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How Can You Raise One Trillion When Even 5 Billion Auctions Fail!?!

Phoenix Capital Research's picture




 

One of the items few investors seem to be focusing on is the fact that while the system is awash with liquidity, there is very little capital available. Indeed, the great irony of central bank policies in the post-2008 era is that despite flooding the system with cheap easy money, they’ve not actually done anything to lower leverage or raise capital.

 

Case in point, the European Financial Stability Facility (EFSF) which is supposed to be the ultimate backstop for the European banking system, is in fact nothing more than a super-leveraged investment vehicle backstopped by bankrupt nations.

 

In plain terms, certain less insolvent nations (Germany and France) are supposed to bailout more insolvent nations such as Greece and Ireland. Common sense tells us this can’t possibly work.

 

So do the markets.

 

            EFSF bond may see weak demand

 

Bankers have warned that the eurozone rescue fund might face lacklustre demand this week for a planned bond issue designed to finance Ireland’s bail-out.

 

The offering will provide a key test of investor sentiment after the announcement last week of new plans to tackle the eurozone debt crisis.

 

The bond from the European financial stability facility will seek to raise €3bn ($4bn) and will be in 10-year bonds rather than a 15-year maturity because of worries over demand, say bankers. A 10-year bond is more likely to attract interest from Asian central banks than a longer maturity.

 

Bankers familiar with the issue said the EFSF had been considering a €5bn issue. However, the EFSF has denied this, saying it had always sought a €3bn issue.

 

http://www.ft.com/intl/cms/s/0/cfe1b102-03d2-11e1-bbc5-00144feabdc0.html?ftcamp=rss#axzz1cNYkqllU

 

 

EFSF Delays 3 Billion-Euro Bond Sale

 

Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets.

 

The European Financial Stability Facility is putting off the 10-year issue “due to market conditions,” according to Luxembourg-based spokesman Christof Roche. The fund may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter.

 

http://www.bloomberg.com/news/2011-11-02/efsf-said-to-plan-delay-in-3-billion-euro-bond-sale.html?cmpid=bit

 

So the EFSF is supposedly going to raise 1 trillion Euros… in an environment in which it struggles to even stage a five billion Euro bond offering?  Give me a break.

 

Again, while the system is flooded with liquidity, actual capital that can be put to use is virtually non-existent. The entire financial system is built up on leverage and easy credit, NOT capital.

 

This is why the bailouts cannot work. You cannot solve a leverage problem with more cheap debt. Just look at Greece. That whole mess started in January 2010…

two bailouts and a number of write-downs later the country is still broke.

 

And somehow this policy is going to work for other countries such as Italy or Spain? Give me a break. The Euro in its current form is finished. The credit markets are already pricing in more Greek defaults. And Italy’s now lurching towards its own default.

 

Ignore stocks, they’re ALWAYS the last to “get it.” The credit markets are jamming up just like they did in 2008. The banking system is flashing all the same signals as well.

 

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding.

On that note, if you’re looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

 

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

 

Good Investing!

 

Graham Summers

 

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

 



 

 

 

 

 

 

 

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Sat, 11/05/2011 - 05:38 | 1848104 Element
Element's picture

The European Financial Stability Facility is putting off the 10-year issue “due to market conditions,” according to Luxembourg-based spokesman Christof Roche. The fund may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter.

http://www.bloomberg.com/news/2011-11-02/efsf-said-to-plan-delay-in-3-billion-euro-bond-sale.html?cmpid=bit

So the EFSF is supposedly going to raise 1 trillion Euros… in an environment in which it struggles to even stage a five billion Euro bond offering?  Give me a break.

 

 

An unbeliever!  ... kill the heritic!

You need to read-up on your MMT ... it can do miracles ... it's unconstrained by leverage, or reality ... JUST BELIEVE ... and ye shall be healed! ... so sayeth the Benocoptier.

Sat, 11/05/2011 - 03:41 | 1848035 canuck
canuck's picture

Hi Mr Summers,

 

Could you find articles to link to from other sources than FT? Some of us just don't feel like going to the trouble of registering or subscribing to FT. Nothing against Martin Wolf and Gillian Tett of course.

Sat, 11/05/2011 - 09:18 | 1848250 CPL
CPL's picture

Read the google cached version.  Or just get the gCache plugin for ff or chrome.

Fri, 11/04/2011 - 22:56 | 1847556 philipat
philipat's picture

If the Eurozone won't bail itself out when it has the financial ability to do so, why should the IMF do it with OPM? As Cameron said, the role of the IMF is to assist individual countries in financial difficuly NOT to rescue a currency experiment. You broke it? It's yours!!

To answer the question, leverage upon leverage to address the problem of too much leverage in the EU Banking system is the only "Answer" because the hard working Germans are not about to allow Merkel to piss even more of their money into the Greek pisspot.

I can't understand why Gold isn't going through the roof, other than that it is being manipulated by the CB's just so the Chinese don't start getting funny ideas?

Fri, 11/04/2011 - 21:18 | 1847253 Buck Johnson
Buck Johnson's picture

Spot on, spot on.  Also as a few articles on the site have said, the G20 countries are reticent or just plain not wanting to fund the EFSF.  So who in gods name is going to buy these bonds, private banks and institutions?  No way, they saw what is happening or may happen to the banks that agreed to the 20% in europe just for the EU to turn around and say now it will be 50% voluntary (so as they hope it wont cause an adverse effect and a run on CDS's).  If your where a hedgefund or a mutual fund or whatever, would you invest in this investment vehicle that was described.  This is what happens when an organization starts to crumble from the inside, eventually we will see a mad dash to the exit with whatever treasure the countries and institutions can take from the EU, ECB.  It's not like they are going to pay it back anyway. 

Fri, 11/04/2011 - 22:21 | 1847510 surf0766
surf0766's picture

That is really what I do not understand. Who is going to buy this crap?

Sat, 11/05/2011 - 09:24 | 1848257 CPL
CPL's picture

You are.  Doesn't matter what country you are from, you will pay...then pay some more.

Fri, 11/04/2011 - 20:26 | 1847138 New_Meat
New_Meat's picture

don't cha' know. - Ned

Fri, 11/04/2011 - 21:18 | 1847248 AldousHuxley
AldousHuxley's picture

You raise it by selling it to yourself. Treasury sells bonds to Banksters who flips it over to the central banksters who holds  it on par value forever.

 

That's how US does it anyways.

 

Watch out for Greek state assets for sale on Groupon, Ebay, Craigslist....

Fri, 11/04/2011 - 22:22 | 1847516 surf0766
surf0766's picture

Well it seems to be working out for us..

Fri, 11/04/2011 - 20:26 | 1847136 Zero Govt
Zero Govt's picture

"..the EFSF is going to raise 1 trillion Euros… in an environment it struggles to even stage a 5 billion Euro offering?  Give me a break."

We all need a break. Yep, detach yourself from reality and think like a Eurocrat 

Fri, 11/04/2011 - 16:57 | 1846564 falak pema
falak pema's picture

we are moving to one fake fiat currency and one global statist resolution of mega debt. Markets will become irrelevant, as they are today totally becoming a manipulated thing for the essential moves. At macro level.

Captialism, having lost its ethics and its compass, is now in total limbo. At least the market version. Not the Oligarchy version which doesnt need markets as its peer to peer Oligarchy plays.

Fri, 11/04/2011 - 16:24 | 1846482 israhole
israhole's picture

EFSF won't see weak demand, they own the printing presses, just like the Fed buys treasuries.  It's currencies that will have less demand.

Fri, 11/04/2011 - 20:51 | 1847209 e2thex
e2thex's picture

"How can You Raise One Trillion When Even 5 Billion Auctions Fail?"

There's a simple but eloquent solution. You take a scissors and you ever so carefully cut up each Euro Bill into one hundred pieces. This saves you on those related costs arising from printing presses, ink and repairs.

Hey,  what's your next fucking question?

Fri, 11/04/2011 - 22:25 | 1847526 CompassionateFascist
CompassionateFascist's picture

There aren't enough scissors.

Fri, 11/04/2011 - 21:31 | 1847296 IQ 145
IQ 145's picture

"How can you---etc" The same way a magician pulls a rabbit out of a hat; mis-direct the audience's attention and cheat.

Fri, 11/04/2011 - 22:17 | 1847494 HD
HD's picture

That's ridiculous - that will never work in the real world...oh look a bunny!

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