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Bond 'Parishioners' Are Leaving The Euro 'Church'
Via Mark Grant, author of Out of the Box,
I have been on Wall Street for thirty-eight years now. You may claim brains and brilliance and the best investment committee this side of Alpha Centauri but I can smell the napalm in the morning and my nostrils are jumping as if infused by pepper gas. It was in the spring of 2010 that I concluded that Spain was going to get put in “time out” and I put it in black and white. Yesterday as Moodys downgraded Spain by three notches to just above junk and likely today the Spanish banks will feel the pain and as the yield on the Spanish ten year is just under 7.00% the heat is on and the stove has been turned up to high. The Italian 10 year yield is 6.25% now and financial markets operate as a matter of faith and it is obvious that the parishioners are leaving the church.
A man named Pedro was walking along a steep cliff one day, when he accidentally got too close to the edge and fell. On the way down he grabbed a $125 billion branch, which temporarily stopped his fall. He looked down and to his horror saw that the canyon fell straight down for more than a thousand feet.
He couldn't hang onto the branch forever, and there was no way for him to climb up the steep wall of the cliff. So Pedro began yelling for help, hoping that someone passing by would hear him and lower a rope or something.
“HELP! HELP! Is anyone up there? HELP!"
The Spaniard yelled for a long time, but no one heard him. He was about to give up when he heard a voice. “Pedro, Pedro. Can you hear me?"
"Yes, yes! I can hear you. I'm down here!"
"I can see you, Pedro. Are you all right?"
"Yes, but who are you, and where are you?
"I am Heinz, Pedro. I am from Berlin."
"You are German? You mean, really German?”
"That's me."
"Heinz, please help me! I promise if, you'll get me down from here, I'll stop spending too much money. I'll act just like a German. I'll be financially responsible for the rest of my life."
"Easy on the promises, Pedro. Let's get you back up here safely; then we can talk."
"Now, here's what I want you to do. Listen carefully."
"I'll do anything, Heinz. Just tell me what to do."
"Okay. Let go of the branch.”
"What?"
"I said, let go of the branch. Just trust me. Let go."
There was a long silence.
Finally Pedro yelled, "HELP! HELP! IS ANYONE ELSE UP THERE?"
With yields just off of Kelvin’s Absolute Zero some people are betting on the Fed’s easing or some new LTRO by the ECB but let me tell you something; when you are at zero interest rates then injections of liquidity are not going to accomplish what they might under other circumstances. Liquidity never cures solvency problems which is just exactly where we are now. All the talk of ringwalls, firewalls and bullet proof vests have not done one thing except to give the EU and the IMF fodder for a delusionary discussion. If the patient has cancer then protecting him by applying sunscreen has all of the value of lending someone $5.00 to buy a Ferrari; it is a nice gesture but it hardly gets the job done. The EU is making any number of nice gestures but they are not getting the job done and Germany is just not going to permit them to head into arenas that might accomplish something because Germany cannot and will not allow the German people to have the same standard of living as the people residing in Athens. There is the prevalent school of thought that Germany eventually will be forced to accede and I am 180 degrees from that position; it will not happen! In the end it will be Germany for the Germans and this is a history lesson that is stamped in iron across eons of our past.
There is talk of European bank deposit insurance; there is no mechanism in place for this, no banks have paid into anything and it would be months or perhaps scores of months before this could get approved even if everyone wanted to approve it which Germany has candidly stated it does not. There are rumblings about Eurobonds which Germany will not approve and it is nothing more than the weaker countries asking Germany for more money which Germany will not provide. There are demands for the EFSF and/or the ESM to provide money directly to banks but this cannot be accomplished under either charter and to change them would also take months. I state again, as I have in my last several commentaries, that if Germany does not want to pay then nothing will be done and Germany, as sure as I am on my boat in the Bahamas, is not going to lower its standard of living or see its borrowing costs rise to a European average without a political upheaval that would topple Ms. Merkel’s government. There should be no surprise that Greece and Spain and Portugal and Ireland keep asking for money and it should not shock anyone that many clever schemes have been postulated to try to get Germany’s money and it should also not surprise anyone that Germany mouths all kinds of nice and polite phrases to object but in the end Germany will keep rejecting any plot that will lessen their lifestyle. It is the pleading song of the beggars and the charity donation of the wealthy but that is all that it is ever going to be as Germany is not going to roll over to placate the other nations.
Don’t Forget
Sunday is my “Big Fat Greek Election.”
Toula: “Will you please stop playing with your food?”
Gus: “After Sunday we may not have any food to play with!”
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perfect storm brewing to get obama tossed..recent scandals.. eurpoe burning and a nice 15 or 20% drop in the market from here out to do it..
The most logical solution to this problem is to place heavier regulations on hedge funds who are placing ridiculusly unfair valuations on government bonds, and banking stocks. In addition to "short selling", hedge funds also engage in credit default swap contracts with willing counterparties (who are equally to blame) which are triggered in the event of a default - TOTALLY CRIMINAL. Yet another dirty trick played by speculators at the expense of hard working and innocent people.
Regulations? Aren't you tired of the gov't holding your fucking hand and protecting you while all they are really doing is fucking you in the ass without vaseline or even a reach around?
How do you type with your hands down Bernanke and Geithner's pants? Ahhh, you must be using Dragon software...
Default is unavoidable for a lot of these countries. We'll have to see if the eventual "restructuring" will be considered credit events. What will be TOTALLY CRIMINAL is if the ISDA allows people who purchased CDS contracts to get screwed out of the protection they bought.
And MDB, while I am often amused by your trolling, it always saddens me to think a lot of people actually believe what you write.
"Saddens?!?"
I am aghast that the denizens of ZeroHedge do not recognize sarcasm of this sort.
That is an excellent way...to keep hedge funds from supporting your shitty bond markets.
I don't know if you've noticed the large number of 'duds' in the CDS triggering department lately. Apparently 'event' is one of the most flexible words in the English language.
Regulations don't go far enough. Yes, regulate, but also, add the transaction tax. In this world of ever increasing trade volumes, the most efficient way to balance budgets is to tax each transaction. Hedge Funds and institutional traders need to recognize their patriotic duty, and pay this minimal yet needed tax
The Germans are beyond reproach,they dream from a 1000 year EURO
The Germans are beyond reproach,they dream from a 1000 year EURO
What's the difference between the euro "church" and the Catholic "church"? Both are based in faith.
The Catholic church only fucks children...
The Euro church fucks EVERYBODY!
what dumb ass buyng euro today ?
What happened to Pedro?
Thanks for the morning laugh, I spit my coffee out. :thumbsup
I think it's called 'gravity'.
"God does not require that you succeed, only that you try." - Mother Teresa Gravity is not so forgiving...
The only "Church' being left here is the $ reserve system. We're all out of souls.
What follows next is not pleasant.
I still don't believe there won't be *some* form of QE or similar trickery.
Long PMs, just on case.
In a sane world, your belief might warrant consideration.
Realistically, though, what choice do 'they' have? Can you really picture any representative of TPTB getting on the television and saying, "Well, you know. We've really been doing this all wrong. And we're headed for disaster. So, effective today, we're going to implement some sound financial and economic policies that will correct all this. Unfortunately, some of you (a lot of you, actually) are going to have to die. Starve to death. Freeze to death. Die from lack of medical care. Etc. And we're going to reduce the income of, uh (how shall I put this?), the most unintelligent, least educated, most violence prone, useless and parasitic elements of society by, oh, 90%. And, the lucky ones, well, we're gonna take all your stuff. Well, maybe not ALL of it. But a lot. You know? Your savings. Your stocks. Your bonds. Your property."
Etc.
What could go wrong with that?
Infidels!!!
Mark, you're all over the world! What are your observations on Iceland after your visit? Enjoy the bahamas.
This IS the QE rally. Even if they announce massive QE at this point equities barely pop. Maybe a day. If they don't announce it........
Germany will cave in, with 50K mercenaries occupying their soil, the gold in London and New York and their bought politicians, there is no chance they will not try to bail out the PIIGS banks.
Germany can grant those mercenaries German citizenship, German babes and tax free packages. Then those mercenaries will instantenously become a loyal German army. :)
---In the end it will be Germany for the Germans and this is a history lesson that is stamped in iron crosses of our past.
There. Fixed it for ya Mark
At this point, markets are 49.99% faith, 49.99% HFT and 0.02% fundamentals.
There is no doubt that Europe is experiencing hard times. However, there are still many doubts if ye have a solution to the crisis. From my point of view, the economic situation in Europe will worsen in the coming months. This will complicate the recovery in U.S. and growth in countries like China and India. I think we must prepare for hard times.
By the time these fucking moron authorities figure out what next to do it'll have happened.
Germany will bail the PIIGS coz bailing the PIIGS bail's itself. Also, "German lifestyle" ??? LOL
Look guys the EUR/USD is the tell here Short Term Technical Analysis
I wonder what would happen if someone (or some people together) found a way to destroy all those money printing presses. I honestly think now that this is the only way to kill the BEAST: chop its head off! Otherwise, it will be QE ad infinitum until all our money becomes toilet paper.
yeah the only thing inaccurate about this parable is that in real life, the cliff is ten feet high, the branch is at the edge, and pedro's expensive shoes are getting scratched by two-foot high bushes on the ground underneath him
Rally warning continues...
Despite stockbears with their pre-election jitters, SPX choppy bullish daily & USDX bearish daily charts strengthen.
Significant equity / EURUSD upside & USDX retracement ahead.
http://www.zerohedge.com/news/2012-12-24/market-analysis
I certainly hope the author is correct and that the German people wont be betrayed by their political class into forking over for the rest of Europe.
This is the test to find out how deep the brainwashing and conditioning of the last 60 years goes. The choice is between "Deutschland Sucht Den Superstar" and "Deutschland wird weiterleben", it will certainly be interesting to see how this pans out.
I'm in Palm Beach heading to Abaco ... where are you located?