Presenting Europe As A Giant CDO

Tyler Durden's picture

Continuing our series of charts worth a thousand words (first one here), below courtesy of Credit Suisse's William Porter, we present the Euro Area as if it were a giant CDO. It should answer most outstanding questions.

Once upon a time, everyone ignored subprime as it had the same detachment points as the Bank of Greece does now. Fast forward a few years, and we are talking prime mortgage impairments. Which incidentally explains why once the dominos start falling (think CDS trigger), it will get very messy all the way through the Super Seniors.

And as a bonus chart, here is another follow up from Porter, showing that absent hundreds of billions in Eurosystem loans to various PIIGS' banks, the entire system would have already collapsed like a house of cards. The pick up in the last three months speaks volume as to why the European market is on such a "tear." P.S. this is in addition to the LTRO.

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Mr Lennon Hendrix's picture

Uber-leverage, bitchez

markmotive's picture

This is something Satyajit Das has been saying for a while. Europe is just piling leverage on top of leverage and calling it a 'solution'.

Check out this interview with Satyajit Das on the Busted "Botox Economy":

markmotive's picture

...but does it feature a host wearing heels and leggings?


resurger's picture

Here is this guy Alessio Rastani  he know's that Greece will not only get busted, (now also their gold will be confiscated as well)

when i first saw him, i thought this guy is a douche, but after seeing couple of interviews with the Irish T.V and this CNN he told the people to be prepared to make money from a downward market (he just lied about the USD and the bonds though)

here is a very interesting part again, because we seem to forget with all this hype that is going on in the markets today

CNN Anchor: but but the reason this whole thing, the interview went viral because you said some thing which considered to be shocking, but you do that because you are trying to sell your self, you are trying to sell a book, you trying to get people to sign up for your trading desk

Alessio Rastani : oh i see whatcha saying, "NO" with all due respect i would not say that.. ah i believe there is a god and could not sit infront of you and say something i dont believe.

it's unfolding

WmMcK's picture

Found from your link, thanks --

Trader on the BBC says Eurozone Market will crash: 

Mute the sound, LOL.

LowProfile's picture

Just finished the first vid, didn't hear any mention of Au or Ag.

Noted that ZH is not on Naked Capitalism's blogroll.

LookingWithAmazement's picture

A great European market week is upcoming. Successful auctions in Spain and France, as well as a new LTRO which saves the banks. No collapse. I expect a market rally and gold + silver lower, now the system will be saved again. Boring world we live in.

BTW: if Obama draws back his fleet from the Hormuz Strait, tension will lower and oil + gasoline prices would plunge. OBAMA CAUSES YOUR EXPENSIVE GASOLINE!

Mr Lennon Hendrix's picture

The world is Obama's oyster, and the elite can manipulate with their advent of the printing press, today's philosoher's stone.  The majikal men will go on in this world where imaginary creations rule.  Rid yourselves of reality, and a boring world we live in.

Michael's picture

we are talking prime mortgage impairments.

One jumbo mortgage going into foreclosure like the 180 estates in Beverly Hills equal like 10 average homes going into foreclosure.

SilverDoctors's picture

Italy, Spain, and Portugal have serious gold reserves compared to Greece.  Don't think they won't be grabbed before this crisis subsides.  Those guy's aren't even the primes...they're the next sub-primes on the list.  This is about to get interesting.

Manthong's picture

And whatever happened to PrimeX?

LiquidityandLunacy's picture

Obviously its not newsworthy.

francis_sawyer's picture

Projected PIIGS Pillage...

"Put Neidermeyer on it... He's a sneaky little shit..."

DoChenRollingBearing's picture

@ Tyler

Somehow, I doubt that any gold left within the PIIGS' physical control will get grabbed...  No way.  They'll just pay with paper fiats or default.

Gold left in other places (like the NY Fed vault in NYC), could be another story...

disabledvet's picture

"gold to be used as payments for the debt." it's not that hard to understand and it's not stealing. Greece made the choice...voiced by the folks..."to stay." well..."you pay." remember how hard Europe laughed when the USA demanded the same thing...even though we bailed THEM out? Well..."and now euro denominated oil costs 40% more." and what's on tap? is it a trillion from the IMF? hahahaha! really?--"show the IMF the gold first then." no? "you'll find a way to work your way through this?" okey dokey! a desert somewhere south of Beserkistan...

resurger's picture

The politicians made the choice to forfeit the gold for fiat ponzi worthless souless paper


Chimerican's picture

surge: The PEOPLE are responsible for their politicians. What are you, a serf?

hooligan2009's picture

all politics corrupts and political arguments corrupt absolutely 

bdc63's picture

The 'bailers' are starting to make it part of their bailout agreeements ... pretty soon they're gonna say 'why don't you just let us hold that for you ... you know, for safe keeping' ...

Make no mistake about it -- the banks want the gold.

hooligan2009's picture

at 32,000 ounces per ton that makes for around $186 billion (@1800/oz), compared to PIIGS paper money debt of what? c.$600 billion equivalent of soveriegn debt. Let's see, does the price of gold move to where the 600 billion equates to the gold holding or will gold never matter. So on that = around $6,000 an ounce. Funny how round numbers keep turning up. 3,233.5 tons = just over 100 million ounces. Lukcy that Italy and Germany have so many gold fillings, er filings.

GeneMarchbanks's picture

Collateralized Dogshit Obligation?

Matt's picture

Think of them as being collateralized by gold. Now imagine you are buying them not because you think you will get paid back in euros, but rather that you expect them to default and pay you in gold.

lolmao500's picture

Deutsche Bank is AAA? LOL!

Tyler Durden's picture

Slight difference between Deutsche Bank and the German central bank. The latter just happens to be the real backstop of everything in Europe... Including the former.

Peter K's picture

You might what to add, " and the ONLY real backstop of everything in Europe" :)

rocker's picture

 Is it not ironic that Deutche Bank gapped up on Friday. The HFT's must be reading more blogs to squeeze shorts.

 Confirming the rigged markets in the financial sector are alive and well.   The Banking Cartel, (FED & Co.), lives on.  

disabledvet's picture

that's because the Fed is the real "backstop to Europe" and everything else for that matter...and not some fictional "Bundesbank." ya'll need to stop asking "who's printing" and start asking "who's paying." if all you can the MSM is suddenly "Greece" (insert "hardy guffaw" here)'re simply another minion buying into the propaganda. See our own Bruce on "IOU's with drug companies" at Seeking Alpha. Once "they" demand payment for their good..."the charade is over." Trust me..."Europe" already understands this and is acting accordingly. Buying gold for the individual investor is everywhere and always an option. not so for a bank. what they need to be doing is buying oil. interestingly..."there are currently three prices for the identical good." that's just for the unrefined product! "better stick with natural gas" is my advice.

hooligan2009's picture

I found that quite funny. The morally and economically bankrupt Fed, being the backstop for Europe. Funny but abysmally sad at the same time.

rocker's picture

If the FED is printing them out like they did our banksters, (some, ones of the same).

 It is holders of the dollar who pay. By a devaluation dollar.  Which seems to be the plan for our debt too.    

lolmao500's picture

Yeah I failed at reading on that one.

StychoKiller's picture

Tyler, are these good guys resigning in protest, or rats leaving the sinking ship?:

Romanian prime minister and cabinet resign en masse
2/20/12 (GERMANY) GERMAN PRESIDENT Christian Ruff resigns (financial corruption charges)
(1) 9/25/11 (SWITZERLAND) Bank chief resigns over £1.5bn rogue trader crisis
(2) 10/29/11 (CHINA) Resignations Suggest Shift for China's Banks
(3) 11/01/12 (INDIA) More directors of the Beed district bank resign
(4) 11/21/11 (JAPAN) UBS's Japan Investment Banking Chairman Matsui to Resign
(5) 11/29/11 (Iran) Iran's Bank Melli CEO Resigns Over Loan Scam
(6) 12/15/11 (UNITED KINGDOM) Senior private banker resigns from Coutts [a very exclusive private bank]
(7) 12/22/11 (FRANCE) Societe Generale's Investment Banking Chief Steps Down
(8) 1/05/12 (UNITED KINGDOM) Chief executive of Saunderson House [Private Bank] steps down
(9)1/09/12 (SWITZERLAND) Switzerland's central bank chief resigns
(10) 1/12/12 (United Kingdom) Lloyds' head of wholesale quits
(11) 1/19/12 (SPAIN) Spanish bank Santander's Americas chief quits
(12) 1/20/12 (JAPAN) Normura's head of wholesale banking quits
(13) 1/29/12 (NEW ZEALAND) New Zealand Reserve Bank Governor Alan Bollard to Step Down in September
(14) 1/21/12 (Greece) Banks' top negotiator quits Greece, but talks go on
(15) 2/06/12 (INDIA) Dhanlaxmi Bank CEO Amitabh Chaturvedi quits:
(16) 2/07/12 (INDIA) Falguni Nayar quits Kotak Mahindra Bank
(17) 2/07/12 (IRAN) Iran denies central bank resignation rumor (don't believe until its denied?)
(18) 2/09/12 (VATICAN) Four Priests Charged In Vatican Banking Scandal
(19) 2/10/12 (INDIA) Tamilnad Mercantile Bank CEO resigns
(20) 2/13/12 (KUWAIT) Kuwait Central Bank CEO resigns
(21) 2/14/12 (NICARAQUA) Nicaraqua Central Bank Pres Rosales resigns
(22) 2/14/12 (UNITED KINGDOM) Social finance pioneer Hayday steps down from Charity Bank
(23) 2/15/12 World Bank CEO Zoellick resigns
Did the White House tell the World Bank president that he's out?
(24) 2/15/12 (SLOVENIA) Slovenia TWO largest Banks CEO's (2) resign
(25) 2/15/12 (KENYA) Governor of Kenyan Central Bank to Resign
(26) 2/16/12 (GHANA) Ken Ofori-Atta steps down as Executive Chair of Databank Group
(27) 2/16/12 (SAUDI ARABIA) Saudi Hollandi Banks Managing Director Quits
(28) 2/16/12 (AUSTRALIA) Anz Bank CFO Australia resigns
(29) 2/16/12 (AUSTRALIA) Royal Bank of Scotland Austrailan CEO Stephen Williams resigns
(30) 2/17/12 (USA) Blankfein out as Goldman Sachs CEO by summer
(31) 2/18/12 (PAKISTAN) AJK Bank's executive steps down
(32) 2/20/12 (RUSSIA) Head of Russian Bank Regulator Steps Down
(33) 2/20/12 (SWITZERLAND) Credit Suisse Chief Joseph Tan resigns
(34) 2/10/12 (KOREA) Korea Exchange Bank chief steps down

ArkansasAngie's picture

This isn't so much an economic problem as it's a political one.

Too bad the economic problem will have to hit the fan before we can apparently do anything about the political problem

Mr Lennon Hendrix's picture

It's as much an economic problem as a political one.

thebankerknownasdrake's picture

Why stop at Europe?  The world is a massive CDO.  Don't have the numbers off hand, but how do you reconcile a global debt to asset ratio of (say) 2x without devaluation or default?

Motorhead's picture

Charts, bitchez!

(Thanks, TD.)

rufusbird's picture

It was brought up again on a thread yesterday and I neglected to say anything. I can't find it now so I will say it here, Thanks to whom ever it was that recommended Rickards' book, "Currency Wars". I am only on page 120 so far, and I am impressed. This is a very rich read. Can't wait to pick it up again to coninue and read the rest of it.

GeneMarchbanks's picture

Relevant. Make sure you read the part about LTCM and Jim's complete and utter heroism there.

Threeggg's picture

This proves JS's call about "QE to infinity" because the money to cover a triggering of these CDS's has not even been printed "YET". (41 to 1 JPM leveraged balance sheet)

How many haircuts will the private sector agree to ;-) Before there is no hair left to cut ?

and with the loss carry forwards piling up against taxing future profits (for the next 100 years) and the general public with no jobs, where "The Fudge" are the taxes going to come from to support this largess ? 

Answer: Checkmate !

DoChenRollingBearing's picture

+ 1

3g's, yes, an incredible amount of real (debt based) wealth is about to be lost.  Checkmate indeed.

Threeggg's picture

The private sector bond holders are going bald taking haircuts while they pile up a mountain of Loss Carry Forwards.

Banks don't pay taxes

Governments don't pay taxes

Corporations don't pay taxes

Now the Private Bond holders won't pay taxes on future profits for next 100 years.

P.S. Loss Carry Forwards are worth an avg of .33 cents on the dollar.................can they re-classify them as equity ?


Clusterfuck !

hooligan2009's picture

NO REPRESENTATION WITHOUT TAXATION! Let's pass a few laws nationalising all banks and remove all prop desks to hedge funds where they can pay any of the bonuses they want without taxpayers guaranteeing their screw ups.

resurger's picture

Since white stole the plates and took them to Russia the U.S has decided to go



monopoly's picture

Here again, a picture is worth more than a thousand words.

Appears the manic Chavez of Venezuela was kinda smart to bring all of the country's gold...


RiverRoad's picture

Ya wants my gold?  Ya gots ta come an' git it........bankers in tanks!!

rescator's picture

Do we have a single idea for how long this farce can last...?

what can make the bubble burst?

Does the new ECB LTRO this week make possible the stock market to go higher...Again...


Thks for yr feedback



Mr Lennon Hendrix's picture

The bubble bursing is a possibilty short term.  The next question in line is, what would be the next bubble?