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The Buyers Have Left The House
Via Mark J. Grant, Author of Out of the Box,
“We are on strike against the morality of cannibals.”
-Ayn Rand
Slowly, surely the largest investors in the world are no longer buying the debt of Europe. Recently the Chinese sovereign wealth fund, China Investment Corp., said that they were done and would no longer be buying European debt. The institutional readers of “Out of the Box” number somewhat more than 5,000 money managers and I can report that one after another they are either seriously pairing back on their holdings or exiting Europe. The risks are just too great and the way Europe does business is also having a serious effect. You see, Europe does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios. The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud for operating in this manner but this is the devised scheme in Europe. This is also why it sets my teeth on edge each and every time I see some country brandishing their debt to GDP ratio in the press; it is just factually inaccurate or to be more succinct---it is a lie.
Let us consider what is happening with Bankia in Spain. The Spanish government’s bank fund has $7.40 billion left in its coffers according to the government. Bankia will require about $23 billion in recapitalization. Spain is floating the idea of guaranteeing Bankia’s debt so that Bankia can then pledge it to the ECB and get cash and since it is a guarantee and not a direct issuance of sovereign debt then Spain is waving the banner, and proudly, that it will not affect their debt to GDP ratio. There is a certain kind of madness about all of this and it is taking place in Spain, Portugal, Ireland, Italy, Greece, Belgium et al. What can clearly be said then is that the numbers we are given, the data that is flouted day in and day out as accurate is nothing short of a con game built on a Ponzi scheme that rests on the back of a financial system that has been purposefully designed to distort the truth.
Regardless of your opinion about all of this there are consequences to this type of manipulation that are in the process of becoming realized. Eventually, when hopes and prayers give way to reality, losses are taken and I submit that we are just at the beginning, just at the start, of seeing realized losses begin to hit balance sheets. A case in point would be Credit Agricole who reported that they had suffered a $3.4 billion loss because of their exposure to Greece, eliminated their dividend and watched the price of their stock sink to an all-time low which is down 72% on the year. Then with the new European bank scheme where regulators, not the judicial system, will decide just who will get what in the case of any bank impairment you can be sure, 100% positive, that the regulators will decide for the benefit of the State and the investor can go hang. While it is certainly true that many European institutions are coerced, forced may be more accurate, to buy the sovereign debt of their country or other European countries the sugar rush from the LTRO is waning while the rest of the non-coerced world is fleeing from European sovereign and bank debt like Floridians from a hurricane. To be sure markets have been gamed before but this is one bubble that will make the American financial crisis or the dot.com debacle seem insignificant in size when the moment comes that it is pushed past the point of redemption. The European nations and banks have performed a neat new trick, nailing themselves to the Cross, and it is now only for Pontius Pilate to pick up the spear and begin.
“He who created us without our help will not save us without our consent.”
-St. Augustine
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Well, investing in Europe is like taking dog shit and mixing it into a sandwich. There is still some good stuff in there, it's just hard to figure out where to take a bite.
You have a stonger stomach than me, my friend.
Much stronger. Even the good parts will be contaminated by the crap.
Not any different than what Micky D's puts out. Lots of ground brown...
China can't have stopped buying. I was told that they were going to bail out the rest of the world.
Where did all the zombies go?
A new kind of debt, Stealth Debt. It is there but it is invisible.... Awesome.
No, it's virtual debt to go along with virtual food, virtual energy and virtual money.
Feasting on government regulators, courts, legislative and executive branches
it's 28 days later
They took their talents to South Beach...
who cares ! As long as super mario is there! He will priiiiiint!
Either we're going to have to default on everything soon, or inflate it all way soon... there is no other option (euro break-up is another possibility but that comes under a 'mix of the previous two'.)
Personally, I prefer default as that punishes those who have malinvested first, whereas inflation punishes everyone. There is a third-way, and it is the one we're on at the moment - denial, austerity, death by a thousand cuts etc. The fools think its 'fake it till you make it', that in some glorious future we'll have discovered free electricity or somesuch (in europe) meanwhile faking everything until the golden goose starts laying again. Unfortunately, everyone can see the bureaucrats are fucking it while they fake it and will only make it worse.
Your third way isn't really a way... more of a charade. Austerity means paying the ever increasing interest burden while cutting services to do so. Debt will continue to increase, not decrease... that's what austerity really is... regardless of how it's presented. If austerity was something else... it would create cascading defaults... basically collapse... which is what I would like to see. Of course, collapse in inevitable, no matter the path they choose... it's only a matter of timing.
And the timing will be dragged out as long as it possibly can. Potemkin villages everywhere.
"... or inflate it all way soon ..."
What could possibly go wrong?
"Aurelio Izquierdo, will be entitled to €14 million in pension and termination benefits"..........seems to be working for the insiders though.....it really is an "US vs Them" now....those in control of the printing presses will make sure they are taken care of at the expense of the rest of us on the outside...
Short the open, buy the close = profit to buy more supplies for my Zombie Apocalypse Kit.
"You see, Europe does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios."
I'm in no way standing up for the Euro-clowns, but everything you say here applies equally to the US government.
It seems a little inaccurate to characterise this as a strictly European deceit when it is, in fact, pretty much universal.
Unless, perhaps, you really, honestly, hand-on-heart believe that $15.7 trillion is the full extent of the debt, guarantees, commitments and promises for which the US government is liable?
I think zerohedge is to much focused on the EU and not enough on the US. They try to brainwash us.
do you always read the last chapter first?
Ha!!! Yes... zerohedge is designed to brainwash us... it never exposes that obscene fraud that is the US economy, US economic data, the corporatist control of our political institutions, the joke that is our regulatory system, etc. etc. etc. Please.
Krid I disagree with your statement. Many times ZH has posts all about the USA. Right now though the EU is just uglier and Greece is once again to the fore front of the debates. Actually I see it as smoke and mirrors for Spain's financial problems. I think if asked you would find most commenters here would agree the USA is not any better off and if you read the replies most state that here at ZH.
I commented on the private investments months ago when the ECB changed the rules of the game subordinating all other debt to them by making a last minute switch of bonds. That was/is a game changer to investors. This happened with GM in the USA. But not on the scale that soverign countries trying to peddle their bonds.
Still bashing Europe while ignoring the biggest deadbeats of all.
You balls deep in US Treasuries Mark? Or is it Gilts? Drinking buddies with Nigel Farage & Niall Ferguson?
Right, just makes me laugh how the U.S. now apparently has no debt and no corruption? Whats this line about 'If the US behaved in this manner Europe does they'd be in jail'? Oh give me a break....either this guy is nieve or he's pullin woll over someones eyes. When does the spotlight get swung around back on U.S. 103% debt/GDP...after 'election season'? Just bullshit.
I think the point is that the Spanish government claims a Debt/GDP ratio of about 60% which is just plane BS. The US claims are more in-line with reality and do not include entitlement liabiliities. Just a tad bit more truthiness.
Clearly, we need those great arbiters of truthiness (the Chi-Coms) to step in and sort this all out ;-)
Giant game of Liars Poker.
When I read, "does not count any contingent liabilities, sovereign guaranteed debt, derivatives, bank guaranteed debt, regional guaranteed debt or promises to pay for various entities as part of their calculation for their debt to GDP ratios" I did not see the difference between the U.S.S.A and Europe. And have yet to see any CEO,s CFO,s,COO,s CMO,s or CVO,s go to jail for any misleading actions leading to fraud and decieving investors out of millions
And the ES is up, up, and away.
Bizarre. It's that 'invisible hand' thingy again, I guess.
changed your avatar?
I dont know who they think they'll sell to higher...maybe the throngs of FaceBook IPO 'new millionaires'? Total delusion now rules the world.
They aren't thinking about that, at this juncture. Only continuing the momentum.
The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud for operating in this manner but this is the devised scheme in Europe...
Hahahaahahha, [wiping tears] thanks for the laugh Mark!
Exactly what I was thinking. Who is this fucking financial shill? Name one big CEO or CFO who has gone to jail since 2008. Where is John Corzine? Fuck the paper-pushers, all of them, in every fucking country. They add no real value to the system anyway and do nothing but steal wealth from the productive through the socialization of their losses and gambling debts. The collapse can't come soon enough for those of us who know the real value of our labor. Bring it!
Where is John Corzine?
In France.....and he would prefer you spelled his first name correctly so you can put it on your protest sign........like this...
FREE JON CORZINE!!!!
Oh wait.....he is.
Tha DOJ has been thinking about it. But it is so expensive to prosecuteand how does one know who knows who knows who knows who and gets pissed off and terminates you sweet government job. It is just easier to look busy.
Tha DOJ has been thinking about it.
Heh heh......GOOD ONE!
Jon "The Motherfucker" Corzine will never see a jail cell.
Simple reason?
He has dirt (read: stinky shit) on a plethora of fellow bankstas and political slime.
If he goes, so go a bunch of fellow Motherfuckers.
The list of slime is stacked so high you need a crane...
Charlie Rangle
Mark Foley
Anthony Weinie....I could go on and on and ON.
The ONLY politicians that get ka-boshed are the real assholes, that all the other political slime hates - and, they were caught really, 100% red-handed (Dan the mail box man Rostenkowski, Blago (who everyone hated), et. al. - easy targets.
The DOJ and the Feds pick the low hanging fruit. Anything tough? They take a pass and cover it up.
No, no, no. It's the bad guy's fault. I'm as pure as the driven snow.
http://youtu.be/Yky4QtRX_DI
The need for constant 'investment' is insane, Europe is already full of TRILLIONS of Euro's...they cant just grow crops and make and export chese and wine and other products and get along just fine?
The ONLY trouble here is the .001% billionaires and trillionaries not able to increase their massive wealth exponentialy any longer.
Its just demographics - there is no return to be made with an ageing population to be catered for.
Soylent Green
Perhaps you should consider the "investments" as instruments of conversion and then consider the targets of your blame a bit more carefully. Consider as well the fact that you can't get truthful information from the media, anything truthful or useful, unless you use international sources and then, only bits and pieces. Something is afoot and you don't need a telescope to see it.
Properly phrased, constant investment should really read "another round of the Ponzi scheme"... because that's all it really is.... literally.
...and when the normal buyers of sovereign debt go away, governments/banks ramp up the financial repression and confiscations of retirement accounts.
not with my retirement. ;-)
Con game and ponzi scheme? Yes of course. But how many know that the int. drug cartels do their business either with tacit approval by our governments or directly by the goverments themselves? Are we not in control of Afgansistan? How come the opium/heroin trade there is at or over the pre-tabliban levels? Makes me wonder if all we really wanted is to get at those opium fields... If all drug money was withdrawn from the financial system entire nations would go under in the blink of an eye.
Afghanistan? Ah, Afghanistan. There's gold in them thar hills.
Not to mention the oil in Azerbyzan and Iran.
South Africa(the other major supplier) is about to meltdown,
Zimbabwe style, with the Benfaction law about to pass.
Interesting times indeed.
What is the Benefaction law?
So now they will never be free of us?
Lets go devils!!!
Lets go Devils!!!
Lets go Devils!!!
Wile E Coyote was always able to suspend in mid air for a few moments, usually pulling out a sign, before plummeting to the ground with a thud and a puff of dust. From Spain, the sign reads "No bailout needed".
It's the suspense that gets me.
- Bugs Bunny
"Of course you know, this means war!"
-- BB (no not Ben, yet)
so, how are the real numbers?
and who will be pontius pilate?
I'm going to make the silliest of suggestions for Europe and the U.S. too: "Printing" only costs paper and ink right? In that case, print the money and give it to banks, don't loan it to them.
Here in the States, the Fed should print money and pay off our obligations. If there is no loan, there are no debts.
Why not let the money first give to the consumer, it will find the way to the bank anyway.
neo-Greenbackers
Wizzard of Oz part II. But it won't have a happy ending.
Fantastic. That's what we should do. Reward the criminals with more free money. Yes, that's it, because if we do that, they'll never fuck us over again, promise. For real this time. They'll be good little bankers, indeed.
Why didn't someone already think of this solution?
The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud for operating in this manner...
BULLSHIT!
fussy fussy fussy :-)
Cliff's Notes version
a) China and hedge funds not buying Euro debt.
b) European debt/GDP ratios bogus.
"The CEO, CFO and the Board of Directors of an American corporation would go to jail for Fraud"
Bullshit.
LOL.
What about MF Global ? Mr. Corzine ? and of course JPM ?
Another story that backs a bullish USD.
http://bullandbearmash.com/index/usd/daily/
can you kindly shill your stupid elliott wave links on another blog?
USA! USA! USA!
There. I said it
Holy biblical references batman!
I AM THE LORD!!!
We see the balls in the air, know it is a juggling exercise, but no one is able to explain just why these tricks and cons work.
just another day on sesame street
http://youtu.be/bMXfr3e9G8c
Still waiting for someone more eloquent to bash this piece of shit article. In good ZH tradition it still insists on superficial truth. On one side you have deified markets & investors (doesnt matter if its communist Chinese regime). On the other, cannibals and zombies unworthy of existence. Yes, it is a ponzi scheme; but includes everyone without exception. Its a huge pile of insanity and fairy tales. Its a civilizational crisis and there are no good and bad guys. System is archaic and heavily outdated compared to scientific knowledge we gathered along the way.
In the end Ayn Rand accepted state assistance and I am not blaming her for it. We are all too fragile and should stop living insane narratives.
If there are no good guys or bad guys then why do folks want to immigrate to say, the US, instead of China or Chad or Iraq? If everything is a ponzi scheme then why bother with living since you're simply taking part in a huge exercise of intellectual dishonesty? If nothing really matters, why post to a blog that nothing really matters?
Downvote is not mine.
People are immigrating to the US because those are good guys? Really? Meaningless.
Excellent choice of term; intellectual dishonesty. Maybe to witness its demise and return (appearance might be a better term) of sanity? Sounds very exciting and IMO it is coming.
You said it, I havent. I was criticizing badly written, agenda-loaded, symptomatic article. I am satisfied if even one person read my comment and at least a bit changed their opinion of this piece of shit article.
"The institutional readers of “Out of the Box” number somewhat more than 5,000 money managers and I can report that one after another they are either seriously pairing back on their holdings or exiting Europe. The risks are just too great and the way Europe does business is also having a serious effect."
It may be a small quibble with this guy's English but if he claims to be a serious (i.e. professional) analyst then, surely, he would make sure his text is grammatically and syntactically correct. The word he wanted to use here is 'paring back' as you would 'pare back' or whittle a stick. The same word is used in the sense of to peel i.e. to pare an apple or, indeed, a pear.
Perhaps spellcheckers should have a function similar to Google's search prompt: "Did you mean…"
The choice here is so tantalising and confusing for the writer: is it pair, pare or pear?
I talk to financial advisors all the time and they have been converting to cash / hedge / gold for a few months now. But the main driver is the uncertainty caused by the hapless administration - Europe is secondary. Not knowing is much worse than bad news for markets and investment.
I think this story is significant, because the Euros themselves will never stop the fraud that is their ponzi banking scheme. They will continue to roll over old bad loan portfolios into new, bigger bad loan portfolios as long as they can. The only thing that will stop them (or accelerate the ultimate collapse of the ponzi) is when external creditors like China say "no mas".
Perhaps the best example of the collapse of Europe is found in "World Right Side Up". It describes the demise of the Ruhr valley steel plants due to increasing rules, shorter work week and union demands. The Chinese dismantled the plant in 1/3 the estimated time by working 12 hrs/day (German unions protested and the Chinese took one day/week). They reassembled the plant and began full production on day one.
Germany, meanwhile, changed the old site by adding a lake and a housing development (in a nation losing population annually). Workers are still on the dole.