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Erste Group Reveals Stunner: Reports Billions In Previously Undisclosed Underwater Sovereign CDS; Who Is Next? And How Much More Is Out There?

Tyler Durden's picture


Anyone looking at a heatmap of European markets today will see a sea of green punctuated by a very red island in the middle. The culprit: Austrian mega bank Erste, which issued an ad hoc and very unexpected press release, in which it warned that losses in its Hungarian and Romanian books would lead to a 14% hit, or €1.1 billion, to tangible book value, something that in itself is not a surprise to anyone (except the stress test). After all, since early 2010, most have known that due to Swiss Franc-based mortgage exposure, Hungary is next to follow in the PIIGS footsteps, and its collapse has so far been delayed due to lower overall public and private sector leverage. What was, however not only a surprise, but a shock, was that Erste disclosed some major losses on its €5.2 billion CDS portfolio, consisting of "EUR 2.4 billion related to financial institution exposures, and EUR 2.8 billion related sovereign exposures". Why is this a surprise? UK-based financial advisory Autonomous explains: "The fact that Erste had a sovereign CDS portfolio which was not marked-to-market has left many investors scratching their heads. As a reminder the EBA stress test data showed Erste to have zero sovereign CDS exposure within its sovereign mix compared to the €2.8bn it now appears to have ‘fessed up’ to (taking a cumulative €460m hit). They also have €2.4bn exposure to banks via writing of CDS. The bulk is non-PIIGS but banks spreads have moved in the same manner as sovereigns (albeit wider and more volatile)." And there you have it: the bogeyman that everyone has been warning about, yet nobody has seen, CDS written (as in sold) in bulk against other sovereigns and other banks which up until now were only mythical, as they, to quote the EBA (which had Dexia as its safest bank) simply did not exist. Oh, they exist all right, and what they do is create a toxic spiral of accentuating losses whenever the risk situation deteriorates, creating positive feedback loops of ever increasing losses until the next Dexia appears... and then the next... and the next. Expect the market to latch on to this dramatic revelation like a rabid pitbull once the hopium high from today's EURUSD short covering squeeze wears off.

Still, this does not answer the question how Erste managed to squeeze this information by its auditors and the regulators, without having broken most public company, not to mention bank, laws. The answer is simple: the accountants let them do it.

Autonomous with more:

Note the EBA only required banks to declare CDS exposures in its trading book (Erste was not trading these but rather holding them as “credit surrogates”) so they could argue their exposures were strictly speaking correctly disclosed to the EBA. It seems Erste has changed their classification following an IASB paper from July. There is a link to the  paper below where the relevant paragraphs appear to be 59-63 - Erste believed previously they were ‘financial guarantees’. With reference to paragraph 62 specifically, our in house accounting expert, notes that CDS do not meet the criteria for designation as a guarantee (as a guarantee must apply to a specific referenced asset held by the buyer rather than simply a referenced name). This isn't something there should expect confusion over - the starting point for all derivatives accounting is FVTPL, with any hedge accounting simply changing where the movements are recorded. Thus the decision to treat these positions as ‘guarantees’ should be considered a very “aggressive” approach.

And, logically, the two immediate follow up questions are 1) who else and 2) how much:

It also raises two broader questions - the scale of protection that has been sold by other banks across Europe and how many other banks have deployed Erste’s accounting approach (and will now be forced to move to mark-to market)? On the latter we have calls in with all the banks we cover cross Europe (more later). On the former I remind you the disclosure on sovereign CDS was a major disappointment in the EBA stress test in July. Despite investor hopes / market pressure at the time, the EBA presented the data in a way which rendered the information almost meaningless. It showed the net of positive market values and negative market values with no data on the notional value of positions.  Market values of PIIGS derivatives exposures according to the EBA data ranged between €1.5bn for BNP Paribas and (€800mn) for LBBW.

As we identified in our note at the time (see page 15 - link below) the problem is that the net market value can change very quickly and unfortunately we remain totally in the dark on who has written what. The BIS data is equally as unhelpful - in its latest Quarterly Review (link below), the BIS explained how complicated the data is and how impossible it is to unravel who has written what. This is an obviou

So while Erste group is getting pummeled for being the first to be truthful, granted under duress, with its book exposure, this is merely the first of hundreds, if not thousands, of banks that it will be revealed in the coming weeks and months wrote hundreds of billions of CDS on sovereigns that have since soared to stratospheric levels. While on one hand ISDA may show up and once again make it clear that it only works for bank interests, reconfirming it would never declare a sovereign credit event (for more on the traditional CDS triggers see table below), the truth is that Erste, and soon many other banks' counterparties will demand a pound of flesh in daily variation margin, for even the tiniest amount of CDS exposure, which in turn will lead to a sudden and very dramatic liquidity crunch as unlike quarterly reporting where banks can fudge numbers and data all they want, when it comes to counterparty exposure, other banks know better than anyone just how bad the bank on the other side of the phone is. And will act accordingly.

Expect many more risk flaring episodes in the weeks ahead once this revelation is properly digested.

And as noted above, while probably very much irrelevant now that IDSA has made it clear in the aftermath of Greece it is merely a figurehead for various banking interests, and will never pronounce a sovereign EOD, here is what in theory, should trigger credit events for various types of CDS.

And from the Erste press release, here are the long-overdue details on its CDS exposure:

Background on the CDS portfolio (protection sold)


In the years up to 2008 Erste Group built up a diversified portfolio of off-balance sheet sovereign and bank risk positions (CDS sold), which – as credit surrogates (financial guarantees) – were held at amortised cost. As at 30 September 2011 the total volume amounted to EUR 5.2 billion (at amortised cost):

  • EUR 2.4 billion related to financial institution exposures, and
  • EUR 2.8 billion related sovereign exposures
  • About 14% or EUR 0.7 billion of the total volume is related to banks and the sovereign in Greece, Portugal, Spain, Ireland and Italy

Following an interpretation issued in a staff paper of the IASB dated 28 July 2011 concerning the classification of CDS as derivatives versus financial guarantees, the management board of Erste Group decided to reclassify the aforementioned portfolio as of 30 September 2011, resulting in a mark-to-market valuation of the entire portfolio. Historical accounts will be adjusted as follows: the cumulative effect of EUR -149 million for the business years prior to 2010 will be booked against equity at the start of 2010; in the business years subsequent to 2009 the valuation result of this portfolio is included in the line item "Net Trading Result”. The overall impact from the reclassification amounts to EUR -176 million pre-tax (EUR -132 million post-tax) in 2010. In 1-9 2011 the negative impact from valuations and from losses on disposal amounted to about EUR -234 million (about EUR -180 million post-tax).


With a view to minimise income statement volatility, Erste Group plans to sell these assets in an accelerated manner, taking advantage of windows of opportunity as and when they arise. As a substantial part of these assets are sovereign exposures, the disposal will have a correspondingly lower impact on risk-weighted assets.


Erste Group has also significantly reduced – mainly as a result of asset disposals – its net exposure (sovereign, bank, corporate and retail) to Greece, Portugal, Ireland, Spain and Italy from EUR 5.1 billion at year-end 2010 to EUR 3.6 billion at 30 September 2011; 81% of this exposure is related to Spain and Italy. Sovereign exposure to Greece, Portugal, Ireland, Spain and Italy was reduced from EUR 1.9 billion to EUR 0.6 billion, while bank exposure declined from EUR 2.3 billion to EUR 2.0 billion; corporate and retail exposure remained unchanged at about EUR 0.9 billion (mainly Spain and Italy). As of 30 September 2011 95% of Erste Group’s sovereign exposure to Greece, Portugal, Spain, Ireland and Italy is carried at market value.

PS: You know the drill: Austria-Erste CDS compression trade...


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Mon, 10/10/2011 - 14:42 | 1758417 Deadpool
Deadpool's picture

cockroach theory. Where there is one there is always many many more.

Ya know, "hundreds of billions of CDS on sovereigns that have since soared to stratospheric levels." is not a European invention. This is a Wall Street (read Goldman Sachs) invention. they really did steal the world.

Mon, 10/10/2011 - 14:43 | 1758456 Cassandra Syndrome
Cassandra Syndrome's picture

Do you not think you are being unfair on Cockroaches using them in this analogy?!

Mon, 10/10/2011 - 15:04 | 1758560 slewie the pi-rat
slewie the pi-rat's picture

take a cockroach to lunch, BiCheZ!

Mon, 10/10/2011 - 15:10 | 1758590 fuu
fuu's picture

la cucalmuerzo!

Mon, 10/10/2011 - 15:24 | 1758670 GetZeeGold
GetZeeGold's picture



In other announcements.....the new spokesman for the EU is Gomer Pyle.




Mon, 10/10/2011 - 15:35 | 1758726 DoChenRollingBearing
DoChenRollingBearing's picture

Beat me to it!


Also, @ fuu,

Yum, may I have dozen please?  "Para llevar a la casa."

Mon, 10/10/2011 - 15:45 | 1758769 fuu
fuu's picture

Cene en sólo!

Mon, 10/10/2011 - 16:26 | 1758941 unclebill
unclebill's picture

hmmmm. I should have been a bankster...and make millions

Mon, 10/10/2011 - 14:46 | 1758471 GeneMarchbanks
GeneMarchbanks's picture

We already know that all Euro banks have tons of off-balance sheet horseshit. The timing of their 'announcements' is the only wildcard. It's always an accidental discovery.

I hope these motherfuckers burn along with all fiat.

Mon, 10/10/2011 - 17:00 | 1759061 dracos_ghost
dracos_ghost's picture

In all seriousness, is there a possibility that these banks are burning the red-headed step children off their books before Basel III really starts to impact them.

Mon, 10/10/2011 - 17:27 | 1759140 vocational tainee
vocational tainee's picture

That is why, we should make tabula rasa..

Mon, 10/10/2011 - 21:37 | 1759640 criticaster
criticaster's picture

Someone obviously got spilt up from the Occupy Wall Street demo...

Goldman did not invent CDSs. They were first offered up by bankers in trust and subsequently by JP Morgan. Originally they were intended as big-ticket risk control for multinational corporates and were supposed to come with the same due dilligence as any insurance policy. JP Morgan and later Citi, were particularly instrumental in deploying them for more general puposes including mortgage securitisation. Of course, by the time CDSs blew the financial system up 'everybody was at it', but it was not Goldmann that invented them.

Lets at least try to get our facts straight.


Mon, 10/10/2011 - 14:38 | 1758423 papaswamp
papaswamp's picture

Loads of 'Come to Jesus' moments bitchez as banksters now run to get bailed by the sheeple.

Mon, 10/10/2011 - 14:52 | 1758481 GeneMarchbanks
GeneMarchbanks's picture

Were you the dude who called this earlier today? Somebody came out earlier and said watch Austria and Eastern Europe. Whoever it was, kudos.

Mon, 10/10/2011 - 14:52 | 1758498 Deadpool
Deadpool's picture

GE wrote that stuff.

Mon, 10/10/2011 - 15:23 | 1758667 papaswamp
papaswamp's picture

In relation to Bulgaria I think I said something....which makes me wonder if something in Bulgaria has gone pop. Was a day or 2 ago though wasn't it? Too much vino and I forget.

Mon, 10/10/2011 - 15:31 | 1758715 GeneMarchbanks
GeneMarchbanks's picture

'Dick Darlington

Vote up!

Vote down!


Austrian "jewel" Erste Group Bank Ag (EBS AV on bbg) getting hammered today after announcing losses in it's Eastern Europe operations and markdowns of it's PIIGS holdings'

Congrats Dick Darlington, call of the week.

Mon, 10/10/2011 - 15:37 | 1758739 DoChenRollingBearing
DoChenRollingBearing's picture

Good eye, Gene, have a green!

Mon, 10/10/2011 - 18:26 | 1759265 GetZeeGold
GetZeeGold's picture



I'll give you a green for that Dick.



Mon, 10/10/2011 - 15:39 | 1758746 Paralympic Equity
Paralympic Equity's picture

I wrote a comment about it in the post on the Max Bank and the greek bank recap/aid. ATX was beaten up by this, Erste booked a big loss on goodwill writeoffs from eastern Europe, I expect more to come. Austrian banks have 300 bn € exposure to mortgage loans in eastern Europe, and most of them are pegd in EUR or CHF and it is a big pile os steaming shit. I am from a eastern Europe country.

Mon, 10/10/2011 - 16:40 | 1758993 papaswamp
papaswamp's picture

It is interesting that the whole eastern european aspect has been largely ignored....or perhaps by design kept out of the news because things could be substantially worsethan the larger 'realm' is aware? 

Tue, 10/11/2011 - 02:40 | 1760240 Paralympic Equity
Paralympic Equity's picture

Things are a lot worse than it is presented, a lot of mortgage dept is under water, and there is a lot of currency risk even with the big interventions by the SNB. It could became very ugly

Mon, 10/10/2011 - 14:39 | 1758424 macholatte
macholatte's picture

Very Bullish

Mon, 10/10/2011 - 15:38 | 1758741 DoChenRollingBearing
DoChenRollingBearing's picture

No doubt about it.

Mon, 10/10/2011 - 14:40 | 1758435 stormsailor
stormsailor's picture

yeah, there is a lot of "hidden" nasty out there.  i have gotten burned today already for 5k, but i believe i'll short again -20 /es this time from 1185. 

Mon, 10/10/2011 - 14:42 | 1758443 defn8Dog
defn8Dog's picture

Sorry... this story missed the bad-news-cutoff last week and is no longer admissable.  The market has put in its lows for the year.  Better luck with these sad, outlier stories, next summer.  

Mon, 10/10/2011 - 15:27 | 1758618 Smithovsky
Smithovsky's picture

didn't you get the memo? humor is only allowed on redES+greenGC days

Mon, 10/10/2011 - 14:42 | 1758446 Smithovsky
Smithovsky's picture

so another 5% up tomorrow?  

Mon, 10/10/2011 - 15:16 | 1758624 Manthong
Manthong's picture

Unless we can just get another 8.5% in the scheduled afternoon melt-up today to equal the stellar performance of Columbus Day 2008 (per previous thread).

Mon, 10/10/2011 - 15:25 | 1758679 papaswamp
papaswamp's picture

Up 2.2% ..then the down sessions will start again...

Mon, 10/10/2011 - 14:44 | 1758450 SheepDog-One
SheepDog-One's picture

HEY no problem! Europe is engineering a $6 trillion Euro leveraged super-fest....hell just borrow some from them! PLENTY to go around! The world is flush with CASH all is well!

Mon, 10/10/2011 - 15:28 | 1758696 plantigrade
plantigrade's picture

And if $6 trillion is not enough they can still be re-leveraged to 60.

Trees do grow to the sky in the land of unicorns.

Mon, 10/10/2011 - 16:35 | 1758974 Dr. Richard Head
Dr. Richard Head's picture

Fiat fuck fest - Fisting the public since 1913.

Mon, 10/10/2011 - 18:27 | 1759268 JayParamedic
JayParamedic's picture


Mon, 10/10/2011 - 14:43 | 1758452 kote
kote's picture

The EBA didn't have Dexia listed as the safest bank.  Intesa Sanpaulo listed Dexia as the safest out of the 21 "peers" it selected.

Mon, 10/10/2011 - 15:34 | 1758727 RockyRacoon
RockyRacoon's picture

Whew!  I can't wait to hear about the others.   Being the leper with the most fingers ain't that high an endorsement.

Mon, 10/10/2011 - 15:39 | 1758747 DoChenRollingBearing
DoChenRollingBearing's picture

...the bearing snickers...

Mon, 10/10/2011 - 17:32 | 1759149 Dugald
Dugald's picture

Yuh!.. cheap bearings are always noisy...

Mon, 10/10/2011 - 16:04 | 1758854 kote
kote's picture

ZH got the facts wrong.  It hurts the credibility of the site and the message when that happens.  The message doesn't change whether or not Dexia was ranked at the top, so why give critics ammo with sloppy / false reporting?

Facts are important, especially for a site outside the MSM.

Mon, 10/10/2011 - 21:38 | 1759652 slewie the pi-rat
slewie the pi-rat's picture

yeah, but tyler put the Intesa Sanpaulo list over the weekend, so i think he just mis-spoke, altho you seem to be technically correct, imo, kote

like you, i do not consider the ideas to be too damaged or "changed" by the glitch, which i have removed here:

"And there you have it: the bogeyman that everyone has been warning about, yet nobody has seen, CDS written (as in sold) in bulk against other sovereigns and other banks which up until now were only mythical, as they, to quote the EBA (...[deleted dexia mention]...) simply did not exist. Oh, they exist all right, and what they do is create a toxic spiral of accentuating losses whenever the risk situation deteriorates, creating positive feedback loops of ever increasing losses until the next Dexia appears... and then the next... and the next. Expect the market to latch on to this dramatic revelation like a rabid pitbull once the hopium high from today's EURUSD short covering squeeze wears off."

but you are correct, i think, in worrying that someone might "report" what zH & tyler are saying, here, and "push" the glitch, just for the sake of confusing disinfo, to make it look like tyler is trying to pull something or "denigrate the EBA" or whatever

so, thanks; i missed that the first time; and yes, this is an important zH/durden call

Mon, 10/10/2011 - 14:43 | 1758454 rambler6421
rambler6421's picture

I heard on the CNBC today that the blogosphere is spreading all these rumors about I-banks like Morgan Stanley........must be a reference to Zerohedge.


Tyler, don't start all these rumors for all these banks!  CNBS (aka Pravda) won't like it. 

Mon, 10/10/2011 - 14:43 | 1758455 abugarance
abugarance's picture

totally irrelevant, the bank is already nationalised and besides Merkozy promised, all will be well, hush little one...

Mon, 10/10/2011 - 14:43 | 1758457 PaperBear
PaperBear's picture

Oh look what I just found down the back of the sofa.

This is a completely asinine situation.

Mon, 10/10/2011 - 14:45 | 1758467 SheepDog-One
SheepDog-One's picture

What did you find, another $1 trillion dollar bill? Hooray, the world is saved once again! 

Mon, 10/10/2011 - 14:54 | 1758506 ouchtouch
ouchtouch's picture

I think you mean a $trillion platinum coin.

Mon, 10/10/2011 - 15:06 | 1758565 Caggge
Caggge's picture

The banking industry needs to give out bonuses to retain their talent. The talent is the best and the brightest in the whole world. Yet, they manage their business this way. Whoops, I found another debt that will  bankrupt our bank if you don't bail us out. It is amazingly stupid to expect the same "talent" to solve the problem that caused the problem.

Mon, 10/10/2011 - 15:41 | 1758755 DoChenRollingBearing
DoChenRollingBearing's picture

@ SheepDog

No, the trillion dollar bill is NEXT week!

Mon, 10/10/2011 - 17:09 | 1759087 Montecarlo
Montecarlo's picture

Hey - this is bullish for metals!

Mon, 10/10/2011 - 15:52 | 1758807 BurningFuld
BurningFuld's picture

Erste had previously consulted with Tim Giethner regarding disclosure of the CDS's.

Mon, 10/10/2011 - 16:13 | 1758895 Greater Fool
Greater Fool's picture

No, no: It's actually more asinine than that.

The basic content of the press release is, "We just asked around a bit and found out that CDS are derivatives. Sorry, guys. Our bad."

Mon, 10/10/2011 - 14:43 | 1758460 Catullus
Catullus's picture

And if ISDA never actually declares a default, those who bought the CDS protection are fucked. There's no way out. It's going to end up being "backstop" everything bazooka time.

Mon, 10/10/2011 - 14:46 | 1758470 SheepDog-One
SheepDog-One's picture

All 'backstopped' on the backs of the people who cant even find a job.

Mon, 10/10/2011 - 17:39 | 1759163 Dugald
Dugald's picture

 And all the while crooks telling the people.....

You have never had it so good!

be greatful damn you...

Mon, 10/10/2011 - 14:57 | 1758521 oogs66
oogs66's picture

And government money flows the stupidest most aggressive accounting banks

Mon, 10/10/2011 - 14:45 | 1758469 oogs66
oogs66's picture

It explains why Austria backs EFSF - better to receive than give

Mon, 10/10/2011 - 15:06 | 1758576 A Man without Q...
A Man without Qualities's picture

There is a joke the Germans tell about Austrians - when an Austrian says to you "guten morgen", he's just lied twice.

I suspect there are all sorts of horror stories on the books of some of their banks, but they are good at keeping secrets among themselves...

Mon, 10/10/2011 - 15:31 | 1758711 Withdrawn Sanction
Withdrawn Sanction's picture

A Kredit Anstalt moment awaits many, it would seem.

KA "...had suffered serious financial trouble in 1929, but various governmental and other sources had leaped to its aid, driven by the blind expediency of the moment telling them that such a large bank must not be permitted to fail. ...The Austrian Government also guaranteed some of the Boden bank's investment. This shored up the shaky bank temporarily. The crisis came when Austria turned to its natural ally, Germany, and, in a world of growing trade barriers and restrictions, declared a customs union with Germany on March 21, 1931. The French Government feared and hated this development, and hence the Bank of France and lesser French banks suddenly insisted on redemption of their short-term debts from Germany and Austria.

That ringing in your ears is an echo.  This excerpt is from Rothbard,  but Anderson is the one who coined "The Tragic Year," referring to 1931, the darkest year of the Great Depression.  The collapse of KA kicked off a chain reaction of messes around the globe.

The current problems at Erste may not rise to the KA level (yet), but someone has blinked, and that's all it will take when a system is as fragile as this one is.

Mon, 10/10/2011 - 15:45 | 1758776 Deadpool
Deadpool's picture

says a little somethin' somethin' about the Austrian School of Economics, huh?

Mon, 10/10/2011 - 14:47 | 1758473 kito
kito's picture

market doesnt give a crap about insolvent banks. the fact that dexia was bailed out only strengthens the investors resolve to BUY BUY BUY!!!!!!  this is NOT 2008, because every investor now understands the game plan. BAILOUTS!!! its risk free investing. dexia set the tone. an austrian bank with cds underwater is a sideshow to investors!!! austria will BAIL THEM OUT if need be......only when the biggest sovereigns themselves explode will there be panic. for now, moral hazard is all the rave. invest em if you got em........

Mon, 10/10/2011 - 14:47 | 1758477 PaperBugsBurn
PaperBugsBurn's picture

WTF is going in??? Fucking sellouts!!!

Why da fff haven't you Tylers covered this???? All that bitching and there you go... selling out!!!

What a bunch of c*ks*kers!!!

Officially announced on October 3, 2011, the "Occupy the Federal Reserve" movement called for by pro-freedom pundit Alex Jones and augmented by "End the Fed" movements nationwide, is set to begin this weekend. Despite the implications of large crowds convening upon America's central bank, run by the very corporate-financier interests that have abused Wall Street and stirred up the "Occupy Wall Street" crowds in the first place, not a word of it has been spoken in the Western media - in fact a Google News search for "Occupy the Fed" retrieves the following, cartoonish headline: "Occupy Wall Street finds sympathy in the Fed."

And looky here:

2012 like Herman Cain, a former Federal Reserve chairman, makes such pandering farcical if not entirely offensive to the American people's intelligence. Not only are Americans calling this hubris-filled bluff, but so are foreign pundits overseas.

Some of you morons around here been fawning abt this Cain scumbag.

WTF!!???  You like being slaves or is it that you know once this Ponzi comes down you'll have to get real jobs??


Mon, 10/10/2011 - 14:49 | 1758486 papaswamp
papaswamp's picture

Many decaf brands are just as tasty as the real thing...

Mon, 10/10/2011 - 14:52 | 1758496 kito
kito's picture

@PAPERBUGSBURN--------EXACTLY!!!!!!!!!!!!!  +10000000000000000000000000000000000000000000000000


Mon, 10/10/2011 - 14:55 | 1758509 SheepDog-One
SheepDog-One's picture

Fuck Herman Cain the FED asspuppet.

Mon, 10/10/2011 - 14:56 | 1758519 Deadpool
Deadpool's picture

hard to believe the Fed is an equal opportunity employer....

Mon, 10/10/2011 - 15:24 | 1758674 Ripped Chunk
Ripped Chunk's picture

Seriously, you can see the piano wire coming out of the back of Cain's coat. What a massive jerk off.

Mon, 10/10/2011 - 17:52 | 1759203 Dugald
Dugald's picture

muahahagahahahaga....Is that Swahili?

Mon, 10/10/2011 - 14:50 | 1758479 Problem Is
Problem Is's picture

Well, like my friend Chuck used to say...

"That will go over like a turd in the punch bowl."

BTW: Hey Europe... how are those Timmah Stress Tests working out for you?

Mon, 10/10/2011 - 14:48 | 1758484 SheepDog-One
SheepDog-One's picture

So now the question is, who wants to hold the vapor pump confidently into the EFSF super secret vote overnite?

Mon, 10/10/2011 - 14:50 | 1758488 MiningJunkie
MiningJunkie's picture

Just keep bringing the bad news - it is kerosene on the short-seller bonfire that is engulfing the hedge-fund and blog community...Just keep buying them with rapidly-eroding fiat just like Zimbabwe.


Mon, 10/10/2011 - 14:52 | 1758493 Tyler Durden
Tyler Durden's picture

What it really does is accelerates the moment of coordinated global (and pretty much ceaseless) money printing. That's it.

Mon, 10/10/2011 - 14:55 | 1758510 Deadpool
Deadpool's picture

Hey! who invited you to your own party? can't we just say uneducated and immature things without you jumping in? ;0)

Mon, 10/10/2011 - 15:50 | 1758793 DoChenRollingBearing
DoChenRollingBearing's picture

LOL and green!

Mon, 10/10/2011 - 14:56 | 1758516 kito
kito's picture

@tyler, you meant to say coordinated global money printing and gold molesting...

Mon, 10/10/2011 - 14:57 | 1758520 SheepDog-One
SheepDog-One's picture

I dont agree 100%, Europe is just being forced to chain itself tightly together as 1 for the big implosion, so that none of them can wiggle out of it. 

1 world govt, 1 world currency....soon.

Mon, 10/10/2011 - 15:02 | 1758547 LawsofPhysics
LawsofPhysics's picture

My thoughts exactly.  These types of announcements will only accerate as the banks suddenly discover more bad debt in and effort to be transparent and forthcoming.  The rape of the taxpayer and theivery of real wealth continues.  Bloody sheep.  I still maintain that the energy and water issues around the world may end up causing more problems than any financial crap in the immediate future.  Confrontations in both areas are imminent  in many locations already.

Mon, 10/10/2011 - 15:08 | 1758581 GeneMarchbanks
GeneMarchbanks's picture


Mon, 10/10/2011 - 15:11 | 1758596 Tao 4 the Show
Tao 4 the Show's picture

We await the "Mother of All Shock and Awe" printing campaigns.

The interlocking of the banks through all these derivatives does seem like a deadly setup for sudden apocalypse. But I don't agree that the PM's will be simultaneously crushed. If so, why bother with them so much now? Why not wait for the final moment to devastate the PM longs.

Notice how the CHF weakened against the EUR late last week and last night? Nice buffer for today's EUR issues. Same with PM's I think. Scare out as many as possible before the big moment.

Mon, 10/10/2011 - 16:26 | 1758942 Tuffmug
Tuffmug's picture

That is the status quo hopium game plan. Only way to stop it is stakes through the hearts of our fiat printing parasitic central bankers!

Mon, 10/10/2011 - 16:47 | 1759012 Spigot
Spigot's picture

TD, yes, I believe that may be a plausible read...the setup, then the con.

Most of these entities stuff this crap into SIVs when they have to do reporting (or similar devices). They then claim 100% ownership in the SIV at stated book, then once the report is run they "buy back" the investment to their books. The more crap these financial "wizards" dream up, the more it makes me believe in alien reptilian lizards (AKA "the Grays") in high places.

But seriously, with so many warped tricks up their sleeves, one has to wonder why they have to confess anything at all, let alone reconcile their books or admit losses, etc.

Causes me to wonder...WHY? Then I have to look at the end result and find out who that benefits.

Mon, 10/10/2011 - 14:51 | 1758491 Belarus
Belarus's picture

I wonder if Merkl and Sarkozy will be fast of enough to recap the banks? Things that indeed make you go hmmmmmm....

Mon, 10/10/2011 - 14:51 | 1758492 reader2010
reader2010's picture

It's all smoke and mirror. When the shit does hit the fan, it won't happen in Euroland. At least thats what Marc Faber says.

Mon, 10/10/2011 - 14:54 | 1758503 SheepDog-One
SheepDog-One's picture

ALL theyre doing in Europe right now is chaining themselves tightly together for the coming collapse so they all sink, and all are forced into the same 1 world govt, thats all, if people want to pile their money into stocks based upon this theyre insane.

Mon, 10/10/2011 - 14:58 | 1758526 Deadpool
Deadpool's picture

blah blah blah socialism blah blah blah socialize the losses blah blah blah fascism. too many words sheepdog1

Mon, 10/10/2011 - 15:14 | 1758613 slewie the pi-rat
slewie the pi-rat's picture

mmmm...  waffles and goulash, ghoulZ!

Mon, 10/10/2011 - 14:52 | 1758499 stickywicket
stickywicket's picture

Belly up to the trough fo the slop runs out.

Mon, 10/10/2011 - 14:52 | 1758500 ZeroPoint
ZeroPoint's picture

Don't you wish there was something we could do kick this motherfucker over the edge? I am tired of talking about imminent collapse. GET ON WITH THE COLLAPSE.

Mon, 10/10/2011 - 14:59 | 1758531 inkarri9
inkarri9's picture

Initiate a bank run by pulling all of your funds from the major banks. 

Mon, 10/10/2011 - 16:02 | 1758841 New_Meat
New_Meat's picture

wash, rinse, repeat ...

Mon, 10/10/2011 - 14:59 | 1758532 inkarri9
inkarri9's picture

Initiate a bank run by pulling all of your funds from the major banks. 

Mon, 10/10/2011 - 15:01 | 1758540 Deadpool
Deadpool's picture

kill the paper shorts by buying physical silver.

Mon, 10/10/2011 - 15:14 | 1758604 s2man
s2man's picture

Pull your funds; Done that.  Pys silver; doing that.  Sorry, I haven't been able to destabilize global finances, yet.  So I just call it prep'ing.

Mon, 10/10/2011 - 15:52 | 1758803 DoChenRollingBearing
DoChenRollingBearing's picture

Prepping is good enough.  Can't do too much.

Mon, 10/10/2011 - 17:58 | 1759216 Dugald
Dugald's picture

Patience young Grasshopper, the full measure of pain and despair must be extracted first

Mon, 10/10/2011 - 14:54 | 1758502 downtownshuter
downtownshuter's picture

" As a reminder the EBA stress test data showed Erste to have zero sovereign CDS exposure within its sovereign mix compared to the €2.8bn it now appears to have ‘fessed up’ to (taking a cumulative €460m hit)"


Couldn't this be fixed by putting CDS on an exchange? Or would that not make a difference?

Mon, 10/10/2011 - 15:01 | 1758543 Deadpool
Deadpool's picture

that's so 2001....over the cliff now.

Mon, 10/10/2011 - 15:05 | 1758569 downtownshuter
downtownshuter's picture

Well I understand that banks can't avoid being screwed at this point, but wouldn't it help us know who is screwed and by how much, and sooner rather than later?

Mon, 10/10/2011 - 15:50 | 1758795 Deadpool
Deadpool's picture

if you sit down at a poker table and can't figure out who the sucker is; it's you.

To answer, You and everything you've got. don't rush it.

Mon, 10/10/2011 - 15:56 | 1758815 DoChenRollingBearing
DoChenRollingBearing's picture

@ downtown

THAT is an excellent question!

Which banks are most on the hook if they do NOT pay their counterparties (they default)?  American banks might be stronger, or not?  Which US banks are most on the hook if everyone defaults?

Yes, that information would be of great use.

Mon, 10/10/2011 - 14:55 | 1758511 TradingJoe
TradingJoe's picture

Yummmyyyyy, popcorn ready! German Beer:)) Ready! Now lets call my girlfriend and get ready for Da' Show!

Mon, 10/10/2011 - 14:57 | 1758524 spankfish
spankfish's picture

Tucher Helles Hefeweizen I hope!

Mon, 10/10/2011 - 15:10 | 1758587 TradingJoe
TradingJoe's picture

Nur, Baby! Mir San koanne Prolletten, Gell!? (My Bayrisch is' halt a Kreutz fuer Euch Preissen, aber nix fuer Ungut)!

Mon, 10/10/2011 - 16:33 | 1758965 Wolferl
Wolferl's picture

Es Ducher is ned schlechd, edz gibt aber fei wida an dungla Gudmann Weiznbock, do kennst di neilehng.

Mon, 10/10/2011 - 14:55 | 1758513 spankfish
spankfish's picture

Stress tests are for sissies.

Mon, 10/10/2011 - 16:43 | 1759000 Dr. Richard Head
Dr. Richard Head's picture

Stress Test - Pissing on the public and telling them it's raining.

If anything, the stress tests should provide a great commentary as it relates to which instiutions are the most unsound.

Mon, 10/10/2011 - 14:56 | 1758514 papaswamp
papaswamp's picture

2005 Chateau Maucaillou Moulis (and brunette in a thong out back) jealous bitchez!

Mon, 10/10/2011 - 15:02 | 1758546 spankfish
spankfish's picture

Actually working on a Chilean one ... they get pissed when you mention Argentinian wine though.

Mon, 10/10/2011 - 16:44 | 1758825 DoChenRollingBearing
DoChenRollingBearing's picture

Actually I have found the reverse to be true.

The way to make an Argentine mad is to tell them, yes, yes, Argentina is a great place!  Nice music, great beef and wine!  The wines in Chile are a little better though...  That'll do it!

Mon, 10/10/2011 - 14:56 | 1758515 tony bonn
tony bonn's picture

as vice chairsatan of the federal reserve alan blinder told all americans in the 1990s, the last duty of a (central) banker is to tell the truth.....

why should anyone be shocked that a bank iss hiding putrid "assets"?

Mon, 10/10/2011 - 15:00 | 1758535 Deadpool
Deadpool's picture

wait'll you see what Fannie Mae and Freddie Mac and FHLB are hiding. yee ha!

Mon, 10/10/2011 - 14:58 | 1758525 LawsofPhysics
LawsofPhysics's picture

The answer to the question really depends on how much taxpayer rape and printing will be eventually allowed.  As more is allowed more of the bad debt will suddenly be "discovered".  Bullish for markets and PMs.

Mon, 10/10/2011 - 14:59 | 1758530 alien-IQ
alien-IQ's picture

no doubt this will boost the /ES another 30 points to the upside because....just fuckin BECAUSE...ok?

Mon, 10/10/2011 - 15:00 | 1758536 csmith
csmith's picture

Equivalent to the "mini-blowups" at U.S. mortgage insurers in late 2007 and early 2008; signs that there are cracks in the system that run in directions few can predict. First it was MGIC Investment Corporation, then Radian Group, then Genworth, then PMI Group (PMI) and then, finally AIG hit the fan.

Mon, 10/10/2011 - 15:05 | 1758567 walcott
walcott's picture

screw this bullshit it never fucking ends. 

Mon, 10/10/2011 - 15:06 | 1758573 GoldbugVariation
GoldbugVariation's picture

It's not a "bailout" it's a "takeover".  Other governments soon to launch takeover bids for many other banks.  Stocks will go to the moon, BUY BUY BUY.

Mon, 10/10/2011 - 15:43 | 1758761 RockyRacoon
RockyRacoon's picture

So, if I read you correctly, the governments will become the banks, or visa versa.  No difference, really.  Isn't that what it has all been about anyhow?   Gov't=banks.   My Senator will become the lender of last resort, approving loans for small business.  Highest and best use for morons I suppose.

Mon, 10/10/2011 - 15:15 | 1758574 Conax
Conax's picture

Found more 'underwater' CDSwaps, eh? Bearish for the markets-

But then, holy cow, there's more tonnage of silver lying on the ocean floor! Bearish for silver!

What a coinky-dink! Shallower than that other wreck that's 15,000 feet deep.

All you silver stackers might as well sell... c'mon, sell... it's gutter metal.. selll.

Mon, 10/10/2011 - 15:09 | 1758582 Zonker
Zonker's picture

The "Useful Idiots" at ZH continue to post Doom and Gloom while market screams "Please Sir may I have another'!  120 Handles of pure Bliss while ZH seeks evidence that it's not real...

Trade what you see and not what you read and hear


Mon, 10/10/2011 - 15:19 | 1758640 s2man
s2man's picture

I see bubbles.  Just because they have not popped yet, does not imply they are not bubbles. 

Mon, 10/10/2011 - 15:24 | 1758675 PY-129-20
PY-129-20's picture

Yeah, luckily you bought Dexia shares and did not listen to this Tyler dude...

Mon, 10/10/2011 - 15:27 | 1758693 fuu
fuu's picture

Pump up the jams, pump it up.

Mon, 10/10/2011 - 15:29 | 1758701 papaswamp
papaswamp's picture

Market only went up because the dollar went down...awake your forex self and join the real party...equities is just here for entertainment.

Mon, 10/10/2011 - 15:52 | 1758805 Deadpool
Deadpool's picture

o.k., so that long position you put on August 15 that is still underwater is a bullish sign, right?

Mon, 10/10/2011 - 16:39 | 1758989 alien-IQ
alien-IQ's picture

why are you here?

Mon, 10/10/2011 - 22:09 | 1759699 Thunder Dome
Thunder Dome's picture

I don't like this insane market anymore than the next guy. But blindly shorting something that's ripping higher is pure amateur hour.

Mon, 10/10/2011 - 15:09 | 1758584 FoieGras
FoieGras's picture

Erste = AIG #2. Naked CDS writing galore.

Mon, 10/10/2011 - 15:15 | 1758619 Loose Caboose
Loose Caboose's picture

This is slightly OT but not really.  I'm still a noob and still uncovering things as I fall down the rabbit hole.  This is a shaft of light I hit on the way down that is a moment of clarity for me.  This BS is real.  The plans were there long ago.  Things are going as planned by the elite.  Robert Welch explains it all in 1958 and 1974 to the John Birch Society.

I nearly have a seizure when I see stuff like this and realize that too many people are still referring to this stuff as Conspiracy Theory - no, it's Conspiracy FACT! 

The truth of it all is borne out by the fact that these things are happening now just as Welch predicted in 1958. 

I need a drink.


Mon, 10/10/2011 - 15:31 | 1758651 Incubus
Incubus's picture


For what? More of the same shit in one hundred years? Sure, this depression will forge some honest, hard-working 'merikans, but their kids will be better off, and their kids better, and then they'll all feel entitled and we'll be back to where we are now.

To deal with society is to accept that people [in masses] are insane. They're not just kind of crazy, they're fucking nuts.


Have you even taken a step back and taken a good objective look at what the fuck we do as a society? Sure, there's plenty of better ways of doing things, but you try telling the insane assholes that they don't have to do the shit they're doing.  You've just gotta view people and their constructs as a sort of great comedy.   You get too caught up in the subjective affairs of these little hominids and you're likely to end up just as mad as they are.


Here's my advice for the day:  never trust a man who's confident with his role in life: he's fucking delusional.

Mon, 10/10/2011 - 16:09 | 1758878 andybev01
andybev01's picture

I give you a green arrow because the actual green arrow isn't click-able for your post.


I hate it when that happens.

Mon, 10/10/2011 - 16:55 | 1759042 Loose Caboose
Loose Caboose's picture

@ Incubus.

So, society is not worth the trouble of awakening. We should all just hit snooze, roll over and go back to sleep?

I can't accept that.  I guess I'm delusional. 

You are right that people (masses) are nuts.  But most of us do not have relationships with the masses - we have relationships with individuals -  family members, friends, who we care about.  We would lay in front of a train for a few of them.  To spare their future being nothing but wage slavery and feeding the beast. 

I can understand your reasoning.  I just can't accept it.


Mon, 10/10/2011 - 15:18 | 1758633 Dick Darlington
Dick Darlington's picture

It has been VERY quiet in Austria's sovereign bonds. Back in the early days of the crisis Austria's spreads widened aggressively on worries over the Eastern European exposures of Austria's banks. Seems that it has been too quiet for too long. Of course in the short term the "markets" will do nothing but the same as in Spanish or Italian bonds ie "downgrades and  insolvency are bullish" or "the fundamentals are solid as a rock" but this WILL come back to haunt the sovereign.

Mon, 10/10/2011 - 15:18 | 1758635 Thunder Dome
Thunder Dome's picture

And yet this market continues to rally.  This move feels very reminiscent of early stage of spus last run to 1375.

Mon, 10/10/2011 - 15:19 | 1758637 pauhana
pauhana's picture

"The market had expected 2011 net profit of 967 million euros and a dividend of 70 cents per share, according to Thomson Reuters data."  From Reuters.  Wow!  Just a tad short of expectations.

Mon, 10/10/2011 - 15:24 | 1758652 slewie the pi-rat
slewie the pi-rat's picture

ah, yes, truth under duress

who knows what is buried where?

Gunmen Attack Mosque in Libyan Capital


  None of the National Transitional Council leaders have until now failed to comment on reports by witnesses that a group of more than 200 heavily armed gunmen, Sunday night, attacked a mosque in the northeastern Al-Masri district of the Libyan capital, Tripoli, ransacked the tombs of two imams, and made off with their relics.
Mon, 10/10/2011 - 15:33 | 1758718 LFMayor
LFMayor's picture

Sweet!  That should get some shit up in the air again.

Mon, 10/10/2011 - 15:35 | 1758732 ??
??'s picture

and it will be blamed on black African migrants

Mon, 10/10/2011 - 15:23 | 1758668 Harndog
Harndog's picture

Erste Group to God: If you rescue me, I'll never sell a Sovereign CDS again.

God to Erste Group: I don't trade Sovereign CDS's....


Mon, 10/10/2011 - 15:23 | 1758671 americanspirit
americanspirit's picture

And now, behind the red door .....

Mon, 10/10/2011 - 15:24 | 1758672 americanspirit
americanspirit's picture

And now, behind the red door .....

Mon, 10/10/2011 - 15:25 | 1758678 RobotTrader
RobotTrader's picture

Amanda Drury looking pretty sassy today

Mon, 10/10/2011 - 16:03 | 1758851 DoChenRollingBearing
DoChenRollingBearing's picture

Thanks for the quick break in the action!

Mon, 10/10/2011 - 15:25 | 1758680 CvlDobd
CvlDobd's picture

Holy reversal Batman! Just looked at NFLX. Thats a big change of intraday fortune!

Mon, 10/10/2011 - 15:31 | 1758710 s2man
s2man's picture

They're just getting ready for the 3pm take off, Robin.

Mon, 10/10/2011 - 15:28 | 1758697 Big Ben
Big Ben's picture

I'm shocked, shocked to find that gambling is going on in here!

Mon, 10/10/2011 - 15:30 | 1758708 pauhana
pauhana's picture

The tide is going out and it appears there are lots of naked people out there in bankland.

Mon, 10/10/2011 - 15:36 | 1758734 slewie the pi-rat
slewie the pi-rat's picture

they're all gonna drain their bathtubs at once?

oh!  the humanity!

Mon, 10/10/2011 - 15:32 | 1758716 stormsailor
stormsailor's picture

made back all my lost coin and still going.  hope it gets even better

Mon, 10/10/2011 - 15:40 | 1758752 jdelano
jdelano's picture

I was gonna make a snarky remark but then empathy kicked in.  Seriously friend--do yourself a favor. Take the profits before you lose them and then some.  I've seen the future via Delorean and you gotta believe me, it gets a little ugly....


...and take a look at the vix

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