PIIGS Bank Deposits Outflow Accelerating

As I noted a month earlier, Spain's bank deposits posted an outflow and this outflow is accelerating for the month of May 2013. This time, Italy is posting outflows too.

Greece, Cyprus are of course still in a decline. I expect bail-ins to come if this trend continues. Europeans should be worried about their deposits.

Read More

Bank Deposits Update

Remember the Cyprus debacle in March? We were worried about deposits declining.

In February, deposits declined in Cyprus, Ireland, Greece, Portugal. But they increased in Italy and Spain.

In March, we see the same happening again. So I don't see any significant changes. Maybe the Cyprus crisis was just a little drop in the sea.

Chart 1: Bank Deposits

Read More

Belgium the next country to fall

As I said before here and here, Belgium is the next domino to fall after Greece.

If you don't believe me, believe Zerohedge. As you can see on chart 1, the countries on the left have the least equity/capital reserves as a percent of deposits.

So to avert insolvency of Belgian banks, depositors need to be thrown into the fire eventually. But luckily, Greece will be first...

Prepare yourself.

Chart 1: % bad debt that can be impaired before deposit haircuts

Read More

Is Greece Bankrupt Yet?

On 31 July 2012 Greece finance minister Christos Staikouras told on television that Greece is on the edge of bankruptcy. If no aid comes from the ECB, Greece won't be able to pay its ECB debt obligation on 20 August 2012. Greece has a repayment due of 3.8 billion euro.

Consecutive debt repayments and spending cuts in 2012 have reduced Greece's debt to GDP from 160% to  132% (Chart 1). This means Greece is going into the right direction concerning its debt.

Chart 1: Greece government debt to GDP

However, Greece depends entirely on the troika: European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB). On Monday 24 July 2012, they announced the 31.5 billion euro bailout money wouldn't be available yet to Greece until September 2012. One of the reasons is because of the IMF refusing to give more aid as Greece will not be able to fulfill its promise to cut debt to 120 percent of annual economic growth in euro terms by 2020.

This means that insolvency is coming near and could have arrived as early as September 2012.

Read More

Spain is following Greece in its path to bankruptcy

The situation in Spain is looking worse every day. I believe Spain is following the path of Greece into bankruptcy.

Let's take a look at the Spanish bond yields. At the end of 2011 we got the massive ECB bailout package named Long Term Refinancing Operation (LTRO). This relieved the bonds of certain peripheral governments like Italy, Greece and Spain. Lately though, with many Spanish regions on the verge of bankruptcy, Spanish bond yields are rising again. Let's take a quick look at these.

The best way to look at stress in the bond yields is to look at the bond spread between long term maturities (Chart 1) versus short term maturities (Chart 2). If the spread narrows, it means there is stress, because the shorter maturity is about to rise above the longer maturity bond yield. Normally in a healthy economy, longer maturities always have higher yields than shorter maturities. If this is not the case, this means that defaults are looming (see Greece bond yields: shorter maturities have higher yields than longer maturities).

To read the analysis go HERE.

Chart 1: Spanish 10 year bonds

Chart 2: Spanish 2 year bonds

Read More

Jim Rogers might sell the euro

It's amazing how the euro has outperformed gold since Hollande became president of France (Chart 1-4). It signals that there is a higher risk that Greece will not get their aid package. Euro global polls say that there is 50% chance that Greece will exit the Eurozone. If this were to happen it will be a deflationary collapse first, after which hyperinflation will occur.

Chart 1-4: Gold Price in Euros

During the second half of 2011 we even see that the euro is losing its secondary currency reserve status. The U.S. dollar is increasing its status as reserve currency (Table 1).

Table 1: Reserve Currency

Jim Rogers knows this and might sell the euro in the future.

As Europe is going to contract in 2012, Mario Draghi has signaled that further stimulus is on its way. 

Read More

Banks And Their Exposure to the PIIGS

In the news of today, Spain has been in the center spot of attention. Spanish bond yields have been rising quickly and financials have seen weakness in their share price. In this article I want to see which banks have the most exposure to Spain and to the PIIGS in general.

During the stress tests of July 2011 the exposure of 90 banks to the PIIGS countries' government debt was released by the European Banking Authority (EBA).

To find out which banks are exposed to the PIIGS and which banks to avoid, please go to my article here:
Analyzing bank exposure to the PIIGS

Read More

Employment Deteriorating for the PIIGS

Since the crisis of 2008, the unemployment rate for the PIIGS has been increasing rapidly. As a consequence, lately investors are putting their hard earned money in more healthy countries like Switzerland and Germany.

Go HERE to read a more in depth analysis on this matter.

Read More