"Dear Angela, Dear Francois, Dear Mario" - From Citi, With No Love At All

Tyler Durden's picture


The big banks are getting restless. Nowhere is this more evident than in the latest just released letter from Citi's European Credit Strategy, literally a letter to Europe's trio of leading politicians, which follows hot on the heels of yet another recent Citigroup missive from Willem Buiter, which was largely ignored in the noise, yet which made it all too clear that when all else fails, it is the Chairman's sworn duty to paradrop money. Because if anyone, it is the banks that know that if things aren't fixed (they aren't), it is up to the central banks to do something to prevent the vigilantes from forcing the politicians hands, as they did in the summer and fall of 2011 (which will not provide a long-term fix, but at least allow bankers to hope that the next collapse won't take place before bonus season). As Citi says, "Until the gravity of the situation is made clear, until the self-reinforcing mechanisms that already seem to be in motion are understood, we don't see how the solutions, the answers, and the certainty that market craves can be brought to the table." Which simply means that things are about to get much, much worse as it will be up to the markets to bring the world to the edge of collapse once again, just so Europe, with the help of the Fed of course, once again is forced to get over the political bickering and prop up risk assets, in yet another iteration of "this time it's different", even though it isn't. Sure enough: "Our impression is that markets will need to act as the proverbial 'attack dog', forcing the issue on the political agenda. We can't escape the sense that it is probably politically easier to let the markets run loose for the time being to make it apparent that further intervention is needed. But 1000bp on Crossover is much closer than you imagine." In other words, Citi just gave the green light for the bottom to fall from the market just so Europe's increasingly impotent political elite does something, anything. Look for many more banks to sign off on the same letter.

From Citi:

Dear Angela, Dear Francois, Dear Mario

It seems that we are at a watershed once again. Judging by the movement we have seen in the credit market and in other risk assets over the last week, a chain of events that could lead to implosion has been unleashed, unless checked by policy action.

2012 started so well. The LTROs allayed market fears about a liquidity crisis in the European banking system and created additional demand for periphery sovereign debt during the first quarter.

However, we reckon it is now time to face the fact that the market does not believe Schäuble's firewall works. Most urgently, the market fears a Greek exit, or the reintroduction of capital controls to stem deposit outflows, might spark deposit flight from banks across a number of other countries. Playing down the importance of a Greek exit now is hardly reassuring, when Mario Draghi said the consequences for the Eurozone would be 'incalculable' only last December.

While the lack of an elected government in Greece complicates matters, the market sees a growing risk any new government will not be able to make the concessions demanded by the Troika quickly enough – or at all. Then what? If a hard line is to be taken on Greece, then we reckon the firewall must be reinforced at least with a pan-European deposit guarantee scheme of some form. The market knows that it is not easy to sell politically in Germany.

It doesn't help that the Spanish spread to Bunds has drifted to record levels again, while there is no clarity on where the funding necessary to  recapitalise the Spanish banking system will come from. It may be that LTRO-driven bank demand can sustain the auctions for now, but it seems likely to us that foreign investors will continue to pull out.

Add in the prospect of Moody's downgrading more banks across Europe and North America, the persistent negative bias in the economic data  relative to consensus, the upcoming Irish referendum, all the funding Italy still needs to do this year and the prospect of Portuguese PSI discussions in only a few months – and it is small wonder that market confidence is breaking down.

Through the LTROs and extremely low interest rates policymakers have ensured that financial markets are flush with cash. We don't recall a time where the liquidity situation and the technical position of the credit market has been much stronger than now. But that isn't enough. Quite simply, the uncertainty is killing any incentive to take risk. What goes in financial markets generally goes in the wider economy too. Companies are flush with cash, but we struggle to see them investing – especially in the countries where investment is sorely needed – while there is no visibility on the Euro project. Meanwhile, things grind to a halt.

We understand the political constraints key policymakers operate under. We know that many backbenchers and ECB board members are not fully onside. We can see in the election results and the opinion polls that a large part of the electorates are not onside either. There seems to be a dangerous perception in many places that enough has been done already.

However, don't be fooled by the apparent resilience of many corporate bonds (and equities). Aside from the sheer amount of cash funds have been left with, it is only the perception that the policy intervention will come eventually, triggering a very large short squeeze that is preventing more selling. Every day seems to bring headlines that challenge that perception. We could be close to the breaking point. Already in the last week there are clear signs in credit that the selloff is becoming more systemic. If you have come across our 'five phases of grief' framework – it appears we are moving straight from 'depression' back to 'anger'.

Until the gravity of the situation is made clear, until the self-reinforcing mechanisms that already seem to be in motion are understood, we don't see how the solutions, the answers, and the certainty that market craves can be brought to the table. Our impression is that markets will need to act as the proverbial 'attack dog', forcing the issue on the political agenda. This would not be the first time that markets have had to bark to get a credible policy response. We can't escape the sense that it is probably politically easier to let the markets run loose for the time being to make it apparent that further intervention is needed. But 1000bp on Crossover is much closer than you imagine.

Moreover, every bark comes with a loss of credibility – a loss of faith in the institutional capacity of the European Union to address the fundamental imbalances. Reining in the market eventually may end up taking a bigger effort than policymakers are bargaining for.

The market needs to know what policymakers are committed to and it needs to see actions that validate those commitments. Inaction is just a carte blanche for investors to sit on the sidelines and wait for things to deteriorate further.

Yours sincerely,

Citi Credit Strategy

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Sat, 05/19/2012 - 18:45 | 2443856 Ahmeexnal
Ahmeexnal's picture

Merkollande in full blown collapse

Sat, 05/19/2012 - 18:58 | 2443867 knukles
knukles's picture

Then again, What Else Are They Gonna Say?
No more money?
Gimme some Bad Earnings?
No bonus pool?

Like WTF, it's not our money, anyhow....

Yassir yassir yassir, let the printing commence.
Europe in disarray, credit flows to seize up, spreads to widen, stocks to crash, banks to be run, cities to burn ...  And that's just Europe.
Who was it the other day observed that the total US banking system capital is something like $12T whilst the exposure (net, all hedged giggle giggle, snort snort) to Europe is something like $4T.
My oh my.....

Sat, 05/19/2012 - 21:30 | 2444035 Crisismode
Crisismode's picture

It's all bullshit, and we all know it.

Don't go looking for a diamond in a pile of shit.


Time to start checking out.

Sat, 05/19/2012 - 21:50 | 2444093 oldman
oldman's picture


How come it is ALWAYS some other dude that is to blame, China, Europe, Japan,Spain, France, Iceland,------I've missed most of them because of a very short-term memory problem, but------------never one of the sacred 'amiricans' in the us of a?

Sorry, knuckles---I just snapped in reading this trash above---'my of my' brought me out of it with a laugh

Thanks a lot!!!!                         om

Sat, 05/19/2012 - 19:09 | 2443886 Eireann go Brach
Eireann go Brach's picture

In other words, if you guys don't print like there is no tomorrow, everyone at CITI including myself will be out of a job!

Sat, 05/19/2012 - 19:16 | 2443894 Ahmeexnal
Ahmeexnal's picture

You should starts lurkin fer a jobs, paddy.

Sun, 05/20/2012 - 00:27 | 2444438 PersonalRespons...
PersonalResponsibility's picture

This is gonna be good, I need more gum.

Sat, 05/19/2012 - 19:37 | 2443925 vast-dom
vast-dom's picture

but QE will not solve a thing -- it only postones the inevitable. these banksters are as insane as they are inane.

Sat, 05/19/2012 - 19:41 | 2443932 LetThemEatRand
LetThemEatRand's picture

As has been observed here on ZH many times, inflation is not a problem for those who get the money first.  You can bet the banksters are converting their personal freshly minted bonus fiat into hard assets and that they have been doing so for years.   Deflation is the one thing that would fuck them, so they will beg for more and more QE.

Sat, 05/19/2012 - 20:21 | 2443955 vast-dom
vast-dom's picture

Rand while what you believe is partially true, it is also simplistic and lacking consideration for the type of characters composing above letter  -- they have been getting paid over and over esp since 2008 till present -- this is not case of them not considering inflation/deflation; rather, this is exclusively about them NOT appreciating endgame and believing, like insane people are apt to do, that their status quo insanity can continue indefinitely.....

Sat, 05/19/2012 - 22:49 | 2444256 RockyRacoon
RockyRacoon's picture

They sense that the music is about to stop, and the number of players vastly outnumbers the available chairs.   As long as the music plays nobody will know the extent of the damage about to befall the bankers and their political pals.   Keep the feet moving and trade on.   To the most of us, the huddled masses, the entire charade is a distraction and a hindrance to being able to carry on.   I hope the place burns to the ground.

Sun, 05/20/2012 - 00:22 | 2444432 slewie the pi-rat
slewie the pi-rat's picture

as far as i can tell, it already has, R_R, but the "news" can't travel in a vacuum?

Sat, 05/19/2012 - 20:28 | 2443968 Al Gorerhythm
Al Gorerhythm's picture

They are only insane from your perspective. They are doing the only sane thing they can do, from their perspective and that is survive, using the only strategy in their tool box; Inflate their liabilities away.  

"The market needs to know what policymakers are committed to and it needs to see actions that validate those commitments. Inaction is just a carte blanche for investors to sit on the sidelines and wait for things to deteriorate further."

Their perspective is that the markets (you and the managers of your savings) will not be allowed to sit on the sidelines while they watch their holdings "detiorate" and get destroyed. They will set up a sell side slide into oblivion like 2008, once again stripping the funds from you and your manager. Once again they will deny you the right to withdraw your funds from your managed accounts, just like they did last time. Redemptions, pah! There will be no redemptions.

You will not be allowed to sit out on the sidelines. There will be restrictions on withdrawals from ATMs as well. They will stop you there too. Markets need to know who is in control. Period.

QE will solve something alright. It capitalizes their current unfunded obligations to all of us at current prices.

Sat, 05/19/2012 - 21:40 | 2444031 Caviar Emptor
Caviar Emptor's picture

Agree with some of what you said. Not all. Yes, the EU heads and their Fed masters won't play the game of default, roll over and play dead. They are well aware what happened last time and no longer so arrogant to believe in "market fundamentalism" and that the baying hounds won't attack if allowed. 

But there in EUland as here in the US and there in Asia and everywhere in the OECD world, things will be moving in one direction, down the path already chosen: further centralization which the majority by far will support to avoid disintegration and a return to civil war and feudalism. 

Sat, 05/19/2012 - 21:52 | 2444096 Al Gorerhythm
Al Gorerhythm's picture

The implication by his statement and the regular smashing of gold and silver is evidence that market fundamentelism doesn't matter (in the short term). When you have control over the regulators and politicians, all that matters is that you don't lose control, which leaves you in control of the markets. Loss of control is bank runs, redemptions, sitting on the sidelines, buying other assets that they have no control over, once bought and held in the white-knukled grip of your hands. Our salvation is their nightmare. Right now, the majority follows them. Later, we'll lead.

Sat, 05/19/2012 - 22:07 | 2444143 oldman
oldman's picture

@al g


I'm laughing so hard at your great sarcastic comment: "They are doing the only sane thing they can do, from their perspective and that is survive,"!!!

We are truly talking about insanity when we jokingly refer to these dudes as being in 'survival mode. The funniest post here in a long, long time.

When these derivatives come apart then we truly speak of 'survival', but until then I will hold your post close to me as a means of quieting the anger within.

Thank you for lightening an oldman's heavy evening         om

Sat, 05/19/2012 - 23:47 | 2444383 Al Gorerhythm
Al Gorerhythm's picture

"If you have come across our 'five phases of grief' framework – it appears we are moving straight from 'depression' back to 'anger'."

Great that you still have a chuckle or two left Old fella. Me, I've run out of the depressive emotion that he suggests and am just over the anger thing. I have moved on to the "Acceptance" or fifth level and am absorbed in how to deal with these sociopathic parasites. I accept them as they are. They have a gene that wills them to destroy the host or at least create a zombie of the host that lives forever in the grasp of their siphoning tentacles. Not this little black duck. My tapeworm remedy is gold and silver. It's available at all natural remedy stores. Tulving is one or Apmex another. Good health.

Sat, 05/19/2012 - 19:54 | 2443940 Bill D. Cat
Bill D. Cat's picture

Come hither , drink deeply of the Merkhoolade .

Sat, 05/19/2012 - 18:50 | 2443861 ArkansasAngie
ArkansasAngie's picture

Neither a Democrat nor Republican be.

I'm not sure that the Banksters understand that the natives are getting a tad bit unhappy.  They might not be giving enough thought to backlash.  Folks are getting tired of working their arse's off only to see their life styles go down and the Banksters laugh all the way to the bonus atm.

Sat, 05/19/2012 - 19:01 | 2443871 XitSam
XitSam's picture

They understand. They don't care. There is still wealth than can be extracted.

Sat, 05/19/2012 - 21:36 | 2444034 Al Gorerhythm
Al Gorerhythm's picture

It's not that they don't care. It's just that you are on the other side of the trade and that's all that matters to them. They need someone else on the other side of the trade, voluntarily or not. 


"Ze market needs to know vat ze policymakers are committed to and it needs to see actions zat ve vill take that validates our commitments. Inaction vill allow investors to sit on ze sidelines and wait for things to deteriorate further!!!!!! Ve vill not let zat happen!!!! Ve haf vays of making you bet!"

You can check out any time you like

but you can never leave.


Sat, 05/19/2012 - 22:32 | 2444212 HungrySeagull
HungrySeagull's picture

Jawhol~ Panzer Dueschemarks Schnell!

Sat, 05/19/2012 - 19:38 | 2443927 Harbanger
Harbanger's picture

It may be Neither Democrat nor Republican but it is about ideology.  All they can do now, is print to sustain their unsustainable project.  Eventually, the entire welfare state collapses along with our currency. 

Sat, 05/19/2012 - 18:52 | 2443862 Eric L. Prentis
Eric L. Prentis's picture

The banksters call for more fixed and manipulated markets, disgusting.

Sat, 05/19/2012 - 20:26 | 2443964 FinalCollapse
FinalCollapse's picture

God forbid the price to find its equilibrium. Price is the enemy. The banksta don't believe in supply and demand. The price must always  go up...

The fucking idiots at the Fed still calculate the P/E  ratios.

Sat, 05/19/2012 - 18:53 | 2443863 no life
no life's picture

How bout try another bank stress test?  Reckon that'd do the trick.

Sat, 05/19/2012 - 19:06 | 2443882 francis_sawyer
francis_sawyer's picture

"I'll Have Another" ~ (wins Kentucky Derby & Preakness)


Sign of the times... Let the printing presses roll...

Sat, 05/19/2012 - 22:34 | 2444215 HungrySeagull
HungrySeagull's picture

No. no . no. Not since Affirmed and Spectacular Bid (Along with Silver charm) has there been a triple.

This one Another is a BIG horse....

The rest ship off to Slaughter.

Sat, 05/19/2012 - 19:07 | 2443883 midgetrannyporn
midgetrannyporn's picture

If anyone is qualified to tell Europe how to handle their affairs it is Citigroup. [/sarcasm]

Sat, 05/19/2012 - 19:08 | 2443885 Everyman
Everyman's picture

Dear Policticians and banksters,


Please FUCK OFF and DIE.  Collectively, take that shiney new handgun out of your desk, load it, and then point it at your collective heads and pull the trigger.  You will be doing the world a favor, and it would be your greatest collective gift to the world.  Your kind is no longer needed on this planet, nor will it be tolerated in the future.  You offer nothing of value, and contribute nothing to our society.  You are OUR problem, YOU are THE PROBLEM.

No more bailouts, no more spending passed your revenues, no more special deals, let's get back to real market and real investing and REAL WEALTH BUILDING!

Or you could just fucking quit.



The Global community

Sat, 05/19/2012 - 20:21 | 2443963 SilverDosed
SilverDosed's picture

I wish jumping out of office building windows would come back in style, any form of modern Seppuku is alright with me.

Sat, 05/19/2012 - 22:34 | 2444217 HungrySeagull
HungrySeagull's picture

The HUDSUCKER Proxy will give you the answer to the Window jump.

Get the DVD and watch!

Sat, 05/19/2012 - 21:09 | 2444003 LeBalance
LeBalance's picture

Dear Global Community,

We sincerely wish you all were smart enough to get out of the Matrix on your own and lead decent lives, but the very great majority of you are still entralled by porn, hollywood, and mickey mouse.

We serve you with BEER, NFL, Playboy, and CONGRESS and you are not even thinking in the slightest about leading reasonable lives on a farm somewhere.

Nope, you all work for the TEAT.  You just can't suck the Squid's dick enough.

Fucking drug addicts.


From all of us here at Circe Central, eat your burger, Fucker.

Have a Nice Day.

Sat, 05/19/2012 - 22:18 | 2444174 Everyman
Everyman's picture

Well put LeBalance.

Sun, 05/20/2012 - 00:26 | 2444437 slewie the pi-rat
slewie the pi-rat's picture

none of you meat packers at cirCent could hold mickey's tail, dickwad

Sat, 05/19/2012 - 19:11 | 2443888 ISEEIT
ISEEIT's picture


A cute response would be:

Who is John Galt?

A real response however must assume that the playay's will keep playin'.

A global print orgy is about to spray sticky, yucky, eweey, stuff on all of us.

The end of ideas.

I would love to do me some art at this point. I would love to arrange them all in a 'certain way'.

I could make a quite marvelous project out of that.

Evolution absent the mind fuck.



Sat, 05/19/2012 - 20:27 | 2443969 Everyman
Everyman's picture

As in "art" via Joker??



Sat, 05/19/2012 - 19:14 | 2443891 insanelysane
insanelysane's picture

Love this quote, "There seems to be a dangerous perception in many places that enough has been done already."

Typical arrogant asshole gansta bankstas.  People don't think that enough has been done already.  People know that what has been done already doesn't work because you can't fix a debt problem with more debt.  The people understand what is going on because it really isn't that complicated.  The bankstas and politicians want the sheeple to think that it is complex but they are losing the propaganda battle as well as the financial battle. 

The world needs a reset where all of the debt vaporizes instead of people's capital being vaporized.

Sat, 05/19/2012 - 19:20 | 2443900 Ahmeexnal
Ahmeexnal's picture

Vaporizing debt would imply sayin goodbye to pensions, all bank accounts, all "funny money".
Got phyzz?

Sat, 05/19/2012 - 21:28 | 2444033 Caviar Emptor
Caviar Emptor's picture

Yes, will never be allowed

Sat, 05/19/2012 - 21:42 | 2444058 TonyCoitus
TonyCoitus's picture

From thin air it came, to thin air it goes!
Vaporize bitchez!

Sat, 05/19/2012 - 19:16 | 2443893 sudzee
sudzee's picture

The printing will come at some point but the man on street will never see a dime of it.

Sat, 05/19/2012 - 20:02 | 2443949 Harbanger
Harbanger's picture

He will, but they will be made of tin.

Sat, 05/19/2012 - 22:35 | 2444220 HungrySeagull
HungrySeagull's picture

The Nickels are worth more in melt value.

A birdie says so.

Sat, 05/19/2012 - 19:17 | 2443896 Sudden Debt
Sudden Debt's picture

If they are flush with cash, why are they starting to offer 5% on deposits again here in Europe?

Sat, 05/19/2012 - 19:22 | 2443907 Ahmeexnal
Ahmeexnal's picture

Monthly inflation will be 5000%.

Sat, 05/19/2012 - 19:18 | 2443897 LetThemEatRand
LetThemEatRand's picture

Dear Citi Credit Strategy,

Fuck you, you FUCKs.


Honest working people everywhere who actually earn a living and from whom you are asking various governments to steal to line your pockets.  You fucks!

Sat, 05/19/2012 - 23:47 | 2444386 StychoKiller
StychoKiller's picture

Hmm, taxpayers are ALSO supporting Gramps via Medicare and Social Security, but perhaps you're in favor of that type of robbery...

Sat, 05/19/2012 - 19:20 | 2443901 q99x2
q99x2's picture

'Investors sitting on the sidelines'

Thar she blows

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