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The Eurogroup statement on Spain: "The loan will be scaled to provide an effective backstop...
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Saturday, June 9, 2012, 2:44 PM ETThe Eurogroup statement on Spain: "The loan will be scaled to provide an effective backstop covering for all possible capital requirements ... with an additional margin of safety up to €100B in total ... the Fund for Orderly Restructuring (FROB), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned."
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June 17th will prove to be a yawn and another disappointment for the perpetually gloomy.
I don’t think you fit that category Truffel! ...$$$
Everyone has consistently underestimated the determination of the leadership of the Euro zone.
"Nice work"
Why can't we do something similar to top 5 banks?
It encouraged competition and was a bonus for
ATT shareholders.
http://bit.ly/LgAAoa
You seem unaware of the implications of this weekend's actions. It matters not what the balance sheets of these banks are. The EU will provide whatever capital is necessary.
You're going to have to be more specific as to what's insulting. I said that I didn't believe you had properly grasped the implications of this weekend's actions, not that you didn't love your mother.
I'm just trying to point out that those that keep publishing all these "endgame" articles and comments, as if the entire EU is about to fold, are seemingly willingly ignoring that the EU is remaining steadfast in supporting its members and the banking/ financial structure that is necessary to maintain the function of the union. The political will to do what's necessary gets reinforced with each action, and the ability to generate funds is not really an issue, as they can issue whatever EU bonds they wish, if they so decide. Money, fundamentally, is limitless.
Now, as I have opined elsewhere, whether the EU can ultimately incorporate all functioning members over time remains to be seen, but that takes time, and they're off to a decent start in recognizing and addressing problems, and have some chance of success because the governments and the populaces of the various members want the union to succeed, although I also think they need more stimulus and less austerity. Making short-term bets on failure of the EU seems, to me, unlikely to be successful.
It was particularly smart of the EU to buttress Spain in a major preemptive fashion because it makes any imagined threat from Greece immaterial, and it sends a message to the Geek people, in advance of the elections, that the EU is going on with or without them. This is a powerful inducement for rational behavior, I believe.
In the end, the EU is going to emulate the U.S. and Fed, more and more, even if reluctantly.
Again, no personal attack or insult intended. Otherwise, always welcome vibrant dialogue.
This story in the Guardian that ftalpha links to is worth a read: http://bit.ly/Lh7YLw It paints a picture of very deep and pervasive corruption in Spain's financial sector. There's more here than a real estate bubble that's burst. I'd say that the exposure and consequences of that is a story worth following.
I have no idea what structural reforms will be pursued. I just think that the EU and Spain have a common goal and will work together. This situation there is much more maleable and manageble than Greece. Rajoy, himself, recently said that Spain would have to make sacrifices in some areas of sovereignty in favor of the union. Spain is playing ball.
I guess all the fundamental issues on the EU have been beaten to death endlessly, here on SA. The camp is divided in binary fashion, as it is on so many issues, between those who think whatever is done, it will all fail, and those that believe that progress will be made, even if with potholes along the way. I find myself in the latter camp, not only because of the specifics of the case at hand, but because of life experience.
As unscientific as this may sound, I, too, was once a young, angry cynic, who thought the country/world would be destroyed by the actions of our or another government, and, of course, when you're young, everything is going to happen tomorrow morning. Time frames of youth are always truncated. Then, I aged, and I learned that life goes on, always, and that progress is relentless, if uneven. And, I started to alter my investment style to match my confidence in the continuation of mankind and his businesses.
So, when I see things beaten down and predictions made that they'll all disappear or never recover, I'm usually right there buying. I've been buying distressed issues, especially with high yields, for more than seventeen years, and I can say it's been a very rewarding strategy.
I can only advise my fellow investment travelers to focus calmly on opportunity, rather than getting caught up in the heated frenzy of predicted failure. All those angry, afraid people do is provide opportunity for others, who have a more measured view of life. It's too bad we all seem to learn this -- if we do, at all -- late in the game, but that's life.
Excuse the digression into philosophy, but it underlies so much of how I look at investments.
The fact is that there's no easy solution here. From day one, my own opinion has always been that the EU and EZ leaders will take half measures -- just enough at each point to stave off an immediate crisis. That they'll prove themselves incapable of taking the big steps needed to confront and resolve the mess they've gotten themselves into. They may or may not be able to muddle through like that. If a crisis point does arrive, I expect it to manifest in Germany, not in the periphery. I'm watching for rising unemployment in Germany. When I see it begin to rise to the levels at the periphery, then I expect we'll see something happen. I'm also watching the German election process as this is far more significant than the elections in Greece or in France. Bellweather Westphalia held early elections and the sentiment was more strongly opposed to the austerians than I think anyone expected. This is significant because the only thing that can rescue the EZ is an ambitious and realistic program for economic growth and that isn't going to come from the Christian Democrats.
However, all this has nothing to do with the mystery phrase about "horizontal structural reforms" :-)
So having just read what you say, then, are you a European bull or bear, if you have to pick one.
Lol, they are going to wish they worded this differently.
I wonder how Greece feels right about now?
Wait, last week it was €50B, now it's €100B. So, in reality, it's closer to €200B?
Things do not look good. If there is a 3rd Round in July, it would be even worse.
Markets and investors do not like uncertainty. And there is a whole lot of it from Greece.
This should mean JPM & WFC should rally strong Monday, if I am not mistaken!
I bought 50 June 16, $36.00 Call Options of JPM for .05 Friday, and another 50 for July for .11
Hope this brings them up for a couple bucks! :)
We're splitting hairs here because loans to Spain would entail extensive sovereign oversight while loans to FROB would not be accompanied by sovereign oversight but oversight over the banking sector. Spain wants to avoid conditionality as imposed on Portugal, Ireland and Greece.
On the surface this is likely to be market positive but if the loans are originated through the ESM, they will enjoy seniority over all other outstanding debt and may disrupt market trading.
The Spanish may be too proud for their own good, but a crummy deal is likely better than no deal. As for sovereign issues, the bond market will the judge of that.
Realizing that bad loan issues in the banking system (there) are still in the early innings of writedown mode, let's at least hope the back-stop contains language and enough bite to, as Herr Hansa suggested earlier, either consolidate some of the mess or at least put a fence around the more toxic stuff.
As for Greece, denial will only get them so far. If they haven't figured it out by now, at least show the world that they can come to consensus with what is the lesser of (all) the evils.
They said no to austerity, they said no to two party majority in its legislature. If they think throwing 50% of the votes into a handful of disparate minority parties is the best they can do then it might be better to dust off the drachma presses and start printing away.
Just as Karl Marx failed to grasp economics, the Greeks seemingly fail to grasp risk. This is the downside of what happens when you run out of other people's money to spend.
According to one report, there are no funds coming from anywhere. The EFSF or ESM will simply print some bonds, then lend the bonds to the FROB, and the FROB will then use the bonds as collateral to get funds from the ECB. In effect another type of LTRO in substance, with newly issued debt as collateral.
It's just more debt on more debt, with likely interest due on both the ESM bonds and then to the ECB for any of what will be newly printed money for the collateral posted via the bonds.
Furthermore there is no indication of how any recapitalization of any Spanish banks will be done. Bankia was mentioned in another report as having the old shareholders wiped out. But even wiping out the old Bankia shareholders may not be enough as that recapitalization was supposedly about 25 billion euros and that may be much more equity than the old Bankia shareholders had. No mention of how Bankia bondholders are to be affected or even if the 25 billion is enough to handle the total real estate and loan losses of Bankia. No mention is made of how recapitalization of any other Spanish banks will be done. And apparently according to another report Spain is already on the hook for about 15 billion euros for some smaller regional banks already propped up earlier.
The chinese in my view are doing just that: largest holder of USD reserves, will probably devalue their currency and then convert their USD reserves in yuan or use the USD to buy European assets which are cheap with a rising USD. They are also the worlds largest buyers of Gold.....so they are stocking their reserve in case the US stop printing USD which is not happening in the short term, if anything the Central bank will print more USD in July/August.....before elections are over....
This statement was made by Cicero in 55 B.C.
Do you really think after 2000 years, June 17th changes anything? We'll be hearing this story as long as we live, best just to ignore it and make your investing plans as usual.