1977 © time

News comments:
Germany doesn't like to be bullied.

With the head of the ECB and Premiers of debt loving' nations seeing a nice way out of austerity with Eurobonds (spending other people's money) it is clear what the upshot will be if they continue to harass the Germans.

Looking at Merkel's body language and that of the German finance minister trying to be seen as cooperative (wsj), it is clear enough is enough. They know the Eurobond cop out is a tax on the German people and they will be underwriting the whole of Europe. So my prediction is Plan b will kick in and Germany will leave the cess pit and issue it's own currency.

Whilst the markets fret over that Greek election, hot money is leaving the belly of Europe for the that safe haven called the UK which is having a 1977 double take; Disco, recession and a Queen's jubilee.

And of course a year when there were lots of European currencies and FX traders had more fun.

Today's shorts:
Facebook (seekingalpha)

Today's longs:
UK to cut rates to -1% (guardian)

Gossip:
NASDAQ to move away from Excel.

WW3 © fintag

News comments:
The whole EU crisis is about bad debts.

Whether it be Santander not providing against its huge real estate portfolio or the ECB not providing against its huge sovereign debt portfolio, Europe is doing exactly what Hedge Funds were accused of during the 2008 crash; holding onto illiquid toxic assets and failing to mark them to market.

The upshot was Hedge Funds were forced to carry out frequent NAV valuations (we are talking about daily in some cases) because their investors demanded transparency and the Eurocrats wanted to take it out on fund managers instead of themselves for being incompetent by ramping up AIFM and MiFID type regulation because being a policy maker is great fun when you aren't elected to be one.

"Transparency" was the big word post Lehman. Banks, Pirate Equity, Fund Managers have all had their clothes ripped off and been forced to parade their smaller than anticipated genitals to the general public. However, the EU hasn't practised what it preaches and is as opaque as ever. Take the ECB. Its accounts are so opaque they make Santander's look truly transparent.

The ECB has little capital (less than the value of FB last Friday) and has more leverage than a couple of Lehman Bros. And yet all its trillions of assets are marked at book. Yep, all that Greek, Italian and Spanish debt and all the other toxic collateral it has sitting in its vaults.

The reason Germany wants to save Greece and keep it in the Euro is because if it leaves, the ECB's accounts will have to be marked to market and be bailed out by the National Central Banks who in turn will have to issue debt to fund the ECB or more likely ramp up taxes on the little people. And Germany (and France) will have to cough up the most (we are talking hundreds of billions) which is why they continue to say the Euro is safe and Greece won't leave.

Germany wants its cake and eat it. It wants a strong Euro/DM and to be able to control neighbouring national governments and turn back passage fun lovin' sun worshippers into puritanical engineering quakers. This has of course all happened by accident, but Germany has started a world war with enemies everywhere. China. the UK and the US are screaming for the EU to get its act together for they want Europe to be strong because it is a huge market that they rely on. The rest of Europe is bending over staring into the sand and praying.

Germany may have failed last century by going down the military route, but this time it is succeeding in crippling its neighbours - Spain, Portugal, Belgium, Ireland, France, Greece - through controlling their economies and alienating the US and Asia. Even the back door Chinese imperialists must be applauding the Germans for having invaded so much of Europe without a bullet fired.

Germany doesn't want inflation, doesn't want to print money, doesn't want to kill off the Euro. It needs Greece, it needs the ECB to keep up its lies, it needs its neighbours to be taught a lesson.

As in most wars, it is the people who decide the outcome. In Germany's case it is likely to be the Greeks who will say no more and watch the ECB be bailed out against all principles of the EU by its club members. Italy and Spain will soon follow and the Euro will be no more. However, not all agree ...

Bill O’Neill, EMEA CIO, Merrill Lynch, Bloomberg 21 May 2012:

"We don’t think Greece will walk away, even if the result after the June 17 election is difficult for the pro-bailout parties. We don’t think they will deliberately step away from the bailout. There will be a process of negotiation in a worst-case scenario, but we don’t believe a Greek exit is going to happen."

...and wasn't it ML who said Lehman wouldn't go bust?

Today's shorts:
UBS play outside the playground (money)

France panics at cost of its share of bailing out the ECB (telegraph)

Whale is beached on hedge fund sand (ftalphaville)

Italy runs and runs (ftalphaville)

The ECB dashboard (ecb)

Today's longs:
Olympic Torches (bbc)

FB and the cliff (fintag)

Lunches are so yesterday (telegraph)

UK people stick boot into ECB (guardian)

Gossip:
ECB to be renamed ECBB (European Central Bad Bank).

a running bank © fintag

News comments:
An alarmist headline like this should send me to jail.

But it is becoming clear we are all leading up to an almighty run on the banks as is already happening at Greek and some Spanish banks. You can feel it in the air and with newspapers like the Daily Mail pronouncing ...

David Cameron says 'truly worrying' crisis could 'get a lot worse'

String of local councils withdraw their deposits from Santander accounts

FSA says it is 'unlikely' to allow UK division to prop up Spanish parent firm

...there will be lines of pensioners and others distrustful of the banks hoovering out their Santander bank accounts. Apparently.

When Northern Rock ran, I was lucky to take the world's first photograph of people lining up. Alas you won't find me standing outside Santander branches because these days its online banking that prevails.

Santander along with all the other Euro banks are gloating over their non-liquidity issue as the ECB is there to cushion them from the effects of a huge deposit drawdown. The ECB is turning into a bad bank, one which could only ever be saved by Facebook and Apple stockholders and this is quite frightening. Not until it starts printing real Euros and the Germans get over their inflation phobia, then we can all sleep peacefully. In the meantime remember fintag has been alerting you all to Spain's woes for years...

Whether Santander suffers a run (with its new 95% LTV mortgages and its attractive 123 bank account it is sending out odd signals), lets hope the cash pours into Lloyds TSB and RBS for these useless banks are owned by the UK taxpayer whereas Santander and other jonny foreigner banks rely on the FSA compensation scheme and fingers crossed Iceland style that you will get your max GBP85k back.

By all means hang around your local branch of Santander with iPhone in hand; personally I am going long mattresses and De La Rue who will soon be printing lots of new Drachma, Lira and Pesetas in the not to distant future.

Today's shorts:
BBC says Santander is safe as houses (guffaw...) (bbc)

Told you so (fintag)

Today's longs:
Santander ban people with iPhones in their branches (evening standard)

Gossip:
Lewis Hamilton to bailout Santander.

facebook © us govt

News comments:
The last 20 years has spawned some incredible once-in-a-life-time events. The collapse of Lehman Bros and the ramifications we are still feeling today is one. The other is this colossal Facebook IPO.

After the dotcom blow ups around 2000, we all tutted and said "what were we thinking? Hot air being valued at silly prices?". Well as a small chunk of the ultimate dotcom is sold off, we can all say "we got that one wrong. Hot air is much more valuable than companies who make and sell things.".

Well here we are again. Facebook has amazingly come in to be valued at USD100bn+ which is what Goldman Sachs told its investors it would be valued at and the likes of DST Global, Bono and Accel Partners will soon be offloading their hot stock and capitalising on the fantasy that is Facebook.

Hats off to this incredible feat. Facebook will probably double in price and then when the hype wears off start falling like Bear Grylls jumping off a Groupon cliff.

Facebook is a free members club. The club puts up a few ads in the VIP rooms and gets paid. Advertising revenue. Yep, that old fashioned and soon to disappear business model.

Whereas the real world is turning to real physical assets like commodities and real estate in London, the mad world is turning to hot air. Facebook will be old news in 10 years time as the Harry Potter generation turn away from their privacy-is-cheap lifestyles and the new generation hide away in a new glossary start-up.

However this is good news for siliconroundabout.org.uk in London. With all these FB sellers, this means more money pouring into the tech sector. Whilst the real world burns as the Euro collapses at least a few geeks with speedy programming skills get to become uber rich.

And as for Sean Parker, you make Warren Buffet look like a casino Whale and I kiss your feet.

Today's shorts:
JP Morgan and Enron (bloomberg)

Greece runs dry of Euros (reuters)

Today's longs:
The Facebook rich list (telegraph)

Gossip:
Santander UK is ringfenced in the UK. Meanwhile the queues get bigger ....

boredom © fintag

News comments:
I am as bored as you.

Greece is to launch a new currency. Wow. How dull. Perhaps it is more interesting to see who will pull the trigger?

Will the new Greek PM ring up the EU and say they want to leave the Euro? Unlikely because without the bail out money, the PM doesn't get paid. Or will it be by default? The lack of new bail out cash will force the Greeks to issue a new currency to pay themselves? Or will the run on the Greek banks force a new currency to appear?

The media are trying to make out the exclusion of Greece from the Euro will lead to the great depression 2.0; this is greatly exaggerated and the Euro will hardly be impacted. The reality is the Euro will appreciate as Greece has been pulling it down.

But perhaps we are looking at the wrong trigger? As you know I have been very bearish about Spain for years and it is possible Spain could leave first.

Either way, it must happen quickly because dragging on for another year will mean we all move into cash; like GBP, USD and JPY which are all the currencies of countries with the largest debts in the world...

Today's shorts:
Poker final going on longer than predicted (fintag)

Santander launches new 95% mortgages (aol)

Today's longs:
Nomura get something right about Santander 2011 (fintag)

Gossip:
PIGS turn into PIS.