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Remember European Problems? They're Baaaack

Tyler Durden's picture


From Peter Tchir of TF Market Advisors

Once again European debt problems are hitting the headlines and putting pressure on stocks globally.  While we were busy basking in the glow of the now annual Jackson Hole rally, the situation in Europe actually got worse.  The bickering and finger pointing seems constant now.  A few key things are worth watching:

Bilateral collateral agreements:  Finland’s side agreement is a big deal.  Greece will not provide collateral to all the lenders, particularly the big lenders, but other countries cannot lend on terms less favorable than Finland.

Italian Austerity:  The Italians seem to be retracting austerity measures at a record pace.  Unlike Greece, which just failed to live up to the measures, the Italians have the confidence to actually vote them back down.  Italy remains my dark horse in the race to leave the Euro.

Lagarde Speaks:  Someone clearly forgot to tell Ms. Lagarde that the IMF is a joke of an entity and is supposed to do as it is told and not make more problems in Western Europe.  Even if all she is doing is telling the truth.

Economic Data Weakens:  Economic data out of Europe continues to be disappointing.  Yesterday’s Manufacturing PMI was 49 which was the second month in a row below 50 and continued the downtrend.  Without a booming economy in Germany, their willingness and ability to support the rest of Europe decreases rapidly.

ECB Bond Purchases:  In the first week, the ECB was able to use a shockingly small amount of capital to bring Spanish and Italian bond yields down.  In the second week, the ECB had to spend a similar amount of money and they could barely keep the 10 year yields below 5%.  Now, here we are in the 4th week and the bonds are drifting lower.  Italian 10 year rates are back to 5.22% and the Spanish 10 year yield is 5.07%.  The move tighter always seemed suspect because there was so little actually money used.  The market had just decided not to fight the ECB.  Now they might.  The ECB has spent a decent amount of money already, is sitting on inventory that is now possibly already under water, and has a leader near the end of his term.  Watch this move closely, but it wouldn’t be surprising to see the market take another run at these artificially low yields now that the ECB seems to have lost some control on the situation.

The mythical Eurobond:  Lots of people seem to hope that this can be implemented.  Some even talk about it in very vague terms, but no discussion about how it could actually be implemented ever ends with anything but some head shaking and the realization that this will take years to done, and that is if everyone really wanted to do it.  The Eurobond will not be done before this crisis resolves itself, and that resolution is looking more and more like big debt write-offs for banks.

In the meantime, as we wait for NFP, SOVX is back above 300, MAIN is above 160, and IG and HY are both well off their tights and are trading as though a lot of bears got long for a trade jumping on the momentum from last week and the month-end and long weekend technicals. 

BAC CDS is back to 330 this morning, from a tight of 265 yesterday, but that is moving for its own separate list of problems.  The stock is back to trading 7.65, right around the price it closed at after the Buffett deal.  The main good thing I see about that deal is that deal is that the treasury department has a good benchmark of what they should demand if they start discussing TARP II.


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Fri, 09/02/2011 - 08:23 | 1625605 DefiantSurf
DefiantSurf's picture

Where have the EU CDS spreads been?

I miss those, especially with the synonyms



Fri, 09/02/2011 - 08:24 | 1625609 Irish66
Irish66's picture

All you need this morning is BAC spread and their contigency plan!

Fri, 09/02/2011 - 08:57 | 1625830 Landrew
Landrew's picture

Holding Sept. 7$ puts :)

Fri, 09/02/2011 - 08:23 | 1625608 Debtless
Debtless's picture

They never leeeeeft.

Fri, 09/02/2011 - 08:25 | 1625614 DefiantSurf
DefiantSurf's picture


 hmm, apparently the 60 second news cycle has me scrambling so much I have overlooked them....


Fri, 09/02/2011 - 08:24 | 1625612 Ricky Bobby
Fri, 09/02/2011 - 08:26 | 1625617 Dr. Engali
Dr. Engali's picture

Man just fucking default already and get it over with. For cripes sakes this game is getting old.

Fri, 09/02/2011 - 08:31 | 1625629 Ghordius
Ghordius's picture

Try to convince the Irish and the Greeks! They are famously stubborn and "well-advised"...

Fri, 09/02/2011 - 08:34 | 1625640 abaccus
abaccus's picture

Thats how it works they will keep "fixing it" untill it all collapses they have a lot of patience plus i'm sure they're moving some things around making sure only tptb and few elites survive through the mess. They will get everyone up to their neck in this shit then bam it all vanishes and they emerge as "problems' solution"

Fri, 09/02/2011 - 09:17 | 1625972 Tijuana Donkey Show
Tijuana Donkey Show's picture

Borrow as much as you can, then default.... The Greeks are milking it, pure genius.


Fri, 09/02/2011 - 08:28 | 1625620 Dr. Engali
Dr. Engali's picture

BAC os going to open up under 7.50. Poor old crazy uncle Warren's money is fading fast.

Fri, 09/02/2011 - 08:58 | 1625836 snowball777
snowball777's picture

I like the "WFC eats BAC" idea making the rounds on the Fed litigation thread last night. WB's move seems less dumb in that scenario.

Fri, 09/02/2011 - 08:30 | 1625624 Ghordius
Ghordius's picture

The mythical EuroBond! From the Age of Mark-to-Unicorn?

Fri, 09/02/2011 - 09:19 | 1625983 Crisismode
Crisismode's picture

The coupon is in Skittles.

Fri, 09/02/2011 - 10:11 | 1626282 GoldBricker
GoldBricker's picture

One bond to bind, one bond to rule them all.

Fri, 09/02/2011 - 08:33 | 1625630 Careless Whisper
Careless Whisper's picture




The Morning Careless Whisper Report

Accounting Magic: City Of Pittsburgh Pension Fund Claims Next 31 Years Tax Revenue Is Current Assset

Evil Dictator Is Greenie: Rebels Sieze Qadhafi's Electric Car

David Einhorn Strikes Out

British Military Submits Plan To Run Public Schools; Force Can Be Used Against Students To "Restore Adult Authority"

Stripper Claims She Gave Rick Perry A "Monica Lewinsky" But He Was Too Coked Up To Bust

Justin Bieber Goes Lesbian







Fri, 09/02/2011 - 08:32 | 1625633 disabledvet
disabledvet's picture

"And the first one's now will later be last for the Times they are a Changin'."

Fri, 09/02/2011 - 08:35 | 1625652 The Limerick King
The Limerick King's picture



I'm sure glad I'm not European

Some bad times they soon will be seein'

The Germans won't pay

So the others can play

All their capital soon will be fleein'.


Fri, 09/02/2011 - 09:03 | 1625865 snowball777
snowball777's picture

there was an old hag from hannover

who just wouldn't roll in the clover

she simply said no

their bunds couldn't flow

and they jumped off the White Cliffs of Dover

Fri, 09/02/2011 - 08:44 | 1625722 Stpierre
Stpierre's picture

I'm European, just get it over with. Continu the avalange and let us start all over again;Love my gold and silver!!

Fri, 09/02/2011 - 08:46 | 1625737 GCT
GCT's picture

Read the military school teacher article and laughed.  But what the hell they have tried everything else and cannot produce anything but kids that will expect the government to provide them everything once they graduate.  Maybe one or two now will be able to produce something.  Too Funny and Too scary!

Get down maggot and give me 20!!!!

Fri, 09/02/2011 - 08:51 | 1625780 RandomRick
RandomRick's picture

" MAIN is above 160, and IG and HY are both well off their tights"

One wonders who the author is dating?

Fri, 09/02/2011 - 08:54 | 1625800 monopoly
monopoly's picture

Getting old, yes. But it just goes on. No politician will do what is right as they will lose their job. Does not matter what country you are talking about.  Absurd but true.

And next month we start losing jobs again.

Fri, 09/02/2011 - 13:40 | 1627023 Curtis LeMay
Curtis LeMay's picture

DAX down 3.5% TODAY...down about 25% in the last five weeks of trading...

And this isn't some pseudo-economy like it's "Partner" Froggystan, Germany is the real deal...

= = = = =

FYI - from Ambrose

8:31PM BST 01 Sep 2011

Central banks and official bodies have parked record sums of dollars at the US Federal Reserve for safe-keeping, indicating a clear loss of trust in commercial banks.

Data from the St Louis Fed shows that reserve funds from "official foreign accounts" have doubled since the start of the year, with a dramatic surge since the end of July when the eurozone debt crisis spread to Italy and Spain.

"This shows a pervasive loss of confidence in the European banking system," said Simon Ward from Henderson Global Investors. "Central banks are worried about the security of their deposits so they are placing the money with the Fed."


Mon, 09/05/2011 - 08:40 | 1633799 shacai
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