Wednesday, August 10, 2011

European Banking Crisis; Gold $1,800

Europe's banks are bleeding losses today as sovereign debt fears have gripped the continent. A simple glance at some European bank stocks shows the extent of the panic:

Societe General: down 21%
BNP Paribas: down 10%
Intesa: down 10% halted
Unicredit: down 10% halted

From Bloomberg:

Societe Generale (GLE) SA posted a record decline and led a drop in French banking shares as the cost of insuring the country’s government bonds increased. UniCredit SpA (UCG), Italy’s biggest bank, paced a retreat in Italian banks after the country’s credit-default swaps widened.

Societe Generale shares slumped as much as 23 percent and were down 16 percent at 21.89 euros at 4:27 p.m. in Paris. Credit-default swaps on the bank rose 29 basis points to a record 299 basis points.

Societe Generale “categorically denies all market rumors,” Emmanuelle Renaudat, a spokeswoman for the French bank said in an interview. She declined to be more specific.

Bank shares lost 5.3 percent, for the biggest decline among the 19 industry groups in the Stoxx Europe 600 Index and the steepest drop since May 2009. French and Italian banks led the retreat. BNP Paribas (BNP) SA shed 11 percent to 35.06 euros and Credit Agricole SA (ACA) sank 15 percent to 5.82 euros.

“If credit default swaps on France are under attack, that’s not a good sign,” said Yves Marcais, a sales trader at Global Equities in Paris. “That means that France is under attack and that’s worrisome. French banks hold a lot of French bonds.”

The cost to insure French government debt against default rose 10 basis points to a record 171 basis points, according to CMA.

Once again the market plunges after yesterdays rally. Gold hit $1800 and is on its way to $2,000.00 and eventually $5,000.00 unless the powers that be stop printing digital fiat currency. Jeremy Grantham said that S&P fair value is 950 which sounds reasonable under the circumstances.

Bottom line: expect the economy to shrink again with more layoffs and higher unemployment. One positive is that food and gas prices will come down as crude is now trading at $80.00 woohoo.


  1. The banks' balance sheets amust be cleaned and all losses recognized while marking to market the remaining assets. The decline is structural. 476AD

  2. Gas prices are coming down b/c a shrinking economy means lower demand for oil... but why are food prices coming down? Because they depend on the price of oil? Or are there other factors?

  3. Many hedge funds were long commodities on the inflation trade plus with zero percent interest free money allows for speculation. Also food prices are heavily dependent on the price of oil (fertilizer, tractors, transport). So while the wall street oligarchs cry us proles get a reprieve. That is, if you have an income.

    The riots in London are telling. I have a feeling that it won't be long until the "fun" starts here. We have a huge percentage of the population that is looking for an excuse to fuck shit up and take some items off the shelf. Think Katrina.

  4. Just saw this video and it somewhat addresses what you wrote before:

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    Sam Lowe, 20, of Keswick Court, Sneinton will appear at Nottingham magistrates court today charged with section 44 of the serious crime act, which is to intentionally encourage or assist the commission of an offence.

    A 16-year-old boy, from St Ann's, has been charged with violent disorder.

    Owen Johnson, 18, of Mansfield Court, Mansfield Road, has been charged with disorderly behaviour.

    10.54pm: Greater Manchester Police says it has arrested two men found with a fuel can, balaclava and ball bearings.

    In the post on Twitter, the force adds "if you want to commit disorder, we'll lock you up."

    Assistant Chief Constable Garry Shewan also tweets: "People still arming themselves to attack property & police. I myself found an axe wrapped in a stolen shirt whilst in the city this morning."

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