The Bump In The Night

Via Mark J. Grant, author of Out of the Box,

“How many times have we stood here, you and I, surveying the field before the battle? How many times have we won? How many times must we lose to have lost all those victories and promises of victory? Just once, old friend. Just once.”
                                       -The Wizard
I know it is sometimes difficult. Europe puts out the numbers which many assume are real. Then they talk about the data as if it was real. Then they point to the numbers time and time again as if they were real and finally people make decisions and act upon the figures thinking they are real and then the train begins to go bump in the night and derailment is possible on the next track and people wonder how it happened. We are at that point where “bump” is about to happen because there is nothing left that can happen.
The dream is about over. Soon everyone will be waking up. It will not be a good morning.
After all of the horses and all of the King’s men have met, convened and had one more council of war; the bills are still unpaid. We have no solution for Cyprus, no answer for Spain and no plan for Greece as the IMF has made two things quite clear. Number one is that they will not give Greece any more money and number two is that they expect Europe to take the unavoidable financial hit and that it will not be them that is going to get left holding the proverbial bag. Now the public bondholders of Greece have already been whacked and even with a modest extension of two years in payments Greece would need $25-40 billion in new funding as Austria and the Netherlands have said they are done providing money. All of this is on one side of the equation with other being that Greece will be out of money sometime in November. This, my friends, is what is known as “Crunch Time” because there is no open door that does not lead to pain. Does the ECB take the hit and wipe out their $18 billion capital base and have to be refinanced? Does the EU Stabilization fund take it so that there will be a capital call on the participating nations which some may refuse to pay? Perhaps Germany will surreptitiously force Greece back to the Drachma so that the people of Greece take the hit while providing some sort of financing that uses Greece as a conduit so that Europe can repay itself. We are about thirty days out on this because the country of Greece is about to run out of Euros. The days of wine and roses and mucking about in the sandbox are just about over and real decisions with real consequences are about to come storming into the Great Game and I suggest you prepare your portfolios for the event.
Then the money requested by Cyprus will be nowhere what is needed if Greece returns to the Drachma as the Cypriot economy, already banged by the Greek Public Sector Involvement, will be forced to its knees as the tragedy plays itself out in Greece. Then we have the “Big Bang,” which is Spain, whom Germany contends does not need any money, which is about an accurate a statement as Wichita, Kansas can be found in Bulgaria. Spain is reeling; calls for secession, banks that are insolvent and held together by paperclips and scotch tape, regional debt that is fifty percent of the country’s total and now the downgrade by S&P with one by Moodys placing them into junk and out of the major European Indexes which can be expected shortly. “Dead man walking” would be the accurate phrase. I will tell you; when there is no place left to run and no place left to hide then it is “tag and you are it” and Europe is now days away from getting tagged.
You have to prepare yourself now for the possibility that Europe is a misrepresentation. You must own running shoes and be prepared to use them!