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Portugal 'Dead Cat Bounces' After Reassurances From Central Bank

Tyler Durden's picture




 

Banco Espirito Santo stocks and bonds are up notably this morning following comments from the Portuguese Central Bank that shareholders are interested in injecting more capital into the failed bank. This has - for now - reassured investors that a bail-in won't be necessary but, as Jefferies notes, "it's hearsay for the moment but it’s helpful." Chatter that "someone" is willing to throw another EUR 2 Billion at this "troubled" financial entity was enough to spur risk-on buying in most of European stocks with Portugal PSI20 surging almost 4%. The question is - after all this additional capital (at what will likely be a major haircut to current equity prices), who will do business with this bank (and why?) after already suffering through the fear of deposit confiscation or debt haircuts?

 

As Bloomberg notes,

Portugal’s central bank said shareholders are interested in injecting more capital into Banco Espirito Santo SA after a second affiliate failed to repay short-term debt.

 

Bonds and shares in the Lisbon-based lender jumped following the comments from Bank of Portugal Governor Carlos Costa. Rioforte Investments SA, a holding company in the Espirito Santo group, missed a 847 million-euro ($1.2 billion) payment of commercial paper yesterday.

 

Investor concerns that bondholders would take losses should financial problems within the Espirito Santo group spill into the bank prompted a 25 percent slump this month in the lender’ssubordinated debt through yesterday. Its shares lost more than 40 percent of their value.

 

“There are certainly shareholders interested in participating in a capital increase,” Costa told Portuguese broadcaster TVI. The bank has a “capital cushion to deal with the risks with which it’s confronted,” he said.

 

Banco Espirito Santo Sub bonds have bounced notably on the news (as hopes that a haircut won't be needed)

 

It doesn't seem like the broad market is convinced this is over...

 

And Portugal bond spreads are down only modestly.

*  *  *

Cue capital controls?

 

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Wed, 07/16/2014 - 08:57 | 4962191 Cognitive Dissonance
Cognitive Dissonance's picture

I've never actually seen a dead cat bounce. But I love the expression.

Why would one try to bounce a dead cat? Why not a mouse or a possum?

Wed, 07/16/2014 - 08:59 | 4962196 Gief Gold Plox
Gief Gold Plox's picture

My bullshit alarm went of upon reading: "There are certainly shareholders interested in participating in a capital increase"

Dunno why.

Wed, 07/16/2014 - 09:03 | 4962198 GetZeeGold
GetZeeGold's picture

 

 

Geez.....that poor damn cat.

Wed, 07/16/2014 - 09:13 | 4962223 NoDebt
NoDebt's picture

One man's dead cat bounce is another man's BTFD opportunity.

Wed, 07/16/2014 - 09:20 | 4962246 Tall Tom
Tall Tom's picture

One man's ex wife is another man's new wife?

Wed, 07/16/2014 - 09:09 | 4962211 Tall Tom
Tall Tom's picture

Well that is all good and well as the party continues onward over the cliff. I have read that the Dead Cat Bounce is also referred to as the Suckers' Rally.

 

I guess that the suckers have dead pussies?

Wed, 07/16/2014 - 09:20 | 4962247 Atomizer
Atomizer's picture

If you like your dead cat bounce, you can keep your dead cat bounce. 

Toonces approved 

http://m.youtube.com/watch?v=ywQEcv22Mdk

 

Wed, 07/16/2014 - 09:28 | 4962275 Cognitive Dissonance
Cognitive Dissonance's picture

God help me....but I just had to click the link.

<Our cat Tramp has way better hair. Just sayin'>

Wed, 07/16/2014 - 08:57 | 4962192 GrinandBearit
GrinandBearit's picture

1000's of issues/problems all throughout the global banking system, but the system never crashes.

 

Someday perhaps.

Wed, 07/16/2014 - 08:59 | 4962193 Buckaroo Banzai
Buckaroo Banzai's picture

Sounds like they are going around the pedophile ring with a collection plate.

Wed, 07/16/2014 - 09:03 | 4962200 Cognitive Dissonance
Cognitive Dissonance's picture

Ouch. That's gonna leave a mark.

<All I know is if they want me to see the pedophile ring, what the hell are they covering up that warrants exposing the pedophile ring?>

Wed, 07/16/2014 - 09:07 | 4962209 GetZeeGold
GetZeeGold's picture

 

 

Sounds like they are going around the pedophile ring with a collection plate.

 

That's awesome.....we're saved. Those guys own all the money in the freakin world!

Wed, 07/16/2014 - 09:40 | 4962315 Atomizer
Atomizer's picture

Who would of thought combing pedophile rings with cheap manufacturing labor could be possible?  The banking capital investment gets two bangs for the buck. 

/ sarc 

Just imagine the new job titles that can be created. 

Wed, 07/16/2014 - 08:59 | 4962197 astoriajoe
astoriajoe's picture

All Clear means 'RUN!!!'  ?

Wed, 07/16/2014 - 09:05 | 4962205 101 years and c...
101 years and counting's picture

i told you last week.  troubled banks is great news for bailouts, printing and the overall fucking of the bottom 90%.  therefore, buy stocks.

Wed, 07/16/2014 - 09:27 | 4962276 eclectic syncretist
eclectic syncretist's picture

I did my part and went long my first non-mining or otherwise PM related equity of 2014 yesterday.  SDS.

Wed, 07/16/2014 - 09:02 | 4962199 yogibear
yogibear's picture

The PIIGS are still rotting. The ECB can spray some Brussels perfume on them to cover the smell.

Kind of reminds you of Bernanke's subprime mortgages are contained speech. Of course they were not.

Lie until she blows.

Wed, 07/16/2014 - 09:18 | 4962240 Tall Tom
Tall Tom's picture

Lie until she blows.

Lying to the whore until she gives you your cheap thrill only leads to unwanted contagion. You had best be prepared.

 

If you try to have that Dead Cat Bounce work for you then you had also be prepared to fall in to the abyss where there is no escape.

Wed, 07/16/2014 - 10:12 | 4962462 Bernoulli
Bernoulli's picture

These kind of moments always occur just before the end. Not only in the banking world. I remember in late 2002 the boss of Alstom gave an interview saying that everything is fine (after a terrible 2001). The next months the stock lost another 70% of its value and Sarkozy had to chip in and bail them out.

 

Wed, 07/16/2014 - 09:05 | 4962202 creeko
creeko's picture

Belgium to the rescue!

Wed, 07/16/2014 - 09:09 | 4962213 GetZeeGold
GetZeeGold's picture

 

 

Dude shhhhh.....it's suppose to be a secret.

Wed, 07/16/2014 - 09:23 | 4962256 Tall Tom
Tall Tom's picture

Dude...The Belgium Operation was used to capitalize the new BRICS Bank.

 

Jim Willie predicted this to happen and...it did.

Wed, 07/16/2014 - 09:11 | 4962218 Atomizer
Atomizer's picture

I'll be the first...FIRE 

Wed, 07/16/2014 - 09:12 | 4962221 hugovanderbubble
hugovanderbubble's picture

Generali is the next one to fail.

Short Italian Banks

Wed, 07/16/2014 - 09:20 | 4962235 Youri Carma
Youri Carma's picture

Portugal Telecom Confirms Espírito Santo Debt Default
16 July 2014, by Patricia Kowsmann - Lisbon (MarketWatch)
http://www.marketwatch.com/story/portugal-telecom-confirms-esp%C3%ADrito-santo-debt-default-2014-07-16

Wed, 07/16/2014 - 09:21 | 4962238 Quinvarius
Quinvarius's picture

Words to buy them a couple hours of breathing room.  During which, they will do nothing and allow the contagion to spread.  However, I am sure that everyone who works with this central banker is using this opportunity to see everything they own in the markets.

Wed, 07/16/2014 - 09:22 | 4962251 Colonel Walter ...
Colonel Walter E Kurtz's picture

What good is it owning a bank if you cannot get a loan?

Someone call E Santo, tell them to get to the keyboard, hit a few buttons, create some digital fiat, loan it to Rioforte so that they can pay back E Santo.

Problem solved, and I think I get the hang of how this all works. Please nominate me to be next Fed chair!

 

 

Wed, 07/16/2014 - 09:29 | 4962285 eclectic syncretist
eclectic syncretist's picture

You could be the new chairman of the bankster circle-jerk

Wed, 07/16/2014 - 09:29 | 4962283 Yancey Ward
Yancey Ward's picture

Because shareholders would rather lose 20 dollars than 10.

Wed, 07/16/2014 - 09:41 | 4962337 Bernoulli
Bernoulli's picture

This has - for now - reassured investors that a bail-in won't be necessary

Come on... PULEEEEEAAAAAASSSSSEEEEE don't be ridiculous....

I wonder how many of those "investors" (=algos?) recently had a look at the 2013 BES annual report and the risks mentioned there. Or as a minimum the balance sheet on page 86?!? Anybody? Nobody? Oh, too busy "investing", no more time to read?!? Sure, I understand.

http://www.bes.pt/SITEBES/cms.aspx?plg=f470dde1-ca83-4f67-ba44-69ac3eb5f5c0

This bank is a house of cards.

Also for those "reassured", check out Otto Dichtl, Managing Director at Stifel Nicolaus commenting on Portugal Telecom on CNBS:
"Strange one off type situation for Portugal telecom"
"don't know the motivation behind it... some sort of silly oversight or mistake"
"Size seems to be a bit disproportionate"

The guy looks like he is SCARED as hell!!! He "knows" and was instructed to tell all is ok...

The fuse is burning and everybody knows it. Now they are only gaining time to preserve their own wealth before the panic starts.

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