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France, As Most Susceptble To Contagion, Will See Its Banks Suffer
As the Pan-European ponzi scheme starts to unravel, I would like to take this time to remind all of the value of this new media, this medium of reporting and opinionated analysis known as the blogosphere. To my knowledge, there are very, very few public sources where one can the granular information that would allow one to not only identify, not only circumvent, but actually profit from global banking collapse. Yes, the mainstream media has its placed, burned permanently in the psyche of content consumers, but it is nigh time the blogosphere moved several rungs up the evolutionary ladder. If you recall, it was a (BoomBust)blog that warned of the pending collapse of Bear, Lehman, WaMu, and Countrywide.
And so it begins...
Last year I was invited to give the keynote speech at ING's Commercial Real Estate Valuation seminar in Amsterdam. The keynote was delivered in April, and let there be no mistake - I pulled no punches. To give you an idea of the tone that I set in this very large European financial insitution, this was the opening slide to the presentation...
Although this was a real estate valuation seminar, the premise was consistent throughout: A dearth of available financing through a weak banking system coming off of a real asset and credit bubble burst spells big trouble. The "big trouble" is much worse than many make it out to be. You see, the one thing that nearly all banks lend against is real estate, and the less banks lend against said real estate, the less said real estate is worth. A vicious, self-reinforcing circle of real asset price correction in an attempt to reach equilibrium.
So, what does this have to do with French Banks?
Well, the big thing in the media nowadays is the sovereign debt crisis. But this crisis is but one part of the solvency puzzle, albeit a big one. Basically, the banks are saying we have XX billion Euro on our balance sheets, when in actuality they have 80% of XX billion euro, at the same time asset values are steadily declining, chewing up equity along the way. I illustrated this in detail in the video above. You see, the concerted efforts of global financial central planners world wide have distorted the valuation and pricing of real asset markets. This distortion has led many to believe that the crash/correction of 2008 is over without us ever having to face true reversion to the mean. Let me be the one to tell you, that just ain't happening... Reference Do Black Swans Really Matter? Not As Much as ...
I have always been of the contention that the 2008 market crash was cut short by the global machinations of a cadre of central bankers intent on somehow rewriting the rules of economics, investment physics and global finance. They became the buyers of last resort, then consequently the buyers of only resort while at the same time flooding the world with liquidity and guarantees. These central bankers and the countries they allegedly strive to serve took on the debt and nigh worthless assets of the private sector who threw prudence through the window during the “Peak” phase of the circle of economic life, and engaged in rampant speculation. Click to enlarge to print quality…
The result of this “Great Global Macro Experiment” is a market crash that never completed. BoomBustBlog subscribers should reference 
The Inevitability of Another Bank Crisis while non-subscribers should see Is Another Banking Crisis Inevitable? as well as The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance.
I will go into the impending continuation of the real estate debacle in a later post, but the impetus behind the debacle is the topic du jour, Is Another Banking Crisis Inevitable?In said piece I made it clear that the global banking lie that the so called "risk free" assets carried on the books are not only far from "Risk free" but have wiped much, if not most of the tangible equity from banking books. When, not if, but when, these banks are forced to make a market price transaction, hell will break loose. My post last month, Eighteen Percent of the EU is Literally Junk, Carried As Risk Free Assets at Par Using 30x+ Leverage: Bank Collapse is Inevitable!!! basically says it all.
Referencing the material from the ING presenation..
Eurocalypse Cometh! Principal Haircuts, Serial Bailouts, ECB Insolvent! Disruptive Sound Of Dominoes In Background Going "Click, Clack"! BoomBustBloggers Instructed To Line Up Bearish Positions Again!
If one were to even come close to marking the EU banks books to reality, market prices, or anything in between, the Lehman situation would look tame in compariosn! As excerpted from the subscriber document: The Inevitability of Another Bank Crisis
(click to enlarge) Even using overly optimisitic and much too rosy Eurostat numbers, the banks are sitting on top of a huge equity hole. The blue box below covers what we feel are the real numbers - a truly gaping hole!
And in the End, What Does It All Mean?
LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%?
It is not as if this wasn't foreseeable, for I have been warning of this hole since 2009/early 2010. In the BoomBustBlog subscriber document European Bank's Greece exposure, I gave the macro warning. I drilled down to more specifics namin the bank I felt was most at risk in this subscriber document. The follow up to this document was going to come out late today, but the CEO has let the cat out of the bag.
FT reports SocGen profit warning on Greek debt:
Société Générale has warned that its profit target for 2012 will be “difficult to achieve” as a writedown linked to its Greek exposure weighed on quarterly results.
...Frédéric Oudéa, chairman and chief executive, cautioned that the group’s €6bn net income target for 2012 looks hard to reach “within the scheduled time frame”.
...However, he said that second-quarter results demonstrated the “resilience” of Société Générale, despite the inclusion of a €395m pre-tax writedown due to Greek government bonds held by France’s second-biggest bank.
The writedown is due to Société Générale’s pledge to play a role in the Greek bail-out plan finalised in July in which all the Greek bond holdings of the French banks maturing before 2020 will be involved. BNP Paribas and Crédit Agricole have also made provisions concerning the loss to bondholders.
Société Générale has no bonds which mature after 2020, a spokeswoman said, adding that the writedown includes sovereign bonds held by Geniki Bank, Société Générale’s Greek subsidiary.
Net income in the three months to June 30 was below consensus analyst expectations at €747m on revenue down 2.6 per cent to €6.5bn, but including the impact of the writedown.
Net income for the first half declined 22.5 per cent to €1.66bn on revenue down 1 per cent to €13.12bn. The group posted half-year earnings per share of €2.05, down from €2.75 last year.
The bank’s shares fell 6.94 per cent to €30.25 in early morning trading.
Société Générale, which last year unveiled a plan to double net profit by 2012, said that targets had assumed a return to a normal economic environment which “has not occurred,” naming the recent eurozone and US debt crises, as well as the political turmoil in the Middle East and Africa as concerns.
I will have some more goodies along these lines that still HAVE NOT been broached by either the pop media or the sell side very soon.
Additional posts on the topic of Bank Runs
- The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
- What Happens When That Juggler Gets Clumsy?
- Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
- Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year
- The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
- The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
- Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run
- Observations Of French Markets From A Trader's Perspective
- On Your Mark, Get Set, (Bank) Run! The D…
- advertisements -
Strong work Mr. Middleton (as always)
Reggie,
Yummy stuff again... it seems the FT Lex Column may be reading your research! ...their column today sugar coats some cheery stuff about BNP and Soc-Gen then delivers a kick between the legs last sentance:
"That explains the sell-off in SocGen and BNP Paribas shares, down 43 per cent and 29 per cent respectively from their February peaks. For now, “elsewhere banks” HSBC and Standard Chartered, and the Scandinavians, look safer."
(my bold highlights)
http://www.ft.com/cms/s/3/f5a330a0-bdc8-11e0-babc-00144feabdc0.html#axzz...
REGGIE yo
.
5 years from now libya will be europes afghanistan/algeria
"5 years" ? ..we have an optmist amongst us!
the suicide socialist EC/EU/ECB will be bankrupt by next year and falling apart at the seams.. the political fireworks as countries begin their stampede to exit this Marxist folly should be a hoot to behold (i'll probably require an Oxygen Tent most of next year from laughing too hard!).. only the wet-liberal vilage idiots (British Govt) will be deluded enough to continue funding this 4th illegal war in Libya in their collection of international terrorism
when the bankers go to jail my friends
when the bankers go to jail
we’ll finally see justice done
when the bankers go to jail
http://thepeakoilpoet.blogspot.com/2011/07/when-bankers-go-to-jail.html
don't count on it...they own the judicial system...
I always enjoy your keen insight Reggie
Thanks Reggie!
Up on Facebook and Twitter both! the normal!
Great Work!
Keep it Up!! (thats what she said)
..and God Bless You and Yours as Always!
You are a Blessing to the World!
Let the Truth be told by ALL! Let the Truth be Heard by ALL!!
Traumatic August for France, Spain and Italy
""The narrative of 1931 is already well-known to readers. France sabotaged a rescue of Vienna’s Credit Anstalt because of strategic disputes with Germany. This set off a financial chain reaction""
Will history repeat?.....
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/08/traumatic-aug...
OT: Hilarious 2 Min Video Upside Down...
http://www.youtube.com/watch?v=W0Uju3tYS2s&feature=feedbul
...but when do i short apple...?
I am by no means a fan of the APPl cult, however they do actually sell a tangible product unlike the vapor that the parasite banks "sell" us.
Thanks again, Reggie.
Realistically, how will banks anywhere make money, enough money to cover their overleveraged collateral, in a low interest framework. Even if they have ZIRP, customers are not enticed to save. Investors are not inclined to go long term in stocks, thus the exchanges are seeing such low volumes. Real estate is quicksand unless you have been holding it prior to 2000 and don't need to liquidate. Developed economies continue to lose jobs to developing economies. Will somebody ignorant please remind why we should be blissful? Maybe I should turn on the MSM.
Dear Reggie,
Thanks for your updates and work. You truely are an Island of Sanity and Tranquility is a sea of Bullshit.
Oh, Reggie, there you go telling the truth again.
I think you forgot to include the snake pit Belgium.
And, I can't help noticing that you never seem to point out that all these fun and games are pure contrivance.
Snake Pit Belgium? Did you drink too much beer on a binge-party in Flanders, or what do you mean?
Reggie, I'm you're biggest fan! You rock!
Spot on Reggie.
Europe is toast.
Not only the continent. Across the channel, England has now taken off the mask. It's 1984 on steroids:
http://www.guardian.co.uk/uk/2011/jul/31/westminster-police-anarchist-wh...
Yes, the UK has ordered the sheeple to denounce any thought criminals (aka anarchists)!!!!!
it looks like freedom of speech / expression in England is Dead!!!
how about rounding up the Jews and sending them back to Israel? they are the Government Owners who have pushed thru the failed multiculturalism!
instead it is the decentralization of power crowd that is next to be drawn and quartered! LOL!!
Thank You for the Great info!! Please keep sharing the non-cable news info on how the Free World continues to be stolen from the little people.
1984 is here!! Hip! Hip! Hooray!!
Eiffel tower to be sold to China and moved to Beijing!!!
LOL! That will be quite an impressive trophy for Beijing
Maybe they will just leave it place and rename Paris to Beijing West
I had read some time ago - at least a year ago - that Austrian banks were at a high risk because of loans made to eastern europe. I'm assuming this is still so, because eastern europe is not faring well.
So will the financial tent collapse because the main pole falls, or because all the little stakes fail?
Ask california, NJ and Michigan!
ask the austrian banks that gave CHF mortgages (non EURO hedged) to their clients and to foreigners as well i.e. hungary, slowakia, etc.
they will all participate in the haircut as well
the neo keynesian fiat currency model is soon over give it another 1-2 years my guess
France is the very definition of a 'real estate bubble'.
you mean the eiffel tower protrusion upwards, irrational spike of exuberance. Dangerous place to drink bubbly if you race down its twirling stairs.
Its old hat now, and there are taller towers to grapple with. Real estate bubbles are now the never ending game of the global race. So much hot money chasing so little solid tit.
Go long 10" cock roosters, as the lady said!
Nahhh, I would give that distinction to Vancouver.
Downtown Toronto has 40 high cranes, at constant work building commercial office and residential units.
No Bubble there?