Tuesday, September 13, 2011
Banking Crisis
BNP Paribas is unable to get dollar funding because US money market funds don't want to put there money there. SocGen keeps denying rumors. At some point, the rumors can't be ignored and have to be taken as fact. The stock prices don't lie. The credit spreads don't lie. The Europeans have a banking crisis and they are doing nothing about it. A press conference by Merkel, Sarkozy, and co. will not solve this problem. Each press conference will be a shorting opportunity. Getting close to the terminal stage of this crisis when there is no going back. I remain bearish.
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8 comments:
Price action and events are very similiar to Bears and Lehman in Europe... the suttle difference is they will nationalise the French banks with out much hesitation, BNP appears the most Lehman like chart, bad new for equity holders, senior bonds the only interesting way to play on the long side otherwise short SPX, just like 08 AUD cracking, Apple likely to also crack soon (remember 8 weeks and a 50% slide in Apple in 08 after having held up like a rock star)
The equity holders in French banks are screwed. The nationalization of European banks will scare equity holders and result in a panic bottom.
The Fed will open some window to any European bank having dollar funding problems.
This isn't a liquidity issue it is a solvency issue, as the CEO of Deustche Bank said its an open secret that if many European banks had to mark to mkt european bond holdings (as opposed to hold to maturity) they would be insolvent. i.e. they are insolvent. You need huge capital injections into either countries or banks not just dollar swap lines. Dollar swaps are a rolling loan that gathers no loss.. eventually you face the music.
Dollar swaps are useless. The European banks are zombie banks extending and pretending. The market has sniffed this out, all the talk about better balance sheets than 2008 doesn't mean anything. Going from super toxic to just plain toxic balance sheets doesn't solve the problem.
Unless the banks are nationalized, the European banks will need to come to the capital markets begging for money.
Hard to be bearish when short interest so high. Agree this will most likely fall apart but uncertain whether we climb wall of worries first
Walls of worry are for bull mkts we are just waiting for a panic big money unlikely to be squeezed in
As I said before, we either make a panic low this time or we do it later. Obviously, we've delayed the panic down move. The market operates on its own time clock, but the time bomb is ticking. I actually hope that the Europeans come up with some kind of plan because in bear markets, the best time to short are government intervention rallies.
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