Post about bond market rout: http://www.elitetrader.com/vb/showthread.php?s=&postid=3030290#post3030290
Interesting to see that UK banks (RBS, LLOY, BARC) are underperforming today. This is largely based on the "news" of Moodys downgrading Ireland from Aa2 to Baa1. http://www.zerohedge.org/article/mo...baa1-5-notch-downgrade-still-investment-grade The idea that UK banks are exposed to Irish debt is discussed in further detail in this Reuters piece: http://www.reuters.com/article/idUSLDE6BG0X520101217 "Banks weigh on FTSE as Moody's cuts Ireland's rating"
Thanks Ralph. That SeekingAlpha post links to the following press release from Lloyds: http://www.investegate.co.uk/Article.aspx?id=201012171326022044Y "LLOYDS BANKING GROUP ANNOUNCES UPDATE ON IRISH PORTFOLIO"
More of the same. S&P 500 maintains at or near multi-year highs (despite oil now at 90.60). Meanwhile EUR and GBP continue to decline against USD. And stocks like NBG trade down, and trade near 52-week lows. Also I note that despite IBEX being almost unchanged, Spanish bank stocks (BBVA, SANT, POP, SAB) all trade down by 0.50% or more. And needless to say, ALBK is down because of the impending massive dilution.
On the topic of a gradual "run on the bank" situation in Ireland, and the obvious flow on effects to other PIIGS countries and indeed to all countries within the EMU. http://www.zerohedge.com/article/sc...pes-bank-run-will-look-and-other-observations "Scott Minerd's Detailed Pre-Mortem On What Europe's Bank Run Will Look Like, And Other Observations"
As a followup to this post, some random thoughts on Europe sovereign debt and European banks. It is widely agreed that the EU has enough money to bailout Greece, Ireland and Portugal. So even though these three countries aren't doing very well (and in the case of Greece and Ireland, bailouts already taken place), we haven't seen a *massive* bank run in these countries as yet. However, even if there is enough EU / IMF / Chinese money to bailout Spain (government debt), is there enough money to provide a guarantee for all Spanish bank deposits? Either way, the Spanish banks seem to be gently underperforming both the $BKX and also the $IBEX. For what it's worth, if I was a Spanish resident, I wouldn't feel very comfortable holding any money in Spanish banks. But if I wanted to hold a deposit in a Spanish bank (for the sake of convenience), then I would probably only consider Santander or BBVA, because they look like they are TBTF banks.
Another followup on the "gradual bank run in Ireland" theme. http://www.zerohedge.com/article/irish-ecb-borrowings-surge-countrys-bank-run-picks-speed "As Irish ECB Borrowings Surge, The Country's Bank Run Picks Up Speed" Reuters article: http://www.reuters.com/article/idUSTRE6BT2UJ20101230 "Irish banks' ECB borrowings up 13.7 percent in November" edited to add: useful Google keyword search is "Irish banks' ECB borrowings". I think these figures are released every month. According to this Bloomberg article: http://www.bloomberg.com/news/2010-...nks-ecb-borrowings-rose-13-7-in-november.html the figures are from the Irish Central Bank. I couldn't find these figures on the Central Bank's web site. If anyone has a copy of the statement I would be grateful if you could post this here.
Update: Forbes article on the Scott Minerd thesis about a run on Irish banks: http://finance.fortune.cnn.com/2011/01/03/2011-year-of-the-bank-run/ Title = 2011: Year of the bank run? Snippets: Irish bank deposits declined in November for the fourth straight month, the central bank said last week. Link to Central Bank of Ireland source data: http://www.centralbank.ie/data/site/cmbs/ie_table_a.4.1_credit_institutions_(domestic_group)_-_aggregate_balance_sheet.xls Link to Scott Minnerd's thoughts on the Ireland Banking system: http://guggenheimpartners.com/gp/me...-Perspectives---December-21-2010.pdf?ext=.pdf I was also interested in the thoughts posted by someone who commented on the Forbes article: "Money moving out of Irish bank deposits makes perfect sense. Indeed, if the Irish government is standing behind all deposits and I can only get a 1% return on money I have in those deposits, but government backed debt is yielding 9%, I would move large portions of my money from deposits and into 9% yielding bonds. Simple common sense." The more I think about it, the more that statement makes sense. (I am genuinely interested to hear rebuttal to this idea). And then obviously that idea applies equally to Greek banks. Just have a look at NYSE:NBG for an example of a bank stock that is declining gradually. Spanish bank stocks haven't been doing that well in the last 2 months either.
I enjoyed the following article which discusses QE. The author shares my view that QE does affect money supply (aka "money printing") and that it is more than "just an asset swap". http://www.zerohedge.com/article/tired-all-qe-just-asset-swap-rhetoric-then-read "Tired (And Broke) From All The "QE Is Just An Asset Swap" Rhetoric? Then Read This"