Sell-Side Strategists Summarize Cypriot Tsunami

Tyler Durden's picture

The usually optimistic bunch of salubrious sell-side strategists are mixed in their perspective of the latest debacle to roll ashore from Europe. Most, if not quite all, expect short-term 'nervousness' and a few hardy Pollyannas remain though looking at the other end of the rainbow - once again because, drum roll please, "central banks will respond." Adding to our summary yesterday, Bloomberg adds another 13 sell-side opinions (and Moody's), it the diversity of response is perhaps best glimpsed with one who "does not expect savers to be fearful of a confiscation of their savings and spark a run on banks" for some whimsical reason and another states unequivocally, "No sensible foreign depositor would continue to keep money in a banking system that just took nearly 10% of his deposit without any notice."

Via Bloomberg,

 * Moody’s

Cyprus bailout negative for depositors across Europe; implication for sovereigns unclear; Cyprus has negative implications for EU banks creditors

May hurt bank ratings across Europe; shows EU will act to monetary Union


Decision to impose levy could trigger market contagion

 * Nomura

Sees more downside risk for EUR/USD, EUR/CHF on Cyprus

Is buying 1.30 EUR put/USD call with 3-month tenor at Asia open to gain exposure to downside move; also cutting long EUR/CHF spot positions until there is greater clarity

 * Rabobank

Yield hunt may mean risk-off tone may be short-lived; in the contagion stakes, Cyprus has clear potential to “punch far above its weight”

 * Saxo Bank

Decision to impose level  “very good for gold” and safe-haven countries like Singapore and Switzerland and “economically more healthy” Scandinavian countries that don’t use the euro should also benefit

 * Citigroup

There is room to amend Cyprus agreement

 * AMP Capital Investors

Cyprus situation could “lead to some worries regarding renewed contagion across Europe”

Compared with banks in Italy, Spain and Ireland, “the risk of the same occurring is extremely low and close to zero, but we could go through a short period of nervousness until we see how the rest of Europe responds and the ECB responds”

 * Barclays

Decision to impose losses on Cypriot depositors is the latest sign of an “ominous trend” for bondholders

 * Brown Brothers Harriman

"We do not expect savers to be fearful of a confiscation of their savings and spark a run on banks”


Bailout likely to shake investors’ recent “unshakable confidence” in ever higher prices

 * Cumberland Advisors

“No sensible foreign depositor would continue to keep money in a banking system that just took nearly 10% of his deposit without any notice”

 * Goldman

While controversial, involvement of non-residents in bailout was foreseeable, and “sends signal” to taxpayers in other nations that domestics won’t bear costs alone

Contagion potential - The Cypriot tax is certain to prompt depositors in GIIPS banks to assess two issues: (1) the probability of savings participating in bank clean-ups (“bail-in”) and (2) perceiving their savings as a potential base for a “wealth tax”.

 * JPMorgan

Difficult to overstate the extend of popular anger in Cyprus; return to “more stressful” episode of debt crisis possible

 * SocGen

Bailout may be crisis trigger; “this will probably go down as an ill thought out rescue plan with consequences for peripheral Europe”

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AU5K's picture

Gold bitchez !

DJ Happy Ending's picture

The Euro sheep will never learn, you watch. There will be no EU-wide bank run on Monday.

Careless Whisper's picture

This is actually bullish for equities. No one is taking 10% of anyone's shares in XOM.  

Fred Hayek's picture

That's like finding out that the casino in which you're playing blackjack has been cheating players at the roulette table and telling yourself that there's no way they'd cheat you. It's only the roulette table that's rigged. They'd never rig one of the other tables.


cifo's picture

This must be the busiest weekend in ZH's history.

TruthInSunshine's picture

03-17 22:51: China February power consumption falls 12.5% on year


I'd bet a large stack of yuán that it's down even more than "officially" reported.

Antifaschistische's picture

There is one reason why the Cyprus Banks are targeted...This is a typical parasite move, just like the parasite class in the US.

When in trouble, take someone ELSEs money.  The Cyprus Banks have enough "someone elses" to infuse the EU for a little while.

Commandment #1 - Achieve Wealth

Commandment #2 - Hide It

138's picture

True, right now. However I KNOW no one is taking any physical AU AG PB/CU that I may or may not be holding. 

A Nanny Moose's picture

Is it bullish for equuities, or the dollar? At what point are these ideas mutually exclusive?

Tuffmug's picture

No bank runs but stock markets worldwide will drop to suck in more shorts to fuck later when the EU says "Nevermind, we found 8 billion for the bailout under the cushions of Merkle's sofa! ". Should ramp the markets to new highs.

jmcadg's picture
  • No more than the US sheep with TARP.
zorba THE GREEK's picture

This could be the trigger for gold to unshackle from the forces that suppress it.

It is time for Europeans to take their money out of insolvent banks and buy

physical PMs. The writing is on the wall.

icanhasbailout's picture

They'll be coming for your gold soon enough. Hope you weren't dumb enough to have purchased it on the record.

macroeconomist's picture

To everyone fed up with the current state of economics:

Please donate to Professor Steve Keen's campaign to raise funds for his dynamic monetary modelling program "Minsky"

"Minsky is also a platform for modeling—not a model in itself. This means you can model any vision of the economy you have—whether that's Austrian, Institutional, Post Keynesian—so long as that vision is dynamic. So it can be used by any economist, and it doesn't lock you in to a particular view of how the economy operates."

Half an hour left for the campaign to end..

toys for tits's picture

I've found that the best model was Sim City 4.  Drop the taxes to 3% and the city thrives.

Non Passaran's picture

In the EU they have Slim City.
A 50% tax for everyone, a 20% VAT, no one's fat!

squid virtuous's picture

Brown Brothers Harriman - are those the two old guys from Trading Places?

onewayticket2's picture

ObamaBank analyst: "we applaud this fresh, original thinking and look forward to our own implementation..."

glenlloyd's picture

my thoughts exactly...obviously people who aren't paying attention.

Law97's picture

No, that's just the firm that handled the Nazi's money during the 30's and 40's, while Prescott Bush was a director and equity partner. 

Critical Path's picture

Someone interested in clarifying Barclays statement?  "ominous trend" for bond holders?  Seems to me the bond holders have been trumping the citizens of supposed soverign nations for quite some time.  Ominous for the general populations and depositers perhaps.

madddmaxxx's picture

agreed, bondholders haven't been hurt yet.

zorba THE GREEK's picture

Bondholders were the losers in Greece.

Fred Hayek's picture

They deserved to be the losers. They bought risky bonds. When the issuer admits its inability to pay risky bonds who the hell should be chalking one up in the "L" column if not the jackasses who bought them?

Bond holders worldwide have gotten too cushy a ride. Karl Denninger over at makes a big deal out of the significance of the bailout of Continental Illinois which I think he pegs as the first bank where the U.S. government, despite having *no* duty to do so, made bond holders whole when they should have gotten nothing.

Oh, and another thing he makes a big point of is that failing banks are supposed to be taken over just as they start to go under not after they've cost taxpayers billions. At least, that's what the law says in the U.S. Maybe EU law is different but I suspect not and that the exorbitant cost of the failure of the big cypriot banks is proof that the EU regulators were not doing their jobs. And now, the EU's capricious response to this is to go after innocent parties.

NoDebt's picture

Also agreed.  Comment makes no sense on it's face.  Bondholders are the ones NOT getting a haircut in this plan.  Perhaps they think it will be rejected by the Cypriot parliament and then bondholders WILL be the ones taking it in the shorts, but that's way out in the weeds at this point.

Conflict of Interest's picture

"No sensible foreign depositor...." -- there are sensible foreign depositors in Cypriot and Greek banks? 

JD59's picture

FUBAR! Why would anyone keep anything in banks?

Sizzurp's picture

Bank runs begets bank failures which begets derivitive meltdown contagion.  Easy to see how this could jump oceans.  Bernanke might have a busy week of printing ahead.

disabledvet's picture

can't say he's not doing the right thing...yes, yes? this is exactly what the "QE" program was designed to mitigate: the effects of a bank run in Europe on the North American markets and economy as a whole. I can see some very scary scenarios here--North Korea "making crazy talk", Syria melting down--Egypt looking like it could blow. An incursion by Turkish regulars. And "that's just the good side."

Sizzurp's picture

I get the feeling that more wars are coming.  Little fires are being lit across the globe and it won't take much wind to get them really going strong.  It all looks very combustable.  The Korean situation, Iran, Pakistan, Syria, Egypt, Turkey, Russia, China, Japan.  Another major financial crisis will be enough to push tensions over the edge somewhere, then it will spread.  So yes sure, if Bernank can keep things calm and orderly that is good, but in the end its only temporary.  Not to mention the central bankers put us in this position to begin with.  Once again we are looking over the abyss thanks to the banker boys, and their debt based money.  The ante keeps getting larger, bail them out or face war and devastation.  It seems like the longer this goes on, the worse the consequences of letting them all fail will get.  At some point we are just going to have to face up to reality.

DeadFred's picture

"Everyone wake up. It's coming" I woke up to that in my head about a week ago. Maybe I know why now.

Theos's picture

So a 10% confiscation in the "first world" results in bringing sentiment back to "kinda neutral"?


Shit we're still fine. BTFD.

NoDebt's picture

Up arrow.  Unique way to put it in perspective.

chump666's picture

Please.  Market needs 2% wipe-outs for anything major, that and the ECB/NYFED 1.29 and 1.30 support is now bid via HFTs on the 5day.

DAX delivers a 3% to 5% neg (remember the old days in 2011?...such memories) we might have a substantial sell off oF risk.  Might...

Anyways the risk averse trade will come out of Asia, not Europe, it's done.  Just being held above water thanks to the FED pumping the ECB.  That's it.

In saying that HK looks tasty

Orly's picture

So, Chump, you long Euros here?  Buy the news?

chump666's picture

Orly, see now you gotta have guts for that trade.  But that 1.29, 1.28 could crack hard on Euro open .  Oil just went bid.  Heaps of players got burnt on EUR shorts, heard on wires banks setting up short positions.  Could be buy the news on ECB, EU re-working bailout etc.  Also the Cyprus peoples don't want massive EUR devaluation (forget bank account haircuts, their pensions would be slaughtered if they leave EZ)

Short answer, I'm out till full correction.

chump666's picture


* IMM CTA data show specs still building long USD positions.

lolmao500's picture


Decision to impose losses on Cypriot depositors is the latest sign of an “ominous trend” for bondholders

Ominous trend for bondholders??? More like DREAM trend for bondholders... Bondholders lose nothing, the average working man gets robbed to bail out the bondholders... how is this bad for bondholders again? Oh yes, it is not.

NoDebt's picture

Agreed here, again, as I did on a similar comment, above.  Bondholders lose NOTHING if the current agreement passes Cypriot parliament.

toys for tits's picture

It's actually bad for bondholders since the resulting run will cause the bank to fail and the bondholders won't get paid.

monopoly's picture

Sometimes it just takes one spark to ignite a raging uncontrollable forest fire. Time will tell.

Number 156's picture

“During my lifetime most of the problems the world has faced have come, in one fashion or other, from mainland Europe, and the solutions from outside it.” — Margaret Thatcher.

Sorry Margret, not this time. Europe is royally screwed.

SIOP's picture

casey13 wrote: "Gazprom Offers Cyprus Restructuring Deal to Avoid EU Bailout"

Thats amazing. (jaw dropping)

Downtoolong's picture

Sell side analysts unite. We must minimize, downplay, diminish, disguise, avoid, and distract from this event. You must soothe, instill comfort and confidence in your clients. Tell them it’s just like another run of the mill car accident. Got it? Now go, go, go, go.

sitenine's picture

It bears repeating that, "you shouldn't be concerned about the return on your capital, you should be concerned with the return OF your capital."