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Guest Post: The Wall Of Worry Just Got Bigger

Tyler Durden's picture


From Peter Tchir of TF Market Advisors

The Wall Of Worry Just Got Bigger

Throughout the PIIGS crisis, it has been a given that the German juggernaut economy would provide the strength for the rest of Europe to rely on.  Last week's weak French GDP number highlighted concerns about the ability of France to retain its AAA rating.  Today's weak German GDP numbers will make it even harder for Merkel to convince German's that they need to spend even more money fixing problems abroad.  Certainly some opposition members are likely to use the weakness as a sign that she has had her eye of the ball and the domestic economy is suffering at the expense of all her bailout jaunts.  I think this potential weakness in the core of Europe is a new addition to the growing list of problems facing the global economy.  Empire manufacturing, a relatively minor data point, was awful yesterday.  Stocks were able to ignore that yesterday, just as they ignored the extremely weak consumer confidence number on Friday.

It feels like a lot of hedges were cut yesterday and the bullishness that was inspired by the strength of stocks has been replaced with doubt again.  So far people aren't rushing to put on hedges, but the tone has become decidedly negative.  It seems like the market is hopeful for a big announcement out of the Merkel/Sarkozy meeting today.  I really don't see how Eurobonds are feasible.  Any meaningful issuance would mean that these 2 countries would have to pay more for their own debt, in order to subsidize other countries, and may even be obligated to pay back money that went to other countries.  I wrote more about that yesterday, and in spite of more people mentioning that it's a possibility, I remain convinced it cannot be implemented in a meaningful way any time soon (next few years).  If we rally on any soundbite regarding Eurobonds or Supersized EFSF, I would fade those rallies quickly.  Since I'm already short, guess it means getting shorter if I don't cover any prior to the press conference.

Italian and Spanish bond yields remain stable. In fact all yields on sovereign debt remain eerily stable.  Eye of the hurricane? It feels like investors are just tired of fighting manipulated sovereign debt markets, so I'm not going to view the stability as positive as I would otherwise.  BAC CDS is back to 320.  Nowhere near its wides of last week, but a definite sign that nervousness still exists at the bank level, and I don't think we will find a real bottom until the banks manage to convince investors they are rock solid or we purge the weakest ones globally. 


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Tue, 08/16/2011 - 09:09 | 1564874 anynonmous
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Roubini from his new Blog site (RGEmonitor has been reborn)

Is Capitalism Doomed?
Tue, 08/16/2011 - 09:14 | 1564900 pepperspray
pepperspray's picture

Why did he turn off commenting?

Tue, 08/16/2011 - 09:15 | 1564904 bankrupt JPM bu...
bankrupt JPM buy silver's picture


Tue, 08/16/2011 - 09:10 | 1564884 Ancona
Ancona's picture

Germany should not bail out the weaker nations of the Eurozone....but they will.

At least they will try.

Tue, 08/16/2011 - 11:38 | 1565466 CrashisOptimistic
CrashisOptimistic's picture

It is my understanding that the German opposition parties are even more in favor of having Germany bail out the weak Eurotrash countries than Merkel.

We need to remember that her political weakness does not mean anything would change if she is booted out.

Tue, 08/16/2011 - 09:16 | 1564906 Jim in MN
Jim in MN's picture

Not sure if folks here at ZH saw this one, massive hit job on Standard & Poor's in Bloomberg after trading last night (note telling link title, not the same as the actual headline):


Tue, 08/16/2011 - 09:16 | 1564907 PulauHantu29
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London House Prices Plunge on Financial Turmoil

By Scott Hamilton

Tue, 08/16/2011 - 09:29 | 1564912 Sudden Debt
Sudden Debt's picture


The Spanish people will also say: THE GERMANS WILL PAY OUR BILLS!

and the Portugese will say: THE GERMANS WILL PAY OUR BILLS!

But the Italians will say: THE GERMANS WILL PAY OUR BILLS!

On which the Irish might also add: THE GERMANS WILL PAY OUR BILLS!

On which the Germans will answer: I'm sorry waitor, I don't know those people and I already got laid by that Greek guy who turned out had the crabs...

Tue, 08/16/2011 - 09:18 | 1564916 Greater Fool
Greater Fool's picture

The price of the Eurobond will be Griechische Anschluss. Nothing else is economically feasible. But there is no political will on either side for this solution, as those who enact it will be voted out of office so quickly their heads will spin.

Expect this drama to go on...and on...and on....

Tue, 08/16/2011 - 09:19 | 1564918 bigdumbnugly
bigdumbnugly's picture

the wall is not only get bigger but more concave as well.

it's looking more and more like a trap and there may be no way over.

Tue, 08/16/2011 - 09:20 | 1564919 SheepDog-One
SheepDog-One's picture

Entire world economy now just based upon who gets stuck with the bill, like a bunch of hobos after eating all nervously eyeing the door while all looking thru their obviously empty wallets. Who will be the first to bolt?

Tue, 08/16/2011 - 09:25 | 1564935 MoneyWise
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Fitch reassures US AAA credit rating, outlook stable,

bears got f*cked again.

Tue, 08/16/2011 - 09:31 | 1564954 oogs66
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i'm not sure even fitch cares about fitch ratings!   this one was bought and paid for - probably by some new change to dodd/frank

Tue, 08/16/2011 - 09:36 | 1564974 SheepDog-One
SheepDog-One's picture

US debt is really a 'C', everyone knows it, but Fitch assures its as good as holding gold? LULZ!

Tue, 08/16/2011 - 10:05 | 1564955 thunderchief
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I have to take my hat off to the Germans.  They got screwed out of WWII and the chance to become a world super power by Hitler, only to be replaced by the Russians and Americans ( a group of lacky's that are today about on par).  That alone should make every German pissed off for eternity.  And now they are being  taken down by the Southern European countries and a sea of debt, while the Chinese are doing everything that they today should be doing, from Africa to the Middle east.  This is worse than Rommels collapse in North Africa.  At least he isn't here today to see this German distaster.   I think the Germans should tell everyone to F.O and start over.  Just like after WWI...

Written by an American.

Tue, 08/16/2011 - 10:34 | 1565143 Printfaster
Printfaster's picture

The Germans really are pissed.

Whom they are pissed at has the name that cannot be spoken.

This will not end well, and this time it will not be the Germans who carry the load of Atlas.


Tue, 08/16/2011 - 11:18 | 1565338 oogs66
oogs66's picture

merkel who seems about as straight laced as a politician can get, handing checks to italian politicians who seem to be at the other end of the straight laced scale, cannot make her happy

Tue, 08/16/2011 - 12:15 | 1565628 optimator
optimator's picture

F-105, they are still occupied by Coke and MacDonalds, most too old to remember being the center of Europe.

Tue, 08/16/2011 - 09:58 | 1565034 RiverRoad
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The sooner Standard and Poor's comes out and downgrades the entire world the better.  Since no major country in the world is apparently willing to either address their debts or formally devalue their own currency, let S&P do it for them so we can begin to rebuild a new world financial order based on the truth instead of lies. 

Tue, 08/16/2011 - 10:00 | 1565045 Silverhog
Silverhog's picture

This is the best part about Ponzi schemes. Keep it a surprise.

Tue, 08/16/2011 - 10:26 | 1565119 Oh regional Indian
Oh regional Indian's picture

Wow. Comments disappearing. Mercury sure is retrograde.


Tue, 08/16/2011 - 15:51 | 1566542 bid the soldier...
bid the soldiers shoot's picture

"and the bullishness that was inspired by the strength of stocks has been replaced with doubt again."

Woe be unto the people whose bullishness is inspired by the strength of its stock markets.

Blessed be unto the people whose bullish stock markets are inspired by the strength of the economy.

Do NOT follow this link or you will be banned from the site!