Who would have thought it only takes for PIIGS spreads to go back to all time records, and for Ireland and Portugal to be hours away from joining Greece in the bailout corner, for Goldman's Erik Nielsen to turn bearish again. To wit: "if investors are running for the door out of fear of being the last one left behind, then there’ll be a liquidity crisis (as there would be for anyone with a financing need), and they’ll need help." Way to stay ahead of the curve Erik. The problem is that while the economic reality below the surface cracks and collapses, investors are largely ignoring the perpetual words of optimism from Europe's politicians, and sellside cheerleaders (which begs the question - is it time to take this Goldman acknowledgment of reality as a buying opportunity?). What happened in Greece may have been brushed under the carpet for a few months, but the policy response there, which is identical to what is happening in Ireland and Portgula now, i.e., blatant lies, has left those holding relevant securities with a bitter taste in the mouth. And now, unlike before, the possibility of holder haircuts is distinctly on the table. Which is why we expect that before the Asian open, there well may be some key news out of Ireland (and/or Portugal)- no matter how much Nielsen believes that Ireland is not in a solvency crisis, with Bund spreads in the 700 range, no matter how much prefunding the government has, it will be irrelevant and will create yet another toxic debt spiral. The biggest threat is not so much to Ireland, which supposedly has its cash needs met through mid 2011, but contagion hitting other European countries, which do have solvency issues, yet have been spared the liquidity hammer so far. And with Italy CDS also hitting record highs, look for the core to start crumbling as everyone, especially Chiswick's perpetual optimist, to appreciate the gorgeous mushroom cloud over the European periphery.