The market took a breather today from its run up last week that was driven by misinterpreted news, false hope, and probably a bunch of fat fingers. Today, the big fear is that the Euro bank stress tests were not as stringent as they should have been, a fact so obvious at the time that even your humble dick joke writer and market analyzer Money McBags told you so (and when Money McBags accepts his Pulitzer, he will be sure to thank all of you in addition to the lovely Sara Varone for the inspiration, though probably not in that order). Only about a month and change too late, the Wall Street Journal (showing why newspapers have jumped the shark) is reporting today what we all knew back then (well, that is all of us who don't accept headlines at face value, even if they are as heartfelt as this one). As Money McBags said many weeks ago:
"The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks’ balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam’s Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch."
And sure enough, investors all have their panties in a bunch today (which would be fine if investors looked like this, instead of this) because of exactly that problem (though why it is just surfacing now is more of a mystery to Money McBags than dark matter or that Hannah Montana thing). Per the WSJ, during the Euro bank stress tests, banks reporting of sovereign debt holdings varied by the nebulous definition from the Committee of European Banking Supervisors (known more familiarly as CEBS pronounced "See BS") with some banks not reporting holdings of subsidiaries, some banks not reporting trading portfolios, and some banks simply slapping their holdings on the tables and exclaiming "stress test this."
There were differences in such simple things as gross and net (and really, how fucked up is any kind of measurement where "gross" has different interpretations? Other than however you may interpret "gross" if you dare to google "blue waffle." How about instead of "gross", the CEBS just says "put every fucking liability you could possibly have down, including off balance sheet conduits, CDS exposure, and drinking problems), whether to include short positions or not, and if Greek debt counted as sovereign since Greece is not likely to remain a sovereign nation for long. The point is, there is a lot of murky shit and inter-EU exposure on EU bank balance sheets and it will only take one credit default (2 to 1 odds on Greece, 8 to 1 on Spain, and 12 to 1 on this Wayne Rooney guy who may already be morally bankrupt, of which Money McBags highly approves) for shit to fall like dominoes or any TV show Ted McGinley touches and if it does, look out below.
Other than European banks fibbing on their stress tests, there wasn't much macro news today except for rumors of more stimulus for the US economy, this time...READ MORE...
Disclosure: No Positions