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Is This The Beginning Of A Horrifying Stock Market Crash In Europe?

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« on: February 08, 2013, 03:40:30 am »

Is This The Beginning Of A Horrifying Stock Market Crash In Europe?

Are we witnessing the start of a historic financial meltdown in Europe?  In recent days, two massive corruption scandals have greatly shaken confidence in European financial markets.  The first involves Spanish Prime Minister Mariano Rajoy.  It is being alleged that he has been receiving illegal cash payments, and the calls for his resignation grow louder with each passing day.  The second is a derivatives scandal at the third largest bank in Italy.  Allegedly, there were some very large unreported derivatives deals that were supposed to help hide losses at the bank, but instead they actually made the losses much larger.  The investigation that is looking into this derivatives scandal is starting to spread to other banks, and nobody is quite sure how far down the rabbit hole this thing goes.  But what everyone does agree on is that this derivatives scandal has shaken up Italian politics, and the outcome of the upcoming election is now very uncertain.  Former Prime Minister Silvio Berlusconi is rapidly rising in the polls, and the European establishment is less than thrilled about that.  Meanwhile, stock indexes all over Europe fell rapidly on Monday, and even the Dow was down 129 points.  So will all this blow over in a few days, or is this the beginning of a full-blown stock market crash in Europe?

That is a very good question.  Perhaps there would not be so much concern if the overall European economy was doing well, but the truth is that the underlying economic fundamentals in Europe have continued to get even worse.  The unemployment rate in the eurozone is at an all-time high, and the unemployment rates in both Greece and Spain are now over 26 percent.  Much of southern Europe is already in the midst of a full-blown economic depression, so it really has been remarkable that the financial markets in Europe have been able to hold up as well as they have so far.

But now all of that may be changing.  Just check out what happened on Monday according to Bloomberg…

    National benchmark indexes declined in all of the 18 western European markets, except Greece and Denmark. Italy’s FTSE MIB Index (FTSEMIB) sank 4.5 percent, the most in six months. Spain’s IBEX 35 slid 3.8 percent for a sixth day of declines, the longest losing streak in 10 months. France’s CAC 40 plunged 3 percent for the biggest drop since April. The U.K.’s FTSE 100 dropped 1.6 percent and Germany’s DAX lost 2.5 percent.

Unfortunately, what happened on Monday was just the continuation of a trend that started last week.  The following is from Zero Hedge…

    The last four days have seen the biggest plunge in over six months with the IBEX (Spain -5.7%) and Italy’s MIB -6.7%. At the same time, Europe’s seemingly invincible OMT-promise-protected sovereign bond market has started to underwhelm. Italian bond spreads are 32bps wider and Spain 28bps wider – the biggest increase in risk in two months.

European banks have been hit particularly hard during this recent downturn.

Just check out some of the huge declines that European banking stocks experienced on Monday…

UniCredit SpA: -8.3 percent

Commerzbank AG: -5.9 percent

Santander: -5.7 percent

Intesa Sanpaolo SpA: -5.4 percent

Credit Agricole SA: -5.4 percent

Société Générale SA: -4.8 percent

Banco Bilbao Vizcaya Argentaria SA: -4.7 percent

Those are huge moves for just a single day of trading.  If we have a couple of more days like that, everyone is going to be talking about a “stock market crash” in Europe.

Unfortunately, it does not appear that any solutions to the scandals that are shaking up southern Europe right now will be forthcoming any time soon.

In Spain, it is increasingly looking like the Prime Minister may actually have to resign.  A recent CNN article explained what the scandal is all about…

    Rajoy denied on Saturday allegations that he and other leaders of his conservative People’s Party had received secret cash payments from a fund operated by the party’s former treasurer. Rajoy said he would publish details of his personal wealth and income tax states on the prime minister’s website.

Of course politicians all over the world are accused of doing evil things all the time, but in this instance it appears that there may be some solid evidence that Rajoy may not be able to deny.  The following comes from a Bloomberg report…

    Newspaper El Pais last week published allegations of illegal cash payments, featuring extracts from handwritten ledgers by the former People’s Party Treasurer Luis Barcenas showing payments to officials including Rajoy.

At this point, opinion polls are showing that even most of his own supporters do not believe him…

    Polls show that 60pc of his own supporters do not believe the official explanation. A national petition drive calling for his resignation has already collected almost 800,000 signatures. Socialist oppo­sition leader Alfredo Pérez Rubalcaba yesterday joined the chorus calling for Mr Rajoy’s head, saying the country had ­become “ungovernable”.

So definitely expect things in Spain to get worse before they get better.

Meanwhile, the derivatives scandal in Italy continues to get more “interesting”.  Italy’s third largest bank is on the brink of collapse due to huge problems with derivatives contracts, and that bank just happens to be closely linked with the Italian politician that is currently leading in the polls…

    The Italian scandal is related to Italy’s third-biggest bank, Monte dei Paschi di Siena, which has received two government bailouts and may yet have to be nationalized as its losses mount.

    The bank is closely associated to Italy’s Democratic Party, whose leader, Pier Luigi Bersani, is leading in the polls, though slipping from his highs as former prime minister Silvio Berlusconi makes a late surge before the Feb. 25th general election. “The Monte [banking] scandals now look like overwhelming the Italian election campaign and put [Mr.] Bersani and the Democratic Party’s victory at risk,” James Walston, political commentator at the American University of Rome,  said in his Monday blog.

    The Monte scandal centres on allegedly unreported derivatives deals that were apparently designed to hide losses and instead made the losses deeper. The bank, now under new management, has admitted that the derivatives losses might total more than €700-million.

So who benefits from all of this?  Well, it turns out that as a result of this scandal former Prime Minister Silvio Berlusconi is rapidly gaining more support.  The following is from a recent Telegraph article…

    In Italy, ex-premier Silvio Berlusconi has upset the political landscape just three weeks before elections, surging back into contention with vows to rip up “German-imposed” austerity policies and cancel a hated property tax.

    His Right-wing alliance has risen to 28pc in the polls, relishing a widening scandal at Banca Monte dei Paschi that has embroiled the Italian left.

But even if none of these scandals had happened, it was inevitable that the gigantic debt bubble in Europe would end up bursting at some point.

In fact, the entire globe is on the verge of a debt implosion.  This was something that Bill Gross of Pimco discussed in his February newsletter…

    “So our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic – it is running out of energy and time. When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets.”

No debt bubble can expand indefinitely.  At some point it can no longer hold itself together.

Europe is rapidly approaching that point, and so is the United States.

So how much time do we have left?

Feel free to share your thoughts on that question by posting a comment below…

http://endoftheamericandream.com/archives/is-this-the-beginning-of-a-horrifying-stock-market-crash-in-europe
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« Reply #1 on: February 08, 2013, 03:41:42 am »

Watch The Financial Markets In Europe

Is the financial system of Europe on the verge of a meltdown?  I have always maintained that the next wave of the economic crisis would begin in Europe, and right now the situation in Europe is unraveling at a frightening pace.  On Monday, European stocks had their worst day in over six months, and over the past four days we have seen the EUR/USD decline by the most that it has in nearly seven months.  Meanwhile, scandals are erupting all over the continent.  A political scandal in Spain, a derivatives scandal in Italy and banking scandals all over the eurozone are seriously shaking confidence in the system.  If things move much farther in a negative direction, we could be facing a full-blown financial crisis in Europe very rapidly.  So watch the financial markets in Europe very carefully.  Yes, most Americans tend to ignore Europe because they are convinced that the U.S. is "the center of the universe", but the truth is that Europe actually has a bigger population than we do, they have a bigger economy then we do, and they have a much larger banking system than we do.  The global financial system is more integrated today than it ever has been before, and if there is a major stock market crash in Europe it is going to deeply affect the United States and the rest of the globe as well.  So pay close attention to what is going on in Europe, because events over there could spark a chain reaction that would have very serious implications for every man, woman and child on the planet.

As I noted above, European markets started off the week very badly and things have certainly not improved since then.  The following is how Zero Hedge summarized what happened on Thursday...

    EuroStoxx (Europe's Dow) closed today -1% for 2013. France, Germany, and Spain are all lower on the year now. Italy, following ENI's CEO fraud, collapsed almost 3% from the US day-session open, leaving it up less than 1% for the year. Just as we argued, credit markets have been warning that all is not well and today's afternoon free-fall begins the catch-down.

In addition, the euro has been dropping like a rock all of a sudden.  Just check out this chart which shows what happened to the euro on Thursday.  It is very rare to see the euro move that dramatically.

So what is causing all of this?

Well, we already know that the economic fundamentals in Europe are absolutely horrible.  Unemployment in the eurozone is at a record high, and the unemployment rates in both Greece and Spain are over 26 percent.  Those are depression-level numbers.

But up until now there had still been a tremendous amount of confidence in the European financial system.  But now that confidence is being shaken by a whole host of scandals.

In recent days, a number of major banking scandals have begun to emerge all over Europe.  Just check out this article which summarizes many of them.

One of the worst banking scandals is in Italy.  A horrible derivatives scandal has pushed the third largest bank in Italy to the verge of collapse...

    Monte dei Paschi di Siena (BMPS.MI), Italy's third biggest lender, said on Wednesday losses linked to three problematic derivative trades totaled 730 million euros ($988.3 million) as it sought to draw a line under a scandal over risky financial transactions.

There is that word "derivative" that I keep telling people to watch for.  Of course this is not the big "derivatives panic" that I have been talking about, but it is an example of how these toxic financial instruments can bring down even the biggest banks.  Monte dei Paschi is the oldest bank in the world, and now the only way it is able to survive is with government bailouts.

Another big scandal that is shaking up Europe right now is happening over in Spain.  It is being alleged that Spanish Prime Minister Mariano Rajoy and other members of his party have been receiving illegal cash payments.  The following summary of the scandal comes from a recent Bloomberg article...

    On Jan. 31, the Spanish newspaper El Pais published copies of what it said were ledgers from secret accounts held by Luis Barcenas, the former treasurer of the ruling People’s Party, which revealed the existence of a party slush fund. The newspaper said 7.5 million euros in corporate donations were channeled into the fund and allegedly doled out from 1997 to 2009 to senior party members, including Rajoy.

That doesn't sound good at all.

So what is the truth?

Could Rajoy actually be innocent?

Well, at this point most of the population of Spain does not believe that is the case.  Just check out the following poll numbers from the Bloomberg article quoted above...

    According to the Metroscopia poll, 76 percent of Spaniards don’t believe the People’s Party’s denials of the slush-fund allegations. Even more damning, 58 percent of the party’s supporters think it’s lying. All of the Spanish businessmen with whom I discussed the latest scandal expect it to get worse before it gets better. Their assumption that there are more skeletons in the government’s closet indicates what little trust they have in their leaders.

Meanwhile, the underlying economic fundamentals in Europe just continue to get worse.  One of the biggest concerns right now is France.  Just check out this excerpt from a recent report by Phoenix Capital Research...

    The house of cards that is Europe is close to collapsing as those widely held responsible for solving the Crisis (Prime Ministers, Treasurers and ECB head Mario Draghi) have all been recently implicated in corruption scandals.

    Those EU leaders who have yet to be implicated in scandals are not faring much better than their more corrupt counterparts. In France, socialist Prime Minister Francois Hollande, has proven yet again that socialism doesn’t work by chasing after the wealthy and trying to grow France’s public sector… when the public sector already accounts for 56% of French employment.

    France was already suffering from a lack of competitiveness. Now that wealthy businesspeople are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

As the report goes on to mention, over the past few months the economic numbers coming out of France have been absolutely frightful...

    Auto sales for 2012 fell 13% from those of 2011. Sales of existing homes outside of Paris fell 20% year over year for the third quarter of 2012. New home sales fell 25%. Even the high-end real estate markets are collapsing with sales for apartments in Paris that cost over €2 million collapsing an incredible 42% in 2012.

Today, the jobless rate in France is at a 15-year high, and industrial production is headed into the toilet.  The wealthy are fleeing France in droves because of the recent tax increases, and the nation is absolutely drowning in debt.  Even the French jobs minister recently admitted that France is essentially "bankrupt" at this point...

    France's government was plunged into an embarrassing row yesterday after a minister said the country was ‘totally bankrupt’.

    Employment secretary Michel Sapin said cuts were needed to put the damaged economy back on track.

    ‘There is a state but it is a totally bankrupt state,’ he said.

So what does all of this mean?

It means that the crisis in Europe is just beginning.  Things are going to be getting a lot worse.

Perhaps that is one reason why corporate insiders are dumping so much stock right now as I noted in my article yesterday entitled "Do Wall Street Insiders Expect Something Really BIG To Happen Very Soon?"  There are a whole host of signs that both the United States and Europe are heading for recession, and a lot of financial experts are warning that stocks are way overdue for a "correction".

For example, Blackstone's Byron Wien told CNBC the other day that he expects the S&P 500 to drop by 200 points during the first half of 2013.

Seabreeze Partners portfolio manager Doug Kass recently told CNBC that what is happening right now in the financial markets very much reminds him of the stock market crash of 1987...

    "I'm getting the 'summer of 1987 feeling' in the U.S. equity market," Kass told CNBC, "which means we're headed for a sharp fall."

Toward the end of 2012 and at the very beginning of 2013 we saw markets both in the U.S. and in Europe move up steadily even though the underlying economic fundamentals did not justify such a move.

In many ways, that move up reminded me of the "head fakes" that we have seen prior to many of the largest "market corrections" of the past.  Often financial markets are at their most "euphoric" just before a crash hits.

So get ready.

Even if you don't have a penny in the financial markets, now is the time to prepare for what is ahead.

We all need to learn from what Europe is going through right now.  In Greece, formerly middle class citizens are now trampling one another for food.  We all need to prepare financially, mentally, emotionally, spiritually and physically so that we can weather the economic storm that is coming.

Most Americans are accustomed to living paycheck to paycheck and being constantly up to their eyeballs in debt, but that is incredibly foolish.  Even in the animal kingdom, animals work hard during the warm months to prepare for the winter months.  Even so, we should all be working very hard to prepare during prosperous times so that we will have something stored up for the lean years that are coming.

Unfortunately, if events in Europe are any indication, we may be rapidly running out of time.

http://theeconomiccollapseblog.com/archives/watch-the-financial-markets-in-europe
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« Reply #2 on: February 08, 2013, 11:55:22 am »

Watch The Financial Markets In Europe

Is the financial system of Europe on the verge of a meltdown?  I have always maintained that the next wave of the economic crisis would begin in Europe, and right now the situation in Europe is unraveling at a frightening pace.  On Monday, European stocks had their worst day in over six months, and over the past four days we have seen the EUR/USD decline by the most that it has in nearly seven months.  Meanwhile, scandals are erupting all over the continent.  A political scandal in Spain, a derivatives scandal in Italy and banking scandals all over the eurozone are seriously shaking confidence in the system.  If things move much farther in a negative direction, we could be facing a full-blown financial crisis in Europe very rapidly.  So watch the financial markets in Europe very carefully.  Yes, most Americans tend to ignore Europe because they are convinced that the U.S. is "the center of the universe",


2Pe 3:1  This second epistle, beloved, I now write unto you; in both which I stir up your pure minds by way of remembrance:
2Pe 3:2  That ye may be mindful of the words which were spoken before by the holy prophets, and of the commandment of us the apostles of the Lord and Saviour:
2Pe 3:3  Knowing this first, that there shall come in the last days scoffers, walking after their own lusts,
2Pe 3:4  And saying, Where is the promise of his coming? for since the fathers fell asleep, all things continue as they were from the beginning of the creation.
2Pe 3:5  For this they willingly are ignorant of, that by the word of God the heavens were of old, and the earth standing out of the water and in the water:
2Pe 3:6  Whereby the world that then was, being overflowed with water, perished:
2Pe 3:7  But the heavens and the earth, which are now, by the same word are kept in store, reserved unto fire against the day of judgment and perdition of ungodly men.



Quote
but the truth is that Europe actually has a bigger population than we do, they have a bigger economy then we do, and they have a much larger banking system than we do.  The global financial system is more integrated today than it ever has been before, and if there is a major stock market crash in Europe it is going to deeply affect the United States and the rest of the globe as well.  So pay close attention to what is going on in Europe, because events over there could spark a chain reaction that would have very serious implications for every man, woman and child on the planet.

And the Vatican also has their fingerprints all over the European Union.

Rev 17:1  And there came one of the seven angels which had the seven vials, and talked with me, saying unto me, Come hither; I will shew unto thee the judgment of the great **** that sitteth upon many waters:
Rev 17:2  With whom the kings of the earth have committed fornication, and the inhabitants of the earth have been made drunk with the wine of her fornication.
Rev 17:3  So he carried me away in the spirit into the wilderness: and I saw a woman sit upon a scarlet coloured beast, full of names of blasphemy, having seven heads and ten horns.
Rev 17:4  And the woman was arrayed in purple and scarlet colour, and decked with gold and precious stones and pearls, having a golden cup in her hand full of abominations and filthiness of her fornication:
Rev 17:5  And upon her forehead was a name written, MYSTERY, BABYLON THE GREAT, THE MOTHER OF HARLOTS AND ABOMINATIONS OF THE EARTH.
Rev 17:6  And I saw the woman drunken with the blood of the saints, and with the blood of the martyrs of Jesus: and when I saw her, I wondered with great admiration.
Rev 17:7  And the angel said unto me, Wherefore didst thou marvel? I will tell thee the mystery of the woman, and of the beast that carrieth her, which hath the seven heads and ten horns.
Rev 17:8  The beast that thou sawest was, and is not; and shall ascend out of the bottomless pit, and go into perdition: and they that dwell on the earth shall wonder, whose names were not written in the book of life from the foundation of the world, when they behold the beast that was, and is not, and yet is.
Rev 17:9  And here is the mind which hath wisdom. The seven heads are seven mountains, on which the woman sitteth.
Rev 17:10  And there are seven kings: five are fallen, and one is, and the other is not yet come; and when he cometh, he must continue a short space.
Rev 17:11  And the beast that was, and is not, even he is the eighth, and is of the seven, and goeth into perdition.
Rev 17:12  And the ten horns which thou sawest are ten kings, which have received no kingdom as yet; but receive power as kings one hour with the beast.
Rev 17:13  These have one mind, and shall give their power and strength unto the beast.
Rev 17:14  These shall make war with the Lamb, and the Lamb shall overcome them: for he is Lord of lords, and King of kings: and they that are with him are called, and chosen, and faithful.
Rev 17:15  And he saith unto me, The waters which thou sawest, where the **** sitteth, are peoples, and multitudes, and nations, and tongues.
Rev 17:16  And the ten horns which thou sawest upon the beast, these shall hate the ****, and shall make her desolate and naked, and shall eat her flesh, and burn her with fire.
Rev 17:17  For God hath put in their hearts to fulfil his will, and to agree, and give their kingdom unto the beast, until the words of God shall be fulfilled.
Rev 17:18  And the woman which thou sawest is that great city, which reigneth over the kings of the earth.
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