It’s Baaaack (Europe)



Well that was a nice drunk we had over the holiday, eh?  Time to face the hangover….

Stocks (MXWD) and the euro declined on concern Europe will struggle to contain the debt crisis. Hungarian shares tumbled and the forint declined as borrowing costs climbed at an auction today.

Hungary is an interesting situation; they’ve “restructured” but not in financial thought way, playing games with the “independence” of their central bank and government structure.  But Hungary has yet to face reality — spending other people’s money only works until you run out of the other people’s money, and eventually they get tired of working so you can take it from them and spend it.

The Stoxx Europe 600 Index (SXXP) lost 0.8 percent at 10:45 a.m. in London as UniCredit SpA, Italy’s biggest bank, tumbled for a second day. Standard & Poor’s 500 Index futures slid 0.8 percent. French 10-year bond yields were little changed after a government debt sale. The euro weakened 0.8 percent to $1.2845. Hungary’s forint sank 0.4 percent to 321.61 versus the euro.

Oh look at the spin.  I heard earlier, incidentally, when Bloomberg TV reported that the French debt sale went “ok.”  Really?  They didn’t sell everything on offer — that would be considered a fail anywhere else!

And note carefully folks, this is an allegedly-triple-A nation!

Have we reached the point of revulsion?  Quite possibly.  If so things are about to get very, very rocky on a world-wide basis.

Greek Prime Minister Lucas Papademos said yesterday deeper cuts in incomes and an agreement on international aid are the only way for the country to avert economic collapse and a “disorderly default.” France sold 10-year bonds at an average yield of 3.29 percent, up from 3.18 percent in December, and the yield on Hungary’s one-year bills climbed to the highest level since 2009. The U.S. service industry probably grew last month and jobless claims fell last week, economists said before reports today.

Here’s the problem with Greece — there is no “international aid” that is going to fix anything.  The only solution for Greece, as with everywhere else, is to stop spending more money than the government takes in via taxes!

That’s the beginning and end of it.

Unicredit sold “rights” and got hammered; they wound up having to give a 43% discount to get the offering to subscribe, basically giving it away.  The investing public obviously doesn’t see this as a particularly impressive and going concern.

The sleeper story to watch, however, is Deutsche Bank.  There are rumors of liquidity problems and may I remind everyone that they’re running with something like 50:1 leverage?

I said in my annual update that I expected the triggering “event” to come from Europe this year — I did not believe it would happen immediately in the new year, but these sorts of events are almost impossible to get the timing nailed on, as they tend to come on slowly — then all at once.

I advise extreme caution — if you’re illiquid or need credit to survive as a business or consumer, you better get that problem solved, right here and now.

I suspect that we’re running out of time, happy-faced BS coming from the media notwithstanding.

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