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What Do $100 Billion Of Ponzi Bonds Mean?
From Peter Tchir of TF Market Advisors
What Do $100 Billion Of Ponzi Bonds Mean?
So Italian banks have issued about $100 billion of these ponzi bonds and even in this day, that is a big number.
Banks issue bonds to themselves. Then they get an Italian government guarantee. Then they take those bonds to the ECB and get money, which I assume they use to pay down other debt mostly.
The Italian banks and Italian sovereign debt markets are essentially becoming one and the same. The sovereign has added 100 billion of risk to the banks (that today no one is focused on) and the banks and ECB would have to come up with some new gimmick if the sovereign had problems.
The circularity has been powerful during this rally, but it seems too clever by half. It is an all or none strategy, and the ultimate double down. If it all works, then it is genius. If we see another round of weakness, we have the start of a death spiral.
These ponzi bonds ensure that Italian sovereign and bank spreads become 100% correlated over time. The fact that LTRO has daily variation margin adds to the death spiral. The fact that the ECB's outright holdings will be made senior to other holders is also an issue. I have lost track of what the EFSF or ESM are currently doing, or plan to do, but some money is being used up on the latest Greek bailouts, and the reluctance to pre-fund it, means that risk of the market rejecting EFSF or ESM bonds at times of crisis remains high.
Spanish bonds continue to struggle, and other than love of their food and culture it is hard to say anything positive about what is going on in Spain. Keep watching this market - it is starting to separate from Italy and not in a good way.
With Ben and Mario continuing to pump money into the system, the fear of renewed crisis has dissipated. On the other hand, their policies, from from creating a "firewall" have done nothing but provide tinder and gasoline ready and waiting for the next fire.
Buy puts. While the current central bank plans may work and it is a scary market to short, vol has come down (the front end more than longer dated) and the risk of a spectacular sell-off is real. Looking for some deep out of the money options makes a lot of sense.
The reach for yield always tends to end quickly and ugly and all you need to do is look at the treasury market to see just how quickly t can reverse course. At least treasuries are moving lower for some of the right reasons - better economic data. A sell off for the wrong reasons in any credit market will be ugly with so many people long and complacent.
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Death Spiral Bitchez
At 3 AM this morning I read an article that stated there is a $3.6 trillion hole to fill!
To quote the late great Slim Pickins - "Somebody go back and get a shit load of dimes!"
Death Spiral Bitchez
@ Unrulian & Powerslave
-1 "There can be only one"
Issue debt to myself then have it backed by the gov't. How do you start a scheme like that?
In very broad terms, it is as most schemes - a pyramid.
The last players get left holding the bag.
To put it another way, we (we as in I am assuming American citizen) are actually issuing debt to ourselves through Social Security and Medicare. It will be backed by the gov't (but really future citizens). So in fact, many of us are already participating in such a scheme.
Spain took 40% of LTRO money when it is just 13% of EZ GDP.
Answer to question:
It means it's bullish!
Well looks like Draghi and the EU elite are winning the day. A few months ago many were proclaiming the end of the euro and now if this strategy works even zerohedge admits they look like geniuses.
Give credit where credit is due.
O/T but worth mention. The TIC L.T. purchases number was 5X the previous print! 101b vs a revised 19.1b. And now you have your answer to parabolic markets.
I suspect you know more about it than I do YC, but how meaningful is that really when TIC S.T. dropped by ~75 over the same period?
Also, I noticed the Nov TIC LT printed at ~61.
[This is why a graph is nice, perspective.]
http://www.treasury.gov/press-center/press-releases/Pages/tg1450.aspx
"I have lost track of what the EFSF or ESM are currently doing, or plan to do"
That's you, me, most of the people involved and ALL the people in charge!
Thanks Peter and ZH for yet another great article!
(banks/gov.) a bunch of broke ass crackheads asking each other for more money so they can go get another dose.... how do you think this is gonna end eventually???!!!
Did you ever see "New Jack City"?
Europe is going to do the same thing. Again and again. Last year it was Greece, now it is Italy and Spain. For those of us who read you post, the belief that the Ponzi is bigger and bigger has never shaken. Too bad for the honest Europeans? their fate is sealed.
Speaking of italian banks, this just popped on the screen:
*INTESA 4Q NET LOSS EU10.1 BLN VS EU505M PROFIT :ISP IM
the word Billion is so 2010 pfft!
This is how things work in all countries. Whatever used to belong to their people, today it belongs to the multinational companies of the Club. People were betrayed by their given leaderships and they lost everything. Capitals and markets were handed to the Club bosses. If you understand what is going on in Greece, you can understand what is going on in Britain, France, and Germany etc..
http://eamb-ydrohoos.blogspot.com/2012/02/world-war-iii.html
Authored by PANAGIOTIS TRAIANOU
Please provide the world a list of all banksters and their home addresses and what is owned to us by them.
Why do the countries with the best football clubs (spain, uk & italy) all have the most dubious economies ? Is there a link ?