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Italy - Weak, But How Would A First Loss Insured Auction Work

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Fri, 10/28/2011 - 09:00 | 1820433 lizzy36
lizzy36's picture

But Italy is really really really working at austerity.

After all what would you call raising the retirment age from 65 to 67 FIFTEEN YEAR from now. I call it S.A.C.R.I.F.I.C.E.

Fri, 10/28/2011 - 09:10 | 1820462 disabledvet
disabledvet's picture

The CDS's have to be off the charts on that one. Probably enough to split the country into three or four pieces if executed on "in their full fury."

Fri, 10/28/2011 - 09:24 | 1820510 kaiserhoff
kaiserhoff's picture

Italians are soooo honest, Lizzy.  Now, about that football thang...

Fri, 10/28/2011 - 09:53 | 1820593 oogs66
oogs66's picture

yeah, but i'm not sure US politicians have the guts to do even that :D

Fri, 10/28/2011 - 11:25 | 1820940 glepo
glepo's picture

Total Gov net liabilities (from SG study) + private sector debt % GDP:

France 549% / 155% (AAA)

Germany 418% / 128%

Italy 364% / 121%

UK 442% / 215%

Spain 244% / 171%

US 541% / 174%

Fri, 10/28/2011 - 09:03 | 1820445 ZeroPower
ZeroPower's picture

If anyone remembers, this first loss approach of the huge EFSF SIV is akin to what the RMBSs had as protection some years back.

Major diff is that the EFSF is supposed to have losses protected on the first tranche, whereas monolines wrote last tranche protection on RMBSs.

Either way, a failed idea.

Dont get fooled by the rising equities, credit and bond world still telling the story - despite the immense credit 'all is well' rally tues and weds.

Fri, 10/28/2011 - 11:35 | 1820982 glepo
glepo's picture


The Sov debt is not even the problem (1tr euro enough for few yrs for new issues) and Sov debt should be liquidity and not solvency problem (apart from Greece and maybe Portugal)

The banks are the problem. They need another 200bn$ min.


Then the main problem is NPLs in the private debt in Greece, Portugal, Ireland and Spain held, apart from local banks, mostly by French/German/UK/Spanish banks. Like all the NPLs still hidden in US banks (clearly time will help to provision more bad loans). The Irish taxpayer where so kind to pay for the banks debt holders (German/UK/French/US banks) and transfer the debt to the public coffers. Most of the lending of the Irish banks was in bad real Estate and construction loans outside of Ireland.

Just look at the books of RF STI FHN ZION KEY etc.




Fri, 10/28/2011 - 09:12 | 1820459 firstdivision
firstdivision's picture

Is anyone really surprised by this, espeically after the "50%" haircut that the banks had to agree to, while having any CDS's they have not trigger on Greek debt.  Why would anyone buy another soon to be bankrupt country and they are naked on the losses?  Europe is going about this debt problem the entire wrong way. 

Look for a Yentervention soon.

Fri, 10/28/2011 - 09:11 | 1820465 gianakt
gianakt's picture

All this EFSF bullshit will never work, I'm going to cash in my 401k when the market opens. I advised all my clients, friends and family to do the same!!!

Fri, 10/28/2011 - 09:12 | 1820466 Cult_of_Reason
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Fitch says that Greece would enter a state of default if investors take a 50% haircut on bonds -- credit event for CDS trigger.

Fri, 10/28/2011 - 10:29 | 1820710 sumo
sumo's picture

Fitch doesn't decide if "credit event" is triggered. ISDA does. And ISDA says, no default since the haircut is "voluntary".

Fine print arbitrage has suckered CDS longs. The banksters have dealt themselves aces from the bottom of the pack. Welcome to the casino.

Fri, 10/28/2011 - 09:22 | 1820504 kaiserhoff
kaiserhoff's picture

Careful Tyler, they already shot the accountants.  Shouldn't enquire too much about the emperor's lack of cloths;)

Fri, 10/28/2011 - 10:01 | 1820622 Invisible Hand
Invisible Hand's picture

Europe and US continue down path to failure.  Political manipulation of markets is appealing but ultimately makes them more volatile.

1.  Over turning US bankruptcy law to benefit unions make bonds of unionized companies only for idiots (or politically connected).

2.  ECB and IMF being made senior to private investors on sovereign bonds makes sovereign debt only for idiots.

3.  Effectively cancelling CDS on sovereign bonds means there is no hedge so interest rates have to increase to compensate for extra risk.  Who would buy sovereign debt without higher interest rates? Idiots. 

4.  Leveraging EFSF is only good if there are no losses.  Leverage magnifies losses as well as gains.  Who believes that will be no losses? Idiots.

I wonder how many idiots have access to trillions to invest to keep this from falling apart (outside govt)?

My guess is not enough to keep this together unless the ECB and FED start printing big time.  My guess is that QE to infinity is coming soon.  What to do?  Kiss our Arses Goodbye?

Fri, 10/28/2011 - 10:10 | 1820651 LawsofPhysics
LawsofPhysics's picture

Yep, the final and ultimate destruction of all paper.

Fri, 10/28/2011 - 11:24 | 1820933 glepo
glepo's picture



Total Gov net liabilities (from SG study) + private sector debt % GDP:

France 549% / 155% (AAA)

Germany 418% / 128%

Italy 364% / 121%

UK 442% / 215%

Spain 244% / 171%

US 541% / 174%


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