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Europe Rips As Money Grows On German Trees Again

Tyler Durden's picture




 

Between Hilsenrath's humoring, Draghi's 'ready-to-act', and Merkel's 'fold', it appears all-is-well once again in the world. European banks are soaring - especially the most recently devastated as the broad European bank index jumps its most in 5 months. Italian and Spanish sovereign bond spreads compress notably, perhaps on hope of a renewed SMP - even as LTRO3 seems to have lost favor with the ECB (effectiveness?). Basis-swaps popped higher (better), Bund yields rose, Swiss 2Y was flat (but low) and Crossover spreads (high-beta credit) are outperforming. It seems that markets are pricing in a best-case scenario. EURUSD is oscillating higher but stocks remain notable underperformers over the last few weeks and frankly this feels more like a short-squeeze bounce than a renewed rally as we know all too well that nothing has been solved (even if Germany is caving on Spanish banks). With the long-weekend and lack of liquidity, it seems markets have simply round-tripped to pre-NFP levels and now it gets interesting - context, as always, is critical.

European banks have best day in 5 months (on what?)...

Crossover credit remains bid, stocks underperforming and the rest of credit modestly better in the last week or two...

European Sovereign spreads are dropping (improving) and Italy and Spain are now unchanged from 5/27...

Charts: Bloomberg

 

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Wed, 06/06/2012 - 11:52 | 2499594 hedgeless_horseman
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A hardcopy of today's one month daily BAC chart is going on my bulletin board.

Wed, 06/06/2012 - 11:53 | 2499601 fonzannoon
fonzannoon's picture

"Hey guys slam down those gold miners then lets get some lunch"

Wed, 06/06/2012 - 12:13 | 2499626 hedgeless_horseman
hedgeless_horseman's picture

 

 

What does today's BAC chart illustrate?

A)  QE3 is assured

B)  A great short entry point

C)  The market is pricing-in future revenues from exciting new initiatives such as, "enhanced Canadian lockbox capabilities."

D)  Brian Sack is giving his future employer a little love as they consider his contract

E)  or, as Mr. Mayor supposes, simply that BAC takes first step to clear mortgage overhang. 

My guess is A, and it is going to be HUGE, with a big chunk going to our European friends via swaps.

Nominal wealth, bitchezzz!!!

Wed, 06/06/2012 - 12:42 | 2499713 The Big Ching-aso
The Big Ching-aso's picture

 

 

With European friends like France we've got everything we could ask for.  This will just semenent the relationship even closer.

Wed, 06/06/2012 - 13:00 | 2499901 Vegamma
Vegamma's picture

semenent?

Best freudian ever?

Wed, 06/06/2012 - 13:01 | 2499907 Ahmeexnal
Ahmeexnal's picture

euROPE and euLAMP-POSTS!

Wed, 06/06/2012 - 13:43 | 2499795 AccreditedEYE
AccreditedEYE's picture

Unbelievable.... clearly the Fed's new weapon of choice (public relations) is working its magic and allowing Ben to have influence without needing to THINK about touching the keyboard.

Right now, YTD, the S&P is up 4.12%, Nazz is up 8.84% and the pathetic DJIA is up 1%.... really not seeing evidence of "moderate growth" being threatened with these numbers but what the hell do I know, I'm not a PhD.

This idiot market keeps forgetting that prices needs to DROP for the Fed to take action. Funny, too, how the threshold for pain/losses on risk assets keeps getting smaller and smaller. A lot of expectations are gonna get scorched on the next move lower... whenever it may come.

Wed, 06/06/2012 - 12:24 | 2499632 trebuchet
trebuchet's picture

@fonzanoon....  noooooooooooooooo!!!!!!!!!!!      African Barrick Gold Ripped 15% today   (Thank you, thank you........)

Wed, 06/06/2012 - 12:15 | 2499706 TheFourthStooge-ing
TheFourthStooge-ing's picture

Money growing on German trees?

Bullish for German telephone sanitizers, account executives, hairdressers, insurance salesmen, personnel officers, public relations executives, management consultants, et. al, but not so good for the trees.

 

Wed, 06/06/2012 - 12:20 | 2499732 BliptoP3
BliptoP3's picture

I believe all of us here can agree, the only reasonable solution is to burn down the forests; this will, of course, re-value our new leaf currency.

Wed, 06/06/2012 - 12:22 | 2499739 trebuchet
trebuchet's picture

with low euro, germans did a calculation 0- they can inflate, pass on some of their earnings from the those export stashes to the voters, get the feelgood factor , while helping to rebalance the trade deficit in favor of their EU partners 

Merkel met the coalition parties yesterday/(day before?) and the tune changed since then.... so next eyes on Italy and any slippage brings out the bond vigilantes, and keep a third eye on Greece and the elections, and a fourth eye on China, and a fifth eye on US data and budgets...  damn so much stuff to keep an eye on

Wed, 06/06/2012 - 12:50 | 2499862 Sandmann
Sandmann's picture

Are you a pothead ? Go look at German INFLATION over the past 20 years then look at German Taxes over the same period. ONLY Corporate Taxes have gone down. For most Workers Taxes have gone UP and UP and Real Incomes DOWN and DOWN.

It is not possible to change it because TAXES in GErmany are too high - only big corporates get to manage taxes. SMEs are creamed by taxation because they cannot raise Taxes as fast as they raise SPENDING>  Find a year when Merkel actually cut Borrowing. she is little better than Greece and has just opened up massive lawsuits from Utilities over her ban on nuclear which will cost them Billions.

Stop thinking the Germans are in control. They are unhappy passengers. ONLY The Americans know what they are doing...which is why everyone is so scared !

 

Wed, 06/06/2012 - 13:07 | 2499920 walküre
walküre's picture

Germans are working 6 to 7 months out of the year just to afford government spending.

Wed, 06/06/2012 - 14:18 | 2500277 Don Diego
Don Diego's picture

about time you grow some balls and become a sovereign nation. If you don't do it fast, the Southern European politicians will bankrupt you too.

Wed, 06/06/2012 - 15:18 | 2500544 trebuchet
trebuchet's picture

LOL - ill go check out what you said and readjust my thinking as appropriate!!

thx for reply and to walkure

 

Wed, 06/06/2012 - 12:39 | 2499809 trebuchet
trebuchet's picture

Story hitting bloomberg wires : European redemption fund ("toxic asset dumping ground) backed by memberstates gold reserves.  This was floated last year but is another suitable rumour that Germany is "acting" without needing to act or if its the real deal.......    it will be a hefty kicking of the can down a long road.

 

... and the gold part is, well, bullish for gold now that CBs topped up their coffers and wont be lending it out on spec

 

 

Wed, 06/06/2012 - 12:47 | 2499847 Colonial Intent
Colonial Intent's picture

All aboard the 'B' ark ladies and gentlemen.....

Wed, 06/06/2012 - 13:01 | 2499903 whatsinaname
whatsinaname's picture

Sell Bunds and buy TempurPedic for 48 percent return in one day (NOT)..

Somebody got Teepeed today!!

Wed, 06/06/2012 - 13:04 | 2499915 skepticCarl
skepticCarl's picture

Money doesn't even need to grow on trees.  It can be, and almost always is, created out of thin air.  Finally, the Germans (not the citizenry, but the Big Players) realized that they become the 'good guys' again, for nearly no effort.

The cheering of this latest rumor will cause a tectonic shift in Germany's policy, and it will be one bailout after another, for ever and ever, amen.

Wed, 06/06/2012 - 11:56 | 2499618 fonzannoon
fonzannoon's picture

(on what?)...

You can apply that question to the last 10 months.

Wed, 06/06/2012 - 12:03 | 2499625 Newsboy
Newsboy's picture

This is short-term, but how short?

This kind of head-faking is good for a weekend, maybe a week.

What will they do to string it out until November?

Banker's position in the world order is at stake here.

It looks like it will take the Fed to open a few trillion dollars of monetary promises to slow this landslide.

It is almost (how almost?) time for a spectacular failure of the global financial house of cards.

This is gonna' hurt everybody...

It is time.

Wed, 06/06/2012 - 12:46 | 2499841 AccreditedEYE
AccreditedEYE's picture

Try tomorrow... If Benny doesn't lend evidence to his mouthpiece at the WSJ tomorrow this rally will have the lifespan of a fruit fly.

Wed, 06/06/2012 - 11:58 | 2499627 adr
adr's picture

To the world banks: FUCK YOU!

I have a new idea for curing cancer. Take more cancer cells and inject them in the body. More of what made you sick will actually make you better. WOW I WONDER WHY NOBODY THOUGHT OF THAT!!!

There is no actual status quo because underneath the facade of the central planners, nothing is actually standing. The workforce is continuing to rot and investments are only being made with borrowed money. The greatest fear of Wall Street is that the Fed will stop giving them free money to gamble with. The greatest hope of future wealth is not valued production, but advertising mediums?

That is a functioning economy?

 

Wed, 06/06/2012 - 11:58 | 2499635 geewhiz190
geewhiz190's picture

probably the last real chance to reduce any equity exposure. rally could spook shorts and lead to a rebound to the 1340-1350 are on the S&P, but given that type of move, the next time it rolls over it goes down for the count. dollar in correction of the beginning of major move to the upside. gold may reach 1750-1780 on this move.  bonds have probably peaked but may test the inflection point before US rates begin to rise on the long end. Treasury missing an historic opportunity to re-finance debt at the long-end.  states are jumping on the chance to improve their balance sheets.  yen probably has peaked and may begin a long decline.

Wed, 06/06/2012 - 12:03 | 2499659 Deep79
Deep79's picture

I agree. 1340-1350 is a given, we may go higher to 1380-1400

But next leg doen will be swift, and take us to around 1100 or lower

Dont agree on bonds, still think they go lower in yeild

 

Wed, 06/06/2012 - 12:07 | 2499668 Dr. Engali
Dr. Engali's picture

That's my take. I think the 10 year willl go sub 1% on the yield then I will get out of that trade.

Wed, 06/06/2012 - 12:13 | 2499702 geewhiz190
geewhiz190's picture

bond yields could make new lows for sure. if so, would probably go short. my guess is if 1380-1400 is reached the divergences would be huge. i never say never to anything, have to play if by ear and wait for the optimistic headlines to start showing up-at whatever level that is-that will be my yellow light.

Wed, 06/06/2012 - 12:32 | 2499779 Deep79
Deep79's picture

Bond yeilds could stay down their for years. I see a full out depression coming.

 

Wed, 06/06/2012 - 12:08 | 2499673 slackrabbit
slackrabbit's picture

So the next question will be: Will Merkyl resign? 

If the US EU UK and every other ponzi is going to shake her down; is it time to get out?

Wed, 06/06/2012 - 12:09 | 2499684 Boilermaker
Boilermaker's picture

SURPRISE!!!

Wed, 06/06/2012 - 12:13 | 2499695 LongSoupLine
LongSoupLine's picture

thanks BM...needed that today.

Wed, 06/06/2012 - 12:10 | 2499685 Mark123
Mark123's picture

One day my grandchildren will ask me "Grandad, why did people think they could prop up the entire world economy using credit that had no backing other than paper?".

 

My response "Shut up and eat your soylent green...".

Wed, 06/06/2012 - 12:10 | 2499688 zebrasquid
zebrasquid's picture

Faber called this, said two weeks ago that a relief rally would take SP500 back up to 1370-1400 (but not new highs).  

Then it heads back down or maybe crashes.

He also said then that gold had bottomed(low 1500s) and was a buy.

 

So far, he's nailed it.

Wed, 06/06/2012 - 12:12 | 2499693 LongSoupLine
LongSoupLine's picture

 

 

 

The last gasp of air before drowning is usually the largest...

Wed, 06/06/2012 - 12:13 | 2499698 scatterbrains
scatterbrains's picture

The pm charts with their pattern failures across the board are setting up massive moves higher. Gold tried to pound it's way through support 6 times and finally said fuk it I'm going back up.  It's off to the races now.  I'm thinking adding a little JJC in here too.

Wed, 06/06/2012 - 12:15 | 2499709 vincent van goo
vincent van goo's picture

400 billion Euros should do the trick /sarc.  But then who is next?  Italy?, France?  Merkel cannot save them all.

Wed, 06/06/2012 - 12:17 | 2499719 firstdivision
firstdivision's picture

So the ECB will be printing USD, judging by the EUR strength today?

Wed, 06/06/2012 - 12:18 | 2499724 mrktwtch2
mrktwtch2's picture

go long food and alcohol stocks..

Wed, 06/06/2012 - 12:25 | 2499748 docj
docj's picture

Gee, who knew you could solve 40-years of financial over-leverage in the global Ponzi system simply by printing a crapton more of the same cash? And by "solve" I of course mean "kick the can thaaaaaaaaaat much further down the road".

It will work, until it doesn't. And nobody knows when that is.

I almost hope the Mayans are right.

Wed, 06/06/2012 - 12:28 | 2499757 q99x2
q99x2's picture

Spain's a lot bigger than Greece so we will be hearing about Spain a lot longer than we heard about Greece. By the time they get to France I'll be dead.

Wed, 06/06/2012 - 12:29 | 2499766 slewie the pi-rat
slewie the pi-rat's picture

on the tail wagging the dog

Wed, 06/06/2012 - 12:36 | 2499791 The Big Ching-aso
The Big Ching-aso's picture

 

 

 

I had a dog once that could do that.   He had one helluva big tail for a chihuahua.

Wed, 06/06/2012 - 12:29 | 2499767 crawl
crawl's picture

Assuming the markets front run the Fed June 20 meeting by running the ES to 1400 or so. How can the Fed bail out the markets near their highs?

Adios fear, nothing but soaring financials, commodities, and gold ahead. Until reality causes a change.

Wed, 06/06/2012 - 12:41 | 2499817 disabledvet
disabledvet's picture

German Marshal Plan en route...coordinated with the Fed, Treasury and IMF of course.

Wed, 06/06/2012 - 12:44 | 2499835 pleseus
pleseus's picture

Fake Rally.  Another reason why there will be no QE3. 

Wed, 06/06/2012 - 12:53 | 2499868 nomorebuyins
nomorebuyins's picture

Last hour of trading should be interesting. I would be happy to sell into this, if i was a loser long over the last few weeks.

Wed, 06/06/2012 - 13:05 | 2499916 razorthin
razorthin's picture

And here in the States, putrid volume everywhere except in commodity related issues.  Yeah, that's healthy.

/SARC

Wed, 06/06/2012 - 13:13 | 2499943 RobotTrader
RobotTrader's picture

PM's are now getting lamp posted.

 

Ratio Traders are going for the kill.

Wed, 06/06/2012 - 13:24 | 2500004 GoNavy
GoNavy's picture

The market's anticipating Bernanke on QE3 and he might very well give it to them, but he shouldn't.  The world is de-leveraging and is deflationary.  The QEZies are just Bernanke's way of avoiding a liquidity trap, but the ECB and the Fed will soon learn that there are limits to even their outsided balance sheets.

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