Sunday, October 23, 2011

Charting Europe's Toxic Debt Jack In The Box - Redux

That Europe is, and for a long time has been nothing more than one spring club loaded, and destructive Jack in the Box, just waiting to be unleashed upon the world when the conditions are most dire, is by now nothing new to regular readers: it was roughly two years ago when we presented for the first time the case of how European bank debt is not only orders of magnitude greater than American debt, but that the equity tranches is a tiny sliver in a world where one bank's assets are another bank's liabilities, and any modest write down of debt would result in a cascading domino effect which wipes out billions and possibly trillions in "book value." It is also yesterday, that we refreshed on why a Greek forced write down of up to 60% would promptly spread like wildfire and lead to every troubled European sovereign to demand the same conditions as Greece, pushing French banks (and their US proxies, we all know who they are), to the edge of the abyss because while one Greek write down of 50% may be viable, the same treatment afforded to Italy (which will become inevitable) will simply topple French banks. And putting it all together is this chart redux of who owes what to whom via the NYT. It is nothing new, and it speaks for itself.

Watch Europe's Professor Chaos And General Disarray At The Clown Summit

For those who need a hearty dose of laughter on a Sunday, here is Europe's version of Professor Chaos and General Disarray yapping at the Clown Summit, having finally received the first shipment of HP-12C in history, and realizing they are all fornicated.

Greek Writedowns - Let's Do ONE Thing Correctly

It is painfully clear now, that in spite of months of talk, headlines, and propaganda, very few people in the EU worked on any details. I thought, at the very least, they were working with traders, lawyers, and structurers and somehow were just getting the wrong answers. But now, it looks like asides from the IMF, no one else was figuring out anything, they were just saying what they thought the market wanted them to say. The IMF and other countries finally realize real losses need to be taken and recognized on Greek debt. For once, they can step back, break away from their existing thinking – the IIF’s PSI proposal – and do something that will actually work.

"No Euro Zone Statement Expected Today"

This, in the parlance of our times, is called massively mismanaging expectations.

They Can't Even Coordinate Press Conferences

In typical European leadership fashion, the need to speak useless words to an audience waiting for some sense of real actionable solution outweighs any actual ability to add value or say something new. What is even more incredible is that we expect the 17 (or 27) nations to agree on anything when they can't even communicate effectively internally as we see the Sarkozy/Merkel press conference perfectly overlap with the Barroso/Van-Rompuy conference. Bloomberg is reporting the headlines - which are the same old same old - and awe-inspiring in their lack of specificity and potential for total opposition in view. Grant Williams (of Things That Make You Go Hhmm fame) perhaps sums it up best: "Europe is broken and the people charged with trying to fix it are clearly not up to the job."

Signs of Distribution in Euro Suggest Caution Towards Risk Assets

Eric De Groot at Eric De Groot - 2 hours ago

Global markets have been held captive by endless policy discussions out of Europe. Equity traders vacillate between risk on and off with every hint, allegation, and the rare sprinkle of truth, while long-term investors, frustrated by the volatility, throw their hands up in disgust. If European policy has become the tail that wags the dog for equities and other risk-on plays, the message of the... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]