http://albertpeia.com/dangerwillrobinson.htm
‘While the US
continues to digest the details of the US Fiscal Cliff Deal (the only important
item is that it does nothing to address our debt or deficit problems), the EU
continues to proclaim the worst to be over… while its financial system crumbles
from within.
The latest EU
official to sound the all clear is German Finance Minister Wolfgang Schauble.
On Friday he told German newspaper Spiegel Online that he believes “we
have the worst behind us” in the Euro Crisis.
It’s an odd
statement given that in just October Schauble wasn’t sure that the worst was
past. What’s changed since then? Not much aside from Greece finally getting
another €57 billion that it’s been waiting for since June.
Indeed, Spain’s
second largest bank, Bankia, (the bank which received nearly €24 billion in
bailout funds in mid-2012) just announced that it needed another €18
billion on Friday. This came after Spain’s own Fund for Orderly Bank
Restructuring announced that Bankia had a negative value of over €4
billion.
Again, the bank already
received €24 billion in bailouts… and it’s worth negative €4.15 billion today.
Given that this is the same bank that revised its 2011 €309 million profit to a
€3 billion loss what are the odds that even this awful assessment is a bit too
rosy?
Lest we think Bankia
is a special case, consider that the entire Spanish banking system is on life
support from the ECB, drawing over €300 billion (for a banking system with a
total market cap of a little over €100 billion this is extraordinary).
Then of course
there’s Greece where the four largest banks announced that they need another
€27.4 billion (the entire banking system needs €50 billion). To give this
number some perspective, the entire capital base of the Greek banking system is
only €22 billion. Keep that €22 billion in mind when you consider that
Greek banks are sitting on €46.8 billion in bad loans.
With this in mind,
and considering that Wolfgang Schauble has historically been one of the more
negative voices in the EU political sphere, I take his “the worst is over”
proclamation to be extremely worrisome.
Indeed, when
you consider that France’s Francois Hollande recently claimed that the EU
Crisis is “over” you have to wonder just what exactly is going on behind the
scenes that these folks feel the need to state everything is great?
My view is that they
know the entire move in the equity and bond markets since June 2012 has been
based on verbal intervention from the ECB (despite promising unlimited bond
buying, it has yet to actually do anything) and are trying to milk this thing
for all it’s worth.
After all, it’s
clear at this point that the entire EU financial system is essentially held
together via duct tape by the ECB. And with Spain and Greece’s banking systems
once again in dire need of capital I’m very concerned that the next round of
the EU Crisis is fast approaching and EU leaders are trying to start the damage
control in advance.
On that note, we
recently outlined a number of targeted trades to help our Private Wealth Advisory newsletter subscribers profit
from the next round of the EU Crisis negotiations. These are the same
“back door” investments our clients have used multiple times to pocket gains
whenever the EU starts to crumble.
Private Wealth Advisory is a bi-weekly investment
advisory newsletter in which we provide high level detailed interpretations of
the global economy and financial markets to our subscribers.
By combining this
analysis with independent investment ideas that grow our clients’ portfolios, Private
Wealth Advisory has become a highly sought research tool for individual investors
as well as strategists at some of the largest financial institutions in the
world.
To find out more
about Private
Wealth Advisory and what makes it different from other investment newsletters…’
Graham Summers
Chief Market
Strategist
Phoenix Capital
Research