EU Commissioner Warns:Soon It Could Be A Big Spanish Bank

Joaquín Almunia, vice president and head of competition at the European commission, has issued a warning over the state of the Spanish banking system.

Right now, it is just the cajas, or Spanish regional banks under threat, according to Almunia. But soon, it could be one of the country's biggest.

Almunia also implored Spain's cajas to take advantage of government support measures to prop up their capital levels now, before the Basel III rules on reserve requirements come into effect.

Almunia's comments come in the midst of a major banking shakeup in Spain, where many different cajas have merged together and one has been bailed out.

Thus far, only investor fear has spread to Santander and BBVA, Spain's two biggest banks. But what Almunia seems to be suggesting is that the reality of those banks' balance sheet conditions is not ideal, and may be endangered as the Spanish banking and European sovereign debt crises continue to develop

Only Way To Contain Oil Leak Is With Small Nuclear Bombs

I Would Recommend You Panic Soon

Bob Janjuah:The eye of the storm ahead of a super nasty Q3/early Q4.

Bob Janjuah, the uber-hot strategist from RBS, is out with his latest market outlook.
Everything's going to plan, he says, as the market is inevitably headed towards S&P mid-800s.



His note:

Plse refer to my most recent comments, from 24th May, and 26th April. Things are playing out nicely. This is just a 'tactical' update. In my cmmt of the 24th May I set out 2 possible paths for the new bear market we are in, and I want to clarify a little:



1 - 1st, the bigger strategic theme is clear and unchanged - global growth HAS peaked and the deflation trend is clear for the next 3/6mths. This is strategically bullish the USD and USTs (think 1 vs the EURO, and low 2% 10yr yields). And this is strategically BEARISH risk assets (think mid-800s S&P in 3/6mths, and the iTraxx XO index up above 750bps). The strategic asset allocation outlook STRONGLY favours QUALITY as defined by balance sheet strength, balance sheet transparency (which therefore excludes most financials), market position, AND the ability to be a price setter (not taker).



Perhaps what's most interesting are his potential game changers, that could send the market much higher:



The game changers are: A) a massive turnaround in China towards new stimulus & a new credit creation binge etc - for now very unlikely IMHO; B) a massive turnaround in corporate behaviour resulting in a leverage, capex, investment, hiring & spending binge - extremely unlike for now and for the rest of this yr; C) a new US fiscal package (pretty impossible now), so the most likely and only really viable remaining option is a MASSIVE DEBASEMENT/MONETISATION move led by the Fed (but no doubt globally co-coordinated) thru the announcement of a NEW (say) USD5trn QE package, aided/abetted by maybe another USD5trn of funny money printing by the BoE, the ECB, ther BoJ, the PBOC, the SNB etc etc.........HOWEVER, I don't expect this last bullet to be used until things get REAL UGLY (see above para for levels). If u know u have only 1 bullet left in the rifle - and unless you are amazingly stupid - u don't try to shoot the charging grizzly bear when its 50 yards away. No, you wait till its 5/10yards away...WHEN we get this final bullet out of the rifle it had BETTER not miss, as if it 'misses' we would then have the mother of stagflationnary busts in history where bonds get crushed due to debasement, taking risk assets out with them too. If this is the outcome - and this is really I think a late 2010/2011 story - then trust me, 2008 really will seem like the Good Old Days.....lets hope Uncle Ben not only has the rifle ready, but also that his scope is well lined up and that he has been practising hard...



2 - In terms of the shrter term tactical outlook, of the 2 scenarios laid out in my last piece, I now marginally favour the 'bullish June, disastrous July/Aug/Sept/Oct' outcome. This is a marginal call - the KEY trend for H2 2010 is BEARISH and HIGHER VOL - but I do think we can see the S&P (as a global risk proxy) up at 1150/1180 in June. This seems to me to be the next and an excellent place to get short risk/get long deflation. A move above 1180 IS possible but unlikely, with 1220 even more remote. However, I would be inclined to rethink a little the precise tactical timing/routemap IF we can get to and close above 1180 for 3 or so consecutive days. A break below 1020 on S&P would indicate that 800s S&P is coming sooner rather than later, but as mentioned, I think this is now business for JULY onwards, not for June.



It is important not to forget that we now have a pretty cool series of lower lows & lower highs on stks whereby we have taken out the early Feb lows. And if u like this sort of thing, a very powerful and ultimately deeply bearish Head & Shoulders is clear too.



And his final advice.



So there u have it. Expect policymakers, the sell side consensus and the media to be Rah Rah over the next few days & weeks (its already begun). But don't get too sucked in - use any bull trap to OFFLOAD risk/to get liquid. JUNE can be a decent bullish month, but I really do think it is the eye of the storm ahead of a super nasty Q3/early Q4.

France, Italy Will Crash Next

The most funny Video about Euro

Brad Gogetter, renown for his expertise in the banking industry and having been extraordinarily accurate in predicting trends in stocks and shares in the past, claims the Euro is doomed and will be disbanded at a cost of billions of dollars. Brad has even predicted the complete breakdown in the capitalist system and a re-establishment of the barter system. Although his outrageous statements are often dismissed as fantasy it is becoming clear that maybe he isn't so crazy after all.He has also stated that the fundamental flaw in the capitalist system is the fact that it depends on infinite growth, a concept that is impossible due to the limited resources on offer from nature.

Robert Shiller on double-dip recession in USA

A video about the coming future.

Dow Theorist Richard Russell: Sell Everything Liquid, You Won't Recognize America By The End Of The Year

Richard Russell, the famous writer of the Dow Theory Letters, has a chilling line in today's note:



Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.



That's pretty intense!



Update: By popular demand, here's more on what he sees in the market. The gist is that the markets recent gyrations are telling him that the economy is in trouble:



And I ask myself, "Am I seeing things? The April 26 high for the Dow

was 11205.03. The Dow is selling as write at 10557 down 648 points

from its April high. If business is even better than expected, then

why is the Dow down over 600 points? And why, if there were 674 new

highs on the NYSE on April 26, were there only 20 new highs on Friday,

May 14? And if my PTI was 6133 on April 26, why is it down 17 points

since its April high?



The fact is that I've been seeing deterioration in the stock market

ever since early-April, and this in the face of improving business

news. The D-J Industrial Average is composed of 30 internationally

known top-quality blue-chip stocks. These are 30 of "America's biggest

companies." If Barron's is so bullish on the future of America's

biggest companies, then why isn't the Dow advancing to new highs?



Clearly something is wrong. But what could it be? Much as I love

Barron's, I trust the stock market more. If I read the stock market

correctly, it's telling me that there is a surprise ahead. And that

surprise will be a reversal to the downside for the economy, plus a

collection of other troubles ahead.



About Dow Theory -- First, we saw the recent April highs in the

Averages. Then we saw a plunge in both Averages to their May 7 lows --

Industrials to 10380.43, Transports to 4298.12, next a short rally. If

ahead, the two Averages turn down and violate their May 7 lows, that

would be the clincher. Such action would signal the certain resumption

of the primary bear market.



Just as for years I asked, cajoled, insisted, threatened, demanded,

that my subscribers buy gold, I am now insisting, demanding, begging

my subscribers to get OUT of stocks (including C and BYD, but not

including golds) and get into cash or gold (bullion if possible). If

the two Averages violate their May 7 lows, I see a major crash as the

outcome. Pul - leeze, get out of stocks now, and I don't give a damn

whether you have paper losses or paper profits!

Euro may Fail but we must not forget about The Holocaust.

If the rumours are real, Why Sarkozy panics first?

If you were wondering why the market is spooked by rumors that Germany may be returning to the DM, here is actual fact that French President is on the verge of reinstating the franc. And with that, the euro is nothing more than a political toy for Merkel, Sarkozy and whoever the current non-indicted head of the Italian government is, to achieve their political goals. The currency is now dead. Parity coming within a few weeks.




From The Guardian:



The markets were initially unsettled by news that the French president had threatened to pull France out of the eurozone. The startling threat was made at a Brussels summit of EU leaders last Friday, at which the deal to bail out Greece was agreed. according to a report in El País newspaper quoting Spanish Prime Minister José Luis Rodríguez Zapatero.



Zapatero revealed details of the French threat at a closed-doors meeting of leaders from his Spanish socialist party on Wednesday.



Sarkozy demanded "a compromise from everyone to support Greece ... or France would reconsider its position in the euro," according to one source cited by El País.



"Sarkozy went as far as banging his fist on the table and threatening to leave the euro," said one unnamed Socialist leader who was at the meeting with Zapatero. "That obliged Angela Merkel to bend and reach an agreement."



A different source who was at the meeting with Zapatero told El País that "France, Italy and Spain formed a common front against German and Sarkozy threatened Merkel with a break in the traditional Franco-German axis."



El País also quotes Sarkozy as having said, according to another of those who met Zapatero, that "if at time like this, with all that is happening, Europe is not capable of a united response, then the euro makes no sense".



Well, an epiphany 10 years late is still better than no epiphany. And, of course as many will say, he who panics first, just may salvage something.

Pictures of China Inflation Era (1945)

Roubini Says China Risks `Significant' Economic Slowdown: Video

Bob janjuah: Euro Will Fall To Dollar Parity, And The S&P Is Fairly Valued At 850

Tarpley predicts 2nd wave of global crisis emerging from Greece

Good example of a Dead Cat Bounce

“Wer soll das bezahlen?”, which in English roughly translates to “Who is going to pay for this”

“Wer soll das bezahlen?”, which in English roughly translates to “Who is going to pay for this”


This is just another extension of transferring risk onto the public sector/govts/international agencies at a very large long-term cost. It should be added that this is not just a question for the Eurozone, or for the currently government-less UK, but across the heavily indebted countries of the world (yes that means you, Uncle Sam). In other words this is just another example of a short-term, leveraged solution, that merely adds to the burden of future problems.

Germans of 1923:To the Germans of 2010 about your future

George Soros:Humpty Dumpty cannot be put together again

Retail investors, politicians and bureaucrats aren’t the only ones speculating on the likelihood of another financial market crash. They’re in good company as billionaire hedge fund manager George Soros has recently weighed in on the subject. In his latest book, Soros discussed the handling of the 2008 financial crisis and drew attention to the handling of the crisis by the major countries involved, particularly the U.S. Regarding the bailouts he said, “These measures have been successful, and the global economy appears to be stabilizing. There is a growing belief that the global financial system has once again escaped collapse and we are slowly returning to business as usual.”

Soros then drops the bomb on this assumption as he offers his opinion: “This is a grave misinterpretation of the current situation. Humpty Dumpty cannot be put together again.”

Elsewhere in the book Soros writes, “I regret to tell you that the recovery is liable to run out of steam and may even be followed by a ‘double dip,’ although I am not sure whether it will occur in 2010 or 2011.” Yet on the same page Soros also admits that “Others – including me – failed to anticipate the extent of the rebound.”

How Many People can earn money from the 1000 points drop?

It is possible to buy but almost in seconds. I believe is a black box selloff like 1987 but this is also the actual fact that most people do not trust this market.

Fundamental the stock markets shall have crash already when the unemployment rate and the debts level are still high in the USA.
When the money run out, it will still crash. Consumers never started buyiny, it is the inflation that shows things are getting better.
This is why i am totally convince we will have another recession soon.

Greece leaving EU might trigger disastrous results

The alternative is a devaluation — which means leaving the euro.

Any announcement of plans to leave the euro would, as Eichengreen points out, trigger disastrous bank runs. By the same token, any suggestion by outside players, like the ECB, that the option exists would amount to invoking a speculative attack on Greek banks, and therefore can’t be made. The whole thing is effectively undiscussable.

But that doesn’t mean it can’t happen. Greece is already starting to look like Argentina 2001.

Again, this isn’t an alternative to debt restructuring; it’s what might be needed in addition to debt restructuring to make the fiscal adjustment possible.

I hope that somewhere, deep in the bowels of the ECB and the Greek Ministry of Finance, people are thinking about the unthinkable. Because this awful outcome is starting to look better than the alternatives.

Which major financial institution is Jim Rogers shorting?

He says: "I am shorting a stock market index in the US, I am shorting an emerging market index and I am shorting one of the large western international financial institutions."

"It is an emerging market index; it is not a specific country. It is an index of many emerging markets and that is mainly because the emerging markets have grown more than most things here during this big recovery. So that is where some of the excesses are developing."

Which major financial institution might he be shorting?

He describes it as a bank which people think is 'extremely sound', but which could be taken down by currency problems.

So, who is it? Citigroup (C) JPMorgan (JPM)? Goldman Sachs (GS)?

My Guess is who has the most Tier 3 assets in their Books.
We foget about BOFA too.

People now are more greedy than people of the past thus crisis happen faster.

This is why we need to be more fearful of the coming crisis.
The Moral and Greediness of the people now has become worst than the great depression of the 1929. This is why we have not earn a single lesson yet from the crisis of 2008.

Thus we can expect crisis to happen in a faster rate than the past.

Jim Chanos still shorting China

Chanos, obviously, is a skeptic. Roach is a bull.

Roach thinks migration from the rural areas to the city will continue. Chanos thinks we could see reverse migration, as the property boom ends and peasants are forced back to the countryside.

Another point, which we can't agree with enough, is the absurdity of Western commenters going out of your way to praise Chinese government policy moves, while slamming government intervention in the economy domestically.

When asked by a member of the audience what might prompt him to cover his short, Chanos obviously didn't say, but did hint he's done well so far -- not surprising given some of the recent carnage in China and elated markets.

Forw what it's worth, Chanos reiterated that he's not short Shanghai stocks directly. Hong Kong property plays and commodity firms are more likely.

This is a Madoff Economy

Investors have looked past the effects of temporary stimulus and opaque accounting, maybe on the Madoff-like thesis that neither sustainability nor accurate disclosure really matter as long as the numbers are good. Yet there's also no denying that this thesis has worked beautifully, and we've missed out by questioning it. As I detailed last week in Looking Back, Looking Forward, the criteria for accepting risk - on the basis of valuation and market action - have been more stringent in periods of credit crisis (both U.S. and internationally) than we could have, in hindsight, got away with last year. I continue to believe that the market's enthusiasm may turn out badly, given the extent to which GDP gains have been induced by unparalleled deficit spending, and earnings gains have been predominated by financials enjoying suspended accounting transparency. But we'll see how this plays out over time

Eight Torpedos to blow up the Global Economy into recession.

1.)The Greek Bailout
"Markets were unimpressed with the size of the just-announced $145 billion rescue package or the ability of Greece to meet the terms. A bailout of all Club Med countries would, according to estimates I’ve seen,
approach $800 billion. This is bigger than LEH."

2.)China tightening
"China raised reserve ratio requirements 50bps for the third time this year (to 17%). A decisive slowing in China and the U.S.A. is a crimp in the near-term commodity price outlook."


3.)Goldman Sachs
"Possible criminal probe on Goldman weighing massively on the stock price; financials being re-rated by rising spectre of financial re-regulation. Shades of Sarbanes-Oxley. There has never been a financial crisis that
was not met afterwards with regulatory reform — it’s how the SEC was created in the first place."

4.)The Current State Of The Economy
"ECRI leading economic index just slipped to a 38-week low. With the restocking phase complete and fiscal stimulus waning, prospects of a second half slowdown loom large. Buy the recovery story when ISM is at
30 and policy stimulus in full swing (13 months ago); fade it when ISM approaches 60 and stimulus subsides. Market Vane sentiment is pushing towards 60% too — yikes! Too much priced in. As for the macro scene, the U.S. economy is barely growing at all, net of all the federal stimulus (+0.7% SAAR in Q1). And net of housing impacts, neither is Canada … should set us up for a fascinating second-half."


5.)Terrorism
"Attempted terrorist attack in Times Square a reminder that geopolitical risks have not gone away. "


6.)The bond market
"Treasury yields have collapsed nearly 35bps from the nearby highs and are not consistent with the recent move by equities to price in peak earnings in 2011. Junk bonds trading back to par for the first time in three years."


7.)Housing
"The latest Case-Shiller house price index confirmed that we are into a renewed leg down in home prices. Financials, retailers and homebuilders are not priced for this outcome."



8.)Jobs
"Initial jobless claims, around 450k, are not consistent with sustained employment growth, notwithstanding what nonfarm payrolls tell us this Friday. A new peak in the unemployment rate and a new trough in home
prices stand as the most pronounced downside surprises for the second half of the year."

Roubini: A Greek Bailout Solves Nothing Since Spain Is The Real Time Bomb That Will Destroy The Euro

As the world remains fixated on the financial problems of Greece, Nouriel Roubini warns that Spain is actually a far larger and deadly financial time bomb.

The Spanish economy is so enormous relative to Greece that a major financial crisis there would easily destroy the euro currency union:

Irish Independent: "Down the line -- not this year or two years from now -- we could have a break-up of the monetary union. It's a rising risk," he said. "The eurozone could drift, essentially with a bifurcation, with a strong centre and a weaker periphery, and eventually some countries might exit the monetary union," he warned.

For all the focus on Greece, however, he also said that Spain may eventually pose an even bigger threat to the eurozone because it is the region's fourth-largest economy and has higher unemployment and weaker banks. "If Greece goes under, that's a problem for the eurozone. If Spain goes under, it's a disaster," he said.

If Roubini's warning is true, it would mean that a Greek backstop by Europe solves nothing. The euro as a currency would still have massive threats ahead regardless.

I’ll Tell You When Chinese Bubble Is About to Burst: Andy Xie

April 26 -- “My maid just asked for leave,” a friend in Beijing told me recently. “She’s rushing home to buy property. I suggested she borrow 70 percent, so she could cap the loss.”

It wasn’t the first time I had heard such a story in China. Some friends in Shanghai have told me similar ones. It seems all the housemaids are rushing into the market at the same time.

There are benefits to housekeeping for fund managers. China’s housemaids may be Asia’s answer to the shoeshine boy whose stock tips prompted Joseph Kennedy to sell his shares before the Wall Street Crash of 1929.

Another friend recently vacationed in the southern island- resort city of Sanya in Hainan province and felt compelled to visit a development sales office. Everyone she knew had bought there already. It’s either buy or be unsocial.

“You should buy two,” the sharp sales girl suggested. “In three years, the price will have doubled. You could sell one and get one free.”

How could anyone resist an offer like that?

The evidence in official-corruption cases no longer involves cash stashed in refrigerators or starlet mistresses in Versace clothing. The evidence is now apartments. One mid-level official in Shanghai was caught with 24 of them.

China is in the throes of a vast property mania. First, let me make it perfectly clear that calling China’s real-estate market a “bubble” isn’t denying China’s development success. As optimism is an essential ingredient in a bubble, economic success is a necessary condition. Nor am I saying that prices will drop tomorrow. A bubble evolves and bursts in its own time. When it is about to burst, I’ll let you know.

Free Lunch

Expectations of a Chinese currency revaluation are, perhaps, the most important force inflating the bubble. First, it plays to the latent human desire for a free lunch. You just need to exchange your money for Chinese yuan. According to all the experts on Wall Street, you can only gain. The money has been gushing into China.

Second, the revaluation story has kept Chinese money inside the country. The dollar has always been the safe-haven asset for Chinese. This is why Chinese banks had a large dollar deposit base. Of course, anybody who was somebody had dollars offshore. Now all that money is back. More importantly, any income, legal or otherwise, now stays in China.

Flats Beat Cash

Why would corrupt officials keep apartments rather than cash? Well, according to Wall Street, the yuan is going to appreciate. So holding dollars is out of the question. And why hold Chinese cash when property prices are always going up? The corruption money can be turbocharged in the real-estate market. Only when they are caught do they understand the downside of holding fixed assets.

The massive liquidity waves have prompted Chinese banks to lend as much as possible. One Wall Street tradition adopted quickly in China was bonus recipients signing company checks to themselves. All you need is to report eye-popping quarterly earnings. It is an easier game than on Wall Street: The Chinese government keeps the lending spread wide by fixing both the deposit and lending rates. You just have to lend. The earnings will follow. Might the loans turn bad in three years? Well, I’m not going to give back my bonuses, right?

For a bubble to last you need a force to hold it together when it stumbles. Wall Street kept pumping out new natural or synthetic products to turn debt into demand for assets. Local governments play this role in China.

Future Profits Now

When it comes to interested parties, Chinese governments are knee-deep in the bubble. They get all the money from land sales. Land values have risen to half of the development cost. In hot spots, land costs more than the development -- the governments want to collect the future price gain immediately.

When properties are sold, transaction and profit taxes kick in. Developers pay more levies to the governments than they earn. When developers finally book their earnings, they must put it to work, as good Wall Street analysts would recommend, so they buy land. As land prices are much higher, their measly earnings aren’t enough, so they have to borrow. The governments get all their earnings and debt repayments. Can you blame them for boosting the market whenever it slips?

Land obsession is another force at work. China was a rural economy not so long ago. The most important asset was always land. “Be a government official and become rich” is a millennium-old Chinese saying. It didn’t explain where the money went. It always went into agricultural land. In cities, you only see buildings, not paddy fields. But the buildings sit on land.

Now housemaids are in the market. Who else? Never underestimate 1.3 billion people. In China, they say you should take the shoeshine boy’s advice. Many would listen to him.

Welcome to China, the land of getting rich quick.