The Great Systemic Rig of 2012
is Ending
http://albertpeia.com/greatsystemicrigof2012ending.htm
‘The following
is an excerpt from a recent issue of Private
Wealth Advisory. In it, we outline the ongoing stress in the EU banking system, particularly
the issues of Spain and Greece, both of which have large banks with negative values.
Private
Wealth Advisory subscribers are already gearing up for the next round of the EU
crisis with several back-door trades that will profit enormously as Europe
falls. To find out their names, symbols, and how to buy them… Click Here Now!
Europe’s banking
system has been on the ropes for years.
It’s a little known
fact that the largest recipients of US bailouts were in fact foreign banks
based in Europe. Also bear in mind that the biggest beneficiaries of QE 2 were
European banks. Things got so bad in mid-2012 that the whole system lurched
towards collapse. The only thing that pulled the EU back from the brink was
Mario Draghi’s promise of unlimited bond buying (a promise and nothing more as
the EU has yet to do any of this).
However, these
efforts, like all cover‐ups, will not last. Indeed, by the look of
things, Europe’s banking system is breaking down again…
Greece’s four
largest banks need to boost their capital by 27.5 billion euros ($36.3 billion)
after
taking losses from the country’s debt swap earlier this year, the largest
sovereign restructuring in history.
National Bank of
Greece SA, the country’s biggest lender, needs to raise 9.8 billion euros,
according to an e-‐mailed report by the Athens-‐based Bank of
Greece (TELL) today. Eurobank Ergasias SA (EUROB) needs 5.8 billion euros,
Alpha Bank (ALPHA) needs 4.6 billion euros and Piraeus Bank SA (TPEIR) needs
7.3 billion euros, according to the report. Total recapitalization
needs for the country’s banking sector amount to 40.5 billion euros, the report
said.
source: bloomberg.
The above articles
tell us point blank that Europe’s banking crisis is neither fixed nor even
close to over. However, the numbers need some perspective: sure, €27.5 billion
sounds like a lot of money, but just how big is it relative to Greece’s banks.
The entire capital
base of the Greek banking system is only €22 billion.
By saying that Greek
banks need €27.5 billion Greece is essentially admitting that is needs to
recapitalize its entire banking system. Also, you should know that Greek banks
are still sitting on €46.8 billion in bad loans.
There is a word for
a banking system with a capital base of €22 billion and bad loans of €46.8.
It’s INSOLVENT.
We get other signs
that Europe is ready to fall back into the abyss from recent revelations
concerning Spain’s sovereign bonds.
In July 2012,
Spain’s ten year bond yield hit 8% even though Spain had already been granted a
€100 billion bailout by the EU and the ECB had also promised to
provide unlimited bond buying.
As a point of
reference, remember that any yield over 7% is GAME OVER as far as
funding your debt.
Then, starting in
August 2012, Spain’s ten-‐year bond yields magically began to fall.
Since that time, they’ve plunged to just 5%.
The reason for this
drop in yields?
It’s not that
Spain’s finances improved (its Debt to GDP ratio hit 85% this year and is on
track to reach 90% by the end of 2013). Nor is it that Spain’s economy is
recovering (unemployment reached a new record in 3Q12).
It’s not also that
investors are less worried about Spain and have decided to buy Spanish debt
(Spain just staged a terrible bond rally in early December).
So why were Spanish
yields falling?
Spain has been
using up its Social Security fund to buy its own debt.
Spain has been
quietly tapping the country’s richest piggy bank, the Social Security Reserve
Fund, as a buyer of last resort for Spanish government bonds, raising questions about the
fund’s role as guarantor of future pension payouts.
Now the scarcely
noticed borrowing spree, carried out amid a prolonged economic crisis, is about
to end, because there is little left to take. At least 90% of the €65
billion ($85.7 billion) fund has been invested in increasingly risky Spanish
debt, according to official figures, and the government has begun withdrawing
cash for emergency payments.
Source: Wall Street
Journal
This is precisely
what we mean when we say the system was rigged in the second half of 2012.
Spain, a country that is totally bankrupt and likely heading for its own
version of the Arab Spring (things are so bad that Spaniards have begun self-‐
immolating just as they did in Tunisia right before that country suffered a
societal breakdown) managed to fool the world into believing that things had
improved by raiding its social security fund to buy its own debt.
As we said at the
beginning of this issue, the rigging that occurred in the second half of 2012
was simply staggering. But it will end. Our view is that we have perhaps
another month or so left at the most before things begin to get ugly again.
This is why, smart
investors are already taking advantage of the lull in the markets to position
themselves accordingly. While everyone else continues to believe the fairytale
story spun by the political class and mainstream media, our Private
Wealth Advisory newsletter subscribers have already been warned of
these issues and are taking action (just as they did in early 2008 when others
were bullish, or in 2010 when the EU crisis first began to take off).
Private
Wealth Advisory outlined several critical investment strategies, designed to hedge
our subscribers from the risks in the market while also alerting them to unique
investment ideas that 99% of investors don’t know about.
This includes out of
the way hard asset plays that are undervalued by as much as 70%, back-door
investments on the US debt ceiling talks that allow individual investors to
profit when the stuff hits the fan there, and more.
To find out about
these investments and start positioning yourself for what we all know is
coming, but no one wants to openly admit, all you need to do is take out a
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Phoenix Capital
Research