Are You Ready? The Perfect Storm Is Coming: Eurozone Is Tapping Into Bank Accounts To Bail Out Banks,‘Spanish And Italian Banks Could Face Similar Levies’, Copper Is Slipping Into A Full-Fledged Bear Market, New Regulations On Derivatives Goes Into Effect, And For The First Time, A Mainland Chinese Company Has Defaulted On Its Bonds
“The unique exceptions have begun piling up in Europe. That will do little to strengthen foreign investors’ faith in Europe.”
The business daily Handelsblatt writes:”The currency union has committed a breach of trust. It weighs especially heavy because the euro states have already secretly been rehabilitating their economies at the expense of depositors. Low interest rate policies help bring down the national debt, but at the same time they gradually deplete the balances of savings and money market accounts. The pensions of many citizens are also dwindling.”
“Anyone who now believes they shouldn’t be interested in the fate of individual depositors on a remote Mediterranean island is mistaken. Cyprus sets a precedent. What happens there can also happen elsewhere. In Spain and Ireland, bank bailouts have allowed the national debt to explode to an unsustainable level. There, the euro zone could see tapping into bank accounts as the next step. In principle, no European depositor can remain assured that their bank balance will remain untouched — even in Germany.”
— Charly Wilder
Confiscation is happening in broad daylight. The above mentioned news regarding Cyprus is an act of outright confiscation. No discussion about it. People need to hand in part of their savings to prevent the bankruptcy of their banks. Confiscation is more actual than ever before, and it has many faces. Inflation, which is constantly underreported by governments, has been around for decades and will continue to be an “invisible” form of confiscation. The trend towards more severe cases of confiscation has just become clear as well.
The Eurogroup and the Cypriot government are trying to prove that the “unique solidarity levy” on all Cypriot bank account is a “one off” measure. Now, as the details of the negotiations on the bailout package start leaking out, it is becoming clear that no European bank account is safe from expropriation.
Watch Spain and Italy.
“It is difficult to overstate the extent of popular anger in Cyprus over the bailout deal which was pulled together on Friday evening,” says JPMorgan’s Alex White.
That’s all setting up for a tense vote in parliament tomorrow. The Cypriot government still has to actually approve the deal, and White thinks the vote is too close to call.
JPMorgan agrees. If the plan gets passed, JPMorgan fixed income strategist Kedran Panageas estimates that the impact on Spanish and Italian bond yield spreads would only widen 5-10 basis points over depositor fears. Not a big move.
However, Panageas says if the bailout plan – complete with deposit haircuts – doesn’t pass the vote, things could get a little crazier in the market.
Pimco CEO Mohamed El-Erian told CNBC today that the decision to loot the bank accounts of Cypriot savers could blow up Europe and lead to civil unrest across the continent.
JUST AS NEW REGULATIONS ON DERIVITIVES GOES INTO EFFECT CYPRUS WEALTH CONFISCATION SENDS FINANCIAL WORLD INTO TAILSPIN
The $639 trillion over-the-counter derivatives market began the largest transformation in its 30-year history Monday with rules intended to contain another financial crisis, trimming profits for Wall Street banks.
Companies from JPMorgan Chase to BlackRock are now required under the 2010 Dodd-Frank Act to have most of their privately negotiated swaps trades backed by a clearinghouse that’s capitalized by the world’s largest banks.
That means dealers and their customers have to post up-front collateral to absorb losses if a firm defaults and settle daily losses.
Regulators are overhauling a market that complicated efforts to untangle the worst financial crisis since the Great Depression by obscuring how interconnected and vulnerable banks had become to each other.
For the first time, a mainland Chinese company has defaulted on its bonds…
For the first time, a mainland Chinese company has defaulted on its bonds. SunTech Power Holdings has been clinging on by its teeth but after failing to repay $541mm of notes due on March 15th – and following four consecutive quarters of losses through the first quarter of 2012 and since then having failed to report quarterly earnings – owed to Chinese domestic lenders, the firm is restructuring. As Bloomberg reports, Chinese solar companies are struggling after taking on debt to expand supply, leading to a glut that forced down prices and squeezed profits – and most notably were unable to renegotiate its liabilities and obtain “additional flexibility” from creditors. This is highly unusual and perhaps is the beginning of a trend for Chinese firms. We already know the little discussed but gargantuan size of China’s corporate bond market (which dwarves the US relative to GDP) as the mis-allocated credit tsunami of the last few years begins to hit its lending limit – just as Chinese corporate leverage is surging. If Suntech, the world’s largest solar-panel maker as recently as 2011, could not renegotiate its loans, we humbly suggest there are more problem firms out there about to find their friendly local banker a little less enthusiastic – just as Marc Faber warned recently.
STP’s 168% rally of ‘hope’ all gone now…
The copper market is in technical trouble. The market has been coiling within a symmetrical triangle pattern since October 2011, as seen on the weekly graph below.
The decline today, if it follows through, would close below the lower boundary line of the triangle and also below the early March low. The solid boundary line connects the orthodox weekly lows, the dashed line connects the lowest Friday closes.
The daily chart mirrors the weekly chart and shows the import of today’s current decline. The market has one more major hurdle before we declare it a full-fledged bear market…