comment Shizzmoney
Shizzmoney's picture

Agreed, you can't really time the defaulting of debt.  You just wake up one morning and BOOM, shit happens.

The only indicator could be precious metals, but even then, central banks try to keep that down b/c even the majority of the public getswhen they do well, things aren't going good.

Mon, 11/21/2011 - 15:10 | Link to Comment Stockmonger
Stockmonger's picture

Come back in three years and tell us how Deutsche Bank's 40-50x leverage worked out.

Have you been buying Greek and Italian debt over the past three years and making a killing?

Mon, 11/21/2011 - 16:11 | Link to Comment PY-129-20
PY-129-20's picture

I do not bet against Reggie. Remember Dexia? I mean, sure, try to be ignorant of what happens outside of Germany and I can understand that sentiment. I just hope you don't run a business. I am prepared and so is the company. Better safe than sorry.

Greetings from Germany too.

Mon, 11/21/2011 - 14:37 | Link to Comment Georgesblog
Georgesblog's picture

In September of 2007, I said that, when this mess blows, it will be spectacular. There is a lot less margin for error, than there was, then. Debt expansion is running it's course. The load is becoming more than the economy can bear.

 http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/

Mon, 11/21/2011 - 14:19 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

"Flu!??!     We've got fucking tuberculosis, pneumonia, syphillis, gonnorhea, AIDS, and an ingrown toe-nail all rolled into one big fat comatose patient here, Dr. Middleton!"

Mon, 11/21/2011 - 16:44 | Link to Comment FeralSerf
FeralSerf's picture

We believe we have a solution for the ingrown toe-nail problem.  Stay tuned!

Mon, 11/21/2011 - 13:05 | Link to Comment Cynthia
Cynthia's picture

Why is it that so many of the RT hostesses come on the air wearing baby-doll nighties and stiletto heels? I hate to think that they are trying to outdo the bottle-blond bimbos on Fox.

Mon, 11/21/2011 - 19:19 | Link to Comment FeralSerf
FeralSerf's picture

It's a Russian thing.

Mon, 11/21/2011 - 14:18 | Link to Comment LFMayor
LFMayor's picture

well, none of the real men are complaining.

Mon, 11/21/2011 - 13:10 | Link to Comment sabra1
sabra1's picture

maybe you prefer janet napolitano? pukefest!

Mon, 11/21/2011 - 12:50 | Link to Comment Haole
Haole's picture

Lauren Lyster makes it move.

Mon, 11/21/2011 - 12:35 | Link to Comment ferret
ferret's picture

Bazooka,

 

Good to see you back posting again. 

Mon, 11/21/2011 - 14:17 | Link to Comment LFMayor
LFMayor's picture

LOL, I seen what you did there

 

Mon, 11/21/2011 - 12:36 | Link to Comment LowProfile
LowProfile's picture

Not really.

Mon, 11/21/2011 - 11:36 | Link to Comment mt paul
mt paul's picture

this is not a credit event

move along ..

Mon, 11/21/2011 - 11:31 | Link to Comment SwingForce
SwingForce's picture

Thanks Reg, got it. (the last word in your title today). Appreciate it.

Mon, 11/21/2011 - 11:50 | Link to Comment philosoraptor
philosoraptor's picture

Reggie, do you think the UK will be dragged into this? Gilts strong at the moment, but the overall debt is one of the largest out there (although much longer dated compared to the Euro countries). RBS and LLoyds part-nationalised - a strength or weakness? Just a matter of time before the UK follows France?

Mon, 11/21/2011 - 11:27 | Link to Comment Bazooka
Bazooka's picture

Equities down = Gold and Silver down

When equities rally briefly again = Gold and Silver will briefly rally

Precious Metals: Safe Haven My Ass!!!

Mon, 11/21/2011 - 15:23 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

These prices are for paper, not physical. Physical will not be priced by paper for much longer.

We don't even want to know how our lives will change when our money is turned into toilet paper by the people "fixing" the sovereign debt problems. Better look at some PMs or rural farmland (with water rights) if you want to have anything when the smoke finally clears.

Mon, 11/21/2011 - 19:17 | Link to Comment FeralSerf
FeralSerf's picture

Don't bet on it. Every since paper money was invented, worthless fiat was replaced by New Fiat. Legal tender laws will ensure that the fiat is legal payment "for all debts public and private".

Physical PMs will be openly valued in the new fiat if ownership is not made illegal. Otherwise a black market will exist.

That rural farmland with water that belonged to the American Indians or the Mexicans didn't do them much good after the Indian wars or the Mexican War. When you find you need to vote with your feet to avoid the relocation/concentration camps, that real estate is difficult to take with you.

Everything has risk. Having all one's eggs in the same basket is especially risky.

Mon, 11/21/2011 - 12:33 | Link to Comment DogSlime
DogSlime's picture

Physical PM's in your posession are a safe haven.

You doubt this?

You think that an account with, say... MF Global is a safer haven?

Physical Gold and Silver are in your control.  So is cash, to some extent (although it's losing value rapidly).

How is this not safe?

What do you define as safe?

 

Mon, 11/21/2011 - 16:41 | Link to Comment FeralSerf
FeralSerf's picture

I've been robbed before and all the gold was taken.  Insurance didn't cover it either because I couldn't prove that I really had them.   You can't sit on your hoard awake with your AK47 all the time.  Safes can be opened.  Loved ones can be threatened.  The people that sold them to you or delivered them can talk.  The list of possibilities of loss is endless.  A large stash of physical PMs at one's home is not only unsafe with respect to the PMs but is also unsafe with respect to your and your family's personal safety.  No matter how many guns you have, you need to sleep sometime.

It's amusing that  the same people that advocate renting their homes are some of the same ones that say one should bury his PMs in the back yard.

Mon, 11/21/2011 - 17:16 | Link to Comment DogSlime
DogSlime's picture

You can be robbed at any time.  They can hold your family hostage while they take you to the cash machine to draw out all your savings - having them in the bank doesn't help in that case.

This is background risk that exists all the time.  If you have your money invested with an institution you have the added risk that they will go bankrupt and/or take your money and run.

This wasn't much of a risk during the good times, but it's an added risk now.  It's another way that you can be robbed - on top of the up-close-and-personal robbery that is a risk that you describe.

 

Mon, 11/21/2011 - 19:06 | Link to Comment FeralSerf
FeralSerf's picture

 I wasn't and I'm not advocating that one keep all his assets available to the ATM.   Some in a limited size account is OK I think, but a major portion of one's assets probably shouldn't be accessable this way.

The only way I know to mitigate these risks are to spread one's assets among multiple accounts and/or locations.  This would include multiple banks/credit unions, multiple countries, and multiple non-bank high security storage locations.   Maybe then the bad guys wouldn't get it all.

If one's heirs do not know the locations of his assets, the danger is that some banker, bureaucrat or a family of gophers will inherit his estate by default.

Mon, 11/21/2011 - 16:55 | Link to Comment Ghordius
Ghordius's picture

I am the only one that knows where my boat sank...

Mon, 11/21/2011 - 18:56 | Link to Comment FeralSerf
FeralSerf's picture

If you get run over by a truck then what?  Your heirs are just fucked, eh?

Mon, 11/21/2011 - 12:07 | Link to Comment LowProfile
LowProfile's picture

Wow, three posts in 2 minutes.

...Troll much?  Where is that "ignore user" button, anyway...?

Mon, 11/21/2011 - 17:24 | Link to Comment taraxias
taraxias's picture

It doesn't look like trolling to me, it's more like he's suffering a meltdown. Probably kept buying the last few dips. The bulltards never learn but somehow they find comfort in trashing gold. Weird.....

Mon, 11/21/2011 - 11:50 | Link to Comment Zero Govt
Zero Govt's picture

Gold and Silver has no counterparty risk... that 'cash' you have in the bank or 'money' you have in stocks can both get torched (see MF'ing Global) 

Holding Gold and Silver in bars/coins is zero risk... in this environment that's becoming priceless

Mon, 11/21/2011 - 16:30 | Link to Comment FeralSerf
FeralSerf's picture

Zero risk does not exist in this universe.  Maybe lower relative risk compared to paper, but zero risk?  Only in your dreams.

Mon, 11/21/2011 - 15:11 | Link to Comment Pitchman
Pitchman's picture

MF Global is a fractal in a frying pan

 
The Disappearance of Chivalry - George Santayana & Murder By Joystick

*

THE ROOT OF OUR SOCIAL, ECONOMIC, MILITARISTIC WOW'S IS AN EVIL, MONETARY SYSTEM.  EVERYTHING ELSE IS A SYMPTOM OR AN ACTION THAT SUPPORTS IT.  AT THE HEART OF THIS SYSTEM ARE THE CENTRAL BANKS; THE FED, THOSE WHO CONTROL IT AND THEIR DISHONEST, DEBT BASED MONETARY POLICIES.  AS SUCH; LAWS, THE CAPTURE OF GOVERNMENT AND THE SUSPENSION OF ACCOUNTING RULES IS FOR THEIR BENEFIT.  AN ACCOUNT OF THE PEOPLE HAS NO PLACE IN IT.  INDEED, IF THE PEOPLE WERE ITS PRIMARY CONCERN, THE WORLD WOULD BE MORE FREE, LESS VIOLENT AND MORE PROSPEROUS.

THE PRIVATELY HELD FED IS THE TOP REGULATOR OF ITS TBTF OWNERS AND MEMBER BANKS.   IT'S CREATION OF MONEY OUT OF THIN AIR; LOANED, AT INTEREST, TO THE SOVEREIGN AND ITS FRACTIONAL RESERVE SYSTEM IS THE MOST INSIDIOUS OF CRIMINAL PONZIS, FOR WHICH ALL ITS FAUX REGULATIONS AND FINANCIAL MISALLOCATIONS FOLLOW. 

TO FREE OURSELVES, RESTORE FREE MARKET CAPITALISM AND REESTABLISH OUR CONSTITUTIONAL REPUBLIC, WE MUST FIRST ELIMINATE THE MOST PERNICIOUS CORRUPTING FORCE OF ALL.

END THE FED!

See:

Money Power And The Central Bank: Life Is But A MEME

END THE FED: THE FIRST STEP IN RESTORING OUR CONSTITUTIONAL REPUBLIC

14 Reasons Why We Should Nationalize The Federal Reserve

Mon, 11/21/2011 - 11:26 | Link to Comment Bazooka
Bazooka's picture

The funnies guy is the Chart Pattern Trader....this guy actually begs for donations! He begs almost every day!

He should make his videos (very poor accuracy in calls made on market) and do what Reggie and Phoenix capital do.

Mon, 11/21/2011 - 11:25 | Link to Comment Bazooka
Bazooka's picture

As Reggie Middleton has now put out his OpEd when market is -2%.....Phoenix Capital will put out their Free Subscription laden advertisement in 3, 2,  1....

Mon, 11/21/2011 - 11:54 | Link to Comment Zero Govt
Zero Govt's picture

Reggie,

I was reading Martin Armstrong again last night and he claims the 50% Eurozone haircuts are no such thing, at least for the banks. The private bondholders will take the hit while the banks will 'publicly' take a 50% haircut but get backdoor bailouts for the balance (ie. no haircut)

That'll prolong (kick the can of) the banking collapse and stave off any imminent meltdown... do you agree?  

Mon, 11/21/2011 - 11:12 | Link to Comment bill1102inf
bill1102inf's picture

Hows the $22-23 groupon short working out for you

Mon, 11/21/2011 - 14:59 | Link to Comment Sudden Debt
Sudden Debt's picture

How long since you checked out the stock?

23,7$ and dropping like a stone

Fraud charges in Europe which could lead to a ban on the website

....

I think he'll be taking that one to the cleaners pretty soon!

 

Mon, 11/21/2011 - 11:36 | Link to Comment Jim in MN
Jim in MN's picture

How's the 5.61% loss on the day so far feeling there, Skippy?

Mon, 11/21/2011 - 11:23 | Link to Comment richard in norway
richard in norway's picture

even reggie cant be right all of the time. he's not god, he's a very naughty boy!!

Mon, 11/21/2011 - 11:32 | Link to Comment achmachat
achmachat's picture

but it's easy to confuse him with "a" god... him having the body of a chocolate greek deity and all...

Mon, 11/21/2011 - 11:31 | Link to Comment El Viejo
El Viejo's picture

Truth always has a way of ferreting out poor business models and untimely IPOs. Time will tell all. (IE: AONE )

Do NOT follow this link or you will be banned from the site!