Presenting Where The Recycled Euro-Ponzi Cash Goes

Tyler Durden's picture

While European leaders would prefer to eschew concerns about individual sovereign nations' ability to pay, borrow, and spend in favor of an aggregate EU that they believe reflects better in the world comparisons (if any aliens are considering stimulus support we assume), Goldman's Hugo Scott-Gall is out today with his normal compendium of insightful charts. One specifically caught our eye on How Governments Spend as we makes the critical point (from a real money investor and not a talking-head perspective) that it is crucial to look at end-market exposures as well as geography. Investors exposed to consumers in countries facing significant ongoing household deleveraging (ring any bells?) face a demand picture that is likely to be challenging for some time. In his view this is more likely Southern Europe than Northern Europe and his critical point is that while many extrapolate trends in GDP multipliers for corporate earnings expectations, the need to reduce deficits relatively quickly for many European governments will reduce corporate revenue forecasts dramatically relative to empirical ponzi spending habits.


and breaking out the Interest segment specifically...also extremely varied (note Ireland's differential and how its credit is seemingly priced much more in line with its better % of GDP rather than % of revenues)

End market exposures are important for Europe's corporates...

One of the standout observations when looking at debt levels in Europe is how different they are, both between countries and also between different parts of economies. And at times, what is masked by the focus on sovereign debt levels is that other parts of economies can be in relatively good shape e.g. the household sector. The exhibit on the front page provides good color and some surprises too, e.g. Spain currently has low levels of government debt, but Italy stands out as having a very uneven debt profile, with low levels of private sector debt at the individual and corporate level, but very high government debt. Other interesting uneven profiles exist for the Netherlands, which has one of the highest household debt levels, and for Belgium, which is driven by large amounts of corporate debt. Germany stands out, helped to a heavy extent by its less leveraged corporate sector, while Finland typifies the Nordic region's relatively lower government debt levels.


...and what this means for corporate earnings...

Exposure to government spending in the case of governments that are seeking to reduce deficits quickly will hurt demand. All of these factors help inform revenue forecasts, and highlight that not all of Europe is moving at the same pace. There are pockets of stronger and weaker demand, and understanding this is crucial in formulating earnings forecasts; e.g. northern European versus southern European consumers; corporate demand from companies reliant on southern Europe's banking system is likely to be weaker than for those in the north. All of this is borne out in terms of consensus earnings revisions, with companies having governments as a high relative exposure seeing their 2012 EPS estimates being brought down by 5% over the last several months.

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diogeneslaertius's picture

Europe is just one giant rape room now.


Really nice, tacit breakdown here of the operant logic


Im gonna need you to hit even harder than this though: "relative to empirical ponzi spending habits."

Whoa Dammit's picture

I wish the US had been included in the charts so we could see how bad off we are in comparision to the EU.

Bam_Man's picture

Yeah, earnings estimates are coming down yet the US and European stock markets continue to melt up.

The stock market is now nothing more than a government policy tool. And one of the only ones "they" have left. Extreme caution is required.

Spooky Polish's picture

Comment ?

Ponzilla attacks at midnight .

Lurking Ponzi

One Ponzi too far 

James Ponzi : Fiat always dies 

Mission Imponzible 6

wandstrasse's picture



Ponz Harder

Dirty Ponzi

The Ponzi Identity


AnAnonymous's picture


Saving private Ponzi

Ponzi Gump (run, Ponzi, run)

Whoa Dammit's picture

run, Ponzi, run is classic. LOL.

Spooky Polish's picture

"Ponz Harder"


and now - Special Bernakie Price for .... wandstrasse


really - 10 pts ! 


Grinder74's picture

The Ponzi Supremacy

The Ponzi Ultimatum


Joe Sixpack's picture

The Ponzinator

Ponzi Ponzi Bang Bang

The Ponzia (extension of the Ponzfather), and the Ponzstra Fiata

Aponzilypse Now






Reptil's picture


All the President's Ponzis.

Once upon a time in a Ponzi.

2 girls one ponzi

as the ponzi turns

StockProdigy's picture

Bad news is the new good news.


Markets could give two shits for now.

fonzannoon's picture

Where is that shadowstarts guy Williams? He seemed like a sharp dude. Is he still out there predicting hyperinflation?

apu123's picture

The markets are melting up despite the "bad" news because the TBTF know that the Fed is going to do a trillion plus LSAP QE and the ECB is going to do a blowout sized LTRO as stated here at ZH.  Sure those two actions have a lot of unforeseen and bad consequences and will end in disaster but the next 6 to 12 months look good.  Take the time to prepare.

fonzannoon's picture

Maybe thats priced in too? One of these big QE's is going to bomb on announcement as the market finally fukin catches on that the QE morphine drip is going to kill it.

Everybodys All American's picture

I think if Bernanke goes with QE it's political suicide for him. No way can it be justified and it blows the lid off of the helping out the little guy BS.

apu123's picture

I do not think the political suicide angle is relevant anymore.  Bernanke is insulated big time by the political and financial/QE crack addict class.  I think he will survive and unfortunately Obama will also be reelected.  Even if he is removed some other Goldmanite will replace him.

Bam_Man's picture

If the Fed does QE3 within the next 60 days you will see $5.00+/gal gas by Memorial Day, guaranteed. So it ain't gonna happen.

catacl1sm's picture

I highly doubt it. $5+ gas would be the end of Obama's term and likely the run up of Paul in the polls.

I predict a market 'disappointment' of no QE announced at the next FOMC meeting, but they'll likely have 'stronger' words hinting at in the 'future'... like right after the election. Stock up, bitchez.

AndrewCostello's picture

Isn't it obvious to anyone with a brain now that our entire world economy is complete fraud?


These economists are not geniuses, they are just conmen.  And they are terrified of people finding out the truth.



sabra1's picture

wait until God gets a hold of them!

GeneMarchbanks's picture

Everybody stands out for something except those hyper-hypothecating motherfuckers and their Queen.... again.

One wonders, how long Goldman and Anglo media outlets can continue to divert from the source of this bullshit?

Catullus's picture

And those balance sheets that are subsisting off tax loot probably need to die as well. The biggest welfare queens are the gold collar, davos jet setters anyway. Diversification means having more than one source of income.

Sandmann's picture

What is "Intermediate Consumption" ? It would appear the UK has a lot of it and it would be nice to know just what it is.

GeneMarchbanks's picture

Can't say but if you look their debt load the financial sector is bloated. Wouldn't be surprised if that is where it comes from.

fonzannoon's picture

Ah the 3pm lift. Right on time.

Vince Clortho's picture

Speaking of bad news, have not heard updates from Merkel, Sarkozy & Co. lately.


Silence to quiet the markets?

sabra1's picture

has anyone seen michelle, her mother, or that runt dog bo?

Grinder74's picture

Dunno, but the last time I saw a picture of the dog, it was massive.  Nearly as big as Moochelle's ass.

fonzannoon's picture

There is google. One down

zerotohero's picture

Everybody is greedy - EVERYBODY - just different levels of greed. It all started in the sandbox - hmmm I like my truck but I like yours too - gimme that. And remember those with the most toys in the end wins right? RIGHT? just sayin'.

oh and I'm new to this but here goes.....BITCHEZ

Hober Mallow's picture

Italy has low coporate debt because its normal to have 120 days payment terms from suppliers.

That doesn't count on the stats but the dumb fucks who prepare them don't take supplier's credit as "debt".

Italian corporate world is full of credit from suppliers (local and foreign), a lot of which is factored and not accounted for as debt.