Month: June 2012

Everyone in the media is viewing the latest announcements out of the EU Summit as game-changers.

They are not.

One facet of the deal is that ESM/ EFSF loans to troubled countries will not subordinate private bondholders holdings. While this does serve the purpose of allowing private bondholders to feel that should a country default, they might get their money back sooner (as opposed to what happened in Greece)… it doesn’t change the more critical issue of stopping defaults from happening.

Indeed, if Spain were to default, the fact that I as a potential private bondholder would be further up the line to collect my funds doesn’t do me a whole lot of good, does it? My money’s gone, at least most of it. So the benefits of this move are of borderline significance.

Moreover, none of the measures address the most critical issue pertaining to Europe: where is the money going to come from?

As I have noted before, the European Stability Mechanism, which everyone sees as the ultimate savior for the EU, does NOT exist yet. Only four out of the required 17 countries have ratified its legislation.

And the due date for ratification? July 9^th.

So we have less than two weeks for 14 EU members to ratify the ESM.

Another interesting fact about the ESM… Spain and Italy will contribute 30% of its funding. So… the mega-bailout fund which is going to save Spain and Italy is receiving nearly one third of its funds from the very same countries it’s going to bail out!?!

You couldn’t make this stuff up if you tried.

Another topic worth discussing is the fact that EU leaders didn’t agree to increase the EFSF or the ESM. The simple and obvious reason for this is no one has the funds to do this.

I’ve been saying this for months. No one seems to be listening: Europe is out of buyers. End of story. There simply isn’t €500 billion lying around to be put to use. That’s why the ESM and EFSF aren’t being increased in size. They couldn’t be.

Another point, and perhaps the most key one is that the ECB will now be using bailout funds to help recapitalize EU banks. This move will ultimately end up hurting the banks that seek funding from the ECB much as those firms which drew on the ECB’s LTRO1 and LTRO 2 schemes found themselves severely punished in the credit and bond markets.

After all, requesting aid is essentially a public admission that one’s bank is in major trouble. In this end this hurts the bank seeking aid as everyone now knows that it’s on the ropes.

Indeed, as we saw with LTRO 2 (which provided over €500 billion to EU banks), those banks that drew on the ECB saw, at most, one month’s worth of gains before they were right back to where they started in terms of share price and funding needs.

Oh, and none of this will go into effect until December. Let’s hope Spain and Italy and others don’t need the funds before then!

My take on this whole mess?

1)   The benefits of the announcements (lower yields on sovereign bonds and higher share prices in EU banks) will be short-lived.

2)   None of these decisions address the core issues facing the EU banking system: namely, insolvency and excessive leverage.

3)   No one in the EU actually has the money to make these measures work (again, Spain and Italy will provide 30% of the ESM’s funding).

Markets will stage a knee jerk reaction to these measures. That reaction will see bank shares rise and yields fall, temporarily. But this move will be short-lived, just as moves following LTRO1 and LTRO 2 were. After all, these announcements are just more political measures than anything else. And Europe needs capital NOT politics at this point.
So I would expect this rally and the drop in bonds to be short-lived. EU leaders may have put off the Crisis by a few weeks (or perhaps even a month). But they still haven’t addressed the core issues causing the Crisis: excess leverage courtesy of hundreds of billions of Euros’ worth of garbage debt.

With that in mind, I would use this rally to further prepare for the EU Crisis.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 30 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 65 straight winners and not one closed loser since July 2011. If you think this is sounds “too good to be true,” you can Click Here to See Our Confirmed Trades.

Indeed, we just locked in two gains of 8% and 10% in less than two weeks’ time. In fact, this track record is getting so much attention that we’ve decided to only make 100 more slots available before we close the doors on this newsletter and simply start a waiting list. Already 60 slots have been reserved, leaving just 40 left.

To learn more about Private Wealth Advisory and lock in one of those last 40 slots…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

 

For weeks now, investors have invested based on the idea that the Fed would announce some major program during its Fed’s June FOMC from June 19-20. The whole notion was absurd for several reasons.

First off, even the Fed doves such as Charles Evans and Bill Dudley have begun to state in public that the consequences of more QE outweigh the benefits. Bernanke’s been saying this since May 2011. The fact that his more dovish colleagues now agree with him makes the likelihood of more QE minimal.

Moreover, the Fed has already become a political hot button for the 2012 Presidential Election. For the Fed to launch a new major program so close to the election now would be a death knell for Obama whom the Fed has been moving to support throughout his Presidency (Obama did re-elect Bernanke after all).

Indeed, all of the primary arguments for QE have now been rendered moot. In terms of liquidity, banks are sitting on over $1.5 trillion in excess reserves. Interest rates are at record lows. And as for boosting the economy, the Fed now realizes that QE pushes the cost of living up which will in turn make the Fed a target of political outrage (again, this is an election year).

Finally, we have to consider the Spanish €100 billion bailout.

NO US entity was involved in this move (neither the IMF nor the Fed). This puts the “prop up the system” job squarely on the EU’s shoulders for now. Americans will not stand for a US bailout of Europe, so until a major bank fails or we enter a full-scale crisis head on (which hasn’t happened yet), I believe the Fed will continue to resort to more symbolic and verbal interventions.

In simple terms, we’ve gone from a time in which the Fed can unveil new massive programs to help the US economy to a time when the Fed can only act when it absolutely has to (a major bank collapses or the system begins to collapse a la 2008).

We’re now seeing the same game occurring in Europe: investors hoping and praying that EU leaders will somehow pull a rabbit out of a hat.

They won’t.

Germany has been implementing measures to permit it to leave the EU for months now. Moreover, Angela Merkel has made it clear that she will not permit Eurobonds with German backing, nor will she permit a pooled banking system.

The reasons are obvious. The EU’s less solvent countries want free money. Germany won’t give it to them. Any and all German funds will only be allowed with the guarantee of certain conditions being met.

As we’ve already seen with Greece, those on the receiving end of the bailout gravy train are not prone to meeting “conditions.” Spain is no different: not only has it missed its budget deficit requirements several times but it is now openly ignoring demands from those propping it up:

Spain PM not to implement IMF suggestions for now

Spain will not immediately implement the International Monetary Fund’s latest recommendations, which include cutting government workers’ wages further, because they are nonbinding advice, the prime minister said Saturday.

The IMF is one of three organizations Mariano Rajoy’s government turned to for an assessment of the state of Spain’s banking sector ahead of a (EURO)100 billion ($125 billion) bailout for failing lenders.

http://www.businessweek.com/ap/2012-06/D9VEB8UG1.htm

In simple terms, Germany may be willing to prop up the EU, but only if its demands are met. The track record for the PIIGS in terms of meeting demands is abysmal. Moreover, implementing such measures takes months if not years. Given that Spain’s ten-year is back over 7% and Italy is now begging informally for a bailout, the EU doesn’t have that time.

With that in mind, I believe the market has topped and we will be heading lower in the coming months, culminating in the collapse of the EU in its current form and very likely the EU banking system.

If you have not already take steps to prepare for this, I highly recommend doing so now.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 30 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 65 straight winners and not one closed loser since July 2011. If you think this is sounds “too good to be true,” you can Click Here to See Our Confirmed Trades.

Indeed, we just locked in two gains of 8% and 10% in less than two weeks’ time. In fact, this track record is getting so much attention that we’ve decided to only make 100 more slots available before we close the doors on this newsletter and simply start a waiting list. Already 60 slots have been reserved, leaving just 40 left.

To learn more about Private Wealth Advisory and lock in one of those last 40 slots…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

 

I’ve often been labeled as “Gloom and Doom” in the past, but the situation in Europe today is beyond anything I’ve ever seen before. It is highly likely that the EU will not exist in their current form by the end of the year

I realize some of this may sound overly dramatic. But the following should give you an idea of how serious things are getting:

A Vote of No Confidence in Europe

Germany and France’s joint proposal to allow Schengen-zone countries to temporarily reintroduce border controls as a means of last resort might sound harmless. But doing so would damage one of the strongest symbols of European unity and perhaps even contribute to the EU’s demise.

Germany and France are serious this time. During next week’s meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as “an ultima ratio” — that is, measure of last resort — “and for a limited period of time.” They reportedly go on to recommend 30-days for the period.

Granted, the Schengen system is not perfect. With the EU’s eastward expansion, its external borders have become more porous. The problem areas are well-known: Greece doesn’t sufficiently guard its border with Turkey, and Italy simply allows refugees through to continue their journey into neighboring countries. Doing so violates the Schengen Agreement, which stipulates that immigrants have to be taken care of by the country in which they arrive.

http://www.spiegel.de/international/europe/german-and-french-proposal-for-border-controls-endangers-european-unity-a-828815.html

The above story have been almost completely ignored by the mainstream media. Let me ask you this… do you think Germany and others are really concerned about an influx of migrants? Of course not, the whole idea is ridiculous. Italy was supposedly upset about 25,000 migrants from North Africa… Italy has a population of 65 MILLION!

No, the move to create border controls is about one thing only: stopping people from fleeing with their money when the collapse comes. The political elite in Europe are watching the bank runs in Spain and Greece and know that when the big Crash comes similar runs will occur throughout the EU.

Consider the following, more recent stories and you’ll see what I mean:

Exclusive: EU floats worst-case plans for Greek euro exit: sources

European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro…

As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union.

http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120611&id=15208663

Swiss eye capital controls if Greece goes

The Swiss National Bank is considering imposing capital controls on foreign deposits if Greece leaves the euro, as the franc comes under heavy demand from investors seeking a haven in Europe.

Speaking to Swiss media, Thomas Jordan, head of the Swiss central bank, said the Swiss government and the SNB were looking at ways of dealing with an expected flood of foreign money into the country in the event of a Greek exit from the eurozone.

http://www.ft.com/cms/s/0/d7678676-a810-11e1-8fbb-00144feabdc0.html#axzz1wNKR2leW

This is not Gloom and Doom. This is reality. Talks are already underway of suspending the Schengen agreement and implementing border and capital controls. The Schengen agreement and freedom across borders was at the very basis of the Eurozone. And now the political elite want to suspend this?

Moreover, the fact that these stories are even making it to the media tells us point blank that the political leaders In Europe are absolutely terrified by the situation they have on their hands.

Indeed, the UK is implementing numerous contingency plans ranging from implementing border controls to literally preparing to help thousands of British expats flee the Eurozone should the banking system collapse and Brits around the EU find themselves without access to cash.

Speaking of which, here’s another story the media has been downplaying:

Natwest glitch: RBS chief Stephen Hester faces pressure to explain fault to public

Stephen Hester, the chief executive of Natwest owner the Royal Bank of Scotland, was under pressure last night to give a public account of the breakdown of the bank’s computer systems as politicians and small businesses attacked the bank’s failures and the crisis entered its sixth day.

Mr Hester admitted yesterday in an email to staff that RBS was not “out of the woods” with the bank drafting in thousands of staff over the weekend to try to deal with the issue. It now looks likely that the cost of the bank’s technical problems will run into tens of millions of pounds.

In his first public statement over the disruption to 12 million business and personal customer accounts of both RBS and its subsidiary, NatWest, which began on Tuesday night, Mr Hester told the bank’s staff that there was “more hard work ahead”.

In a confidential message sent to those working this weekend, a copy of which was seen by The Sunday Telegraph, Mr Hester said: “Behind the scenes, we are making progress on our task to clear the backlog of payments.”

http://www.telegraph.co.uk/finance/personalfinance/consumertips/banking/9351741/Natwest-glitch-RBS-chief-Stephen-Hester-faces-pressure-to-explain-fault-to-public.html

That is correct, 12 million RBS customers have been shut out of their accounts and ATM withdrawals for SIX days due to a “glitch.” REALLY?

Let’s be blunt, the EU banking system is a $46 trillion toxic sewer filled with PIIGS debt. Even the ECB’s is not immune to this mess: over a quarter of its balance sheet is comprised of this garbage.

This is why the ECB freaked out and pumped so much money into the EU banking system. You don’t spend over $1 trillion in nine months unless something very very bad is coming down the pike. The fact countries are now actively putting together contingency plans to get their citizens out of EU should give you an idea of how fragile the entire system is over there. Yes, they political leaders will try to float various ideas on how they’ll “solve” the problems, but the reality is that there simply isn’t enough capital available to prop up the system. And the market is starting to realize this (see the yields on Italian and Spanish bonds as well as those countries respective CDS).

So if you’re not already taking steps to prepare for the coming collapse of the EU, you need to do so now. We have at most a few months and possibly just a few weeks before the EU Crisis comes to a head.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 30 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 65 straight winners and not one closed loser since July 2011. If you think this is sounds “too good to be true,” you can Click Here to See Our Confirmed Trades.

Indeed, we just locked in two gains of 8% and 10% in less than two weeks’ time. In fact, this track record is getting so much attention that we’ve decided to only make 100 more slots available before we close the doors on this newsletter and simply start a waiting list. Already 50 slots have been reserved, leaving just 50 left.

To learn more about Private Wealth Advisory and lock in one of those last 50 slots…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

Europe is heading into a full-scale disaster.

You see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The below chart shows the official Debt to GDP ratios for the major players in Europe.

As you can see, even the more “solvent” countries like Germany and France are sporting Debt to GDP ratios of 75% and 84% respectively.

These numbers, while bad, don’t account for unfunded liabilities. And Europe is nothing if not steeped in unfunded liabilities.

Let’s consider Germany. According to Axel Weber, former head of Germany’s Central Bank, Germany is in fact sitting on a REAL Debt to GDP ratio of over 200%. This is Germany… with unfunded liabilities equal to over TWO times its current GDP.

To put the insanity of this into perspective, Weber’s claim is akin to Ben Bernanke going  on national TV and saying that the US actually owes more than $30 trillion and that the debt ceiling is in fact a joke.

What’s truly frightening about this is that Weber is most likely being conservative here. Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.

And of course, Germany has yet to recapitalize its banks.

Indeed, by the German Institute for Economic Research’s OWN admission, German banks need 147 billion Euros’ worth of new capital.

To put this number into perspective TOTAL EQUITY at the top three banks in Germany is less than 100 billion Euros.

And this is GERMANY we’re talking about: the supposed rock-solid balance sheet of Europe. How bad do you think the other, less fiscally conservative EU members are?

Think BAD. As in systemic collapse bad.

Indeed, let’s consider TOTAL debt sitting on Financial Institutions’ balance sheets in Europe. The below chart shows this number for financial institutions in several major EU members relative to their country’s 2010 GDP.

Country	Financial Institutions’ Gross Debt as a % of GDP
Portugal	65%
Italy	99%
Ireland	664%
Greece	21%
Spain	113%
UK	735%
France	148%
Germany	95%
EU as a whole	148%

Source: IMF

As you can see, financial institutions in Germany, France, Italy, Spain, the UK, and Ireland are all ticking time bombs.

Indeed, taken as a whole, European financial institutions have more debt than Europe’s ENTIRE GDP.  Let’s compare the situation there to that in the US banking system.

Taken as a whole, the US banking system is leveraged at 13 to 1. Leverage levels at the TBTFs are much much higher… but when you add them in with the 8,100+ other banks in the US, total US bank leverage is 13 to 1.

The European banking system as a whole is leveraged at nearly twice this at over 26 to 1. That’s the ENTIRE European Banking system leveraged at near Lehman levels (Lehman was 30 to 1 when it collapsed).

To put this into perspective, with a leverage level of 26 to 1, you only need a 4% drop in asset prices to wipe out ALL capital. What are the odds that European bank assets fall 4% in value in the near future as the PIIGS continue to collapse?

These leverage levels alone position Europe for a full-scale banking collapse on par with Lehman Brothers. Again, I’m talking about Europe’s ENTIRE banking system collapsing.

This is not a question of “if,” it is a question of “when.” And it will very likely happen before the end of 2012.

The reason that this is guaranteed to happen before the end of 2012 is that a HUGE percentage of European bank debt needs to be rolled over by the end of 2012.

I trust at this point you are beginning to see why any expansion of the EFSF or additional European bailouts is ultimately pointless: Europe’s ENTIRE BANKING SYSTEM as a whole is insolvent. Even a 4-10% drop in asset prices would wipe out ALL equity at many European banks.

On that note I believe we have at most a month or two and possibly even as little as a few weeks to prepare for the next round of the EU Crisis.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 30 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 66 straight winners and not one closed loser since July 2011.

Indeed, we just locked in two gains of 8% and 10% in less than two weeks’ time.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

Indeed, interest is growing to the point that we’re not considering closing the doors on this newsletter and starting a waiting list. So if you’ve been putting off subscribing, you need to get a move on to reserve on of the remaining open slots.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

As I’ve assessed in earlier pieces, neither the Fed, nor the IMF, nor the EFSF, nor the ECB has the firepower or the political backing to prop up Spain or the EU.

This ultimately leaves the ESM, the permanent European Stability Mechanism… which technically doesn’t even exist yet (it’s supposed to be ratified by July 2012).

That’s right… the bailout fund which is meant to SAVE Europe doesn’t even exist yet. And it’s not clear that it will anytime soon either…

Indeed, in order for the ESM to be ratified it needs the individual EU member states that will contribute 90% of its capitalization to first ratify it on an individual basis.

Here’s the list of countries that represent that 90% of capital as well as the status of their individual ratifications and the percentage of funding they are to provide.

Country	Ratified?	Percentage of Capital
Germany	NO	27%
France	YES	20%
Italy	NO	18%
Spain	NO	12%
Netherlands	YES	6%
Belgium	NO	3%
Greece	YES	3%
Austria	NO	3%
Portugal	NO	2%
Finland	NO	2%
Ireland	NO	1%
Slovakia	NO	0.8%
Slovenia	YES	0.5%
Luxembourg	NO	0.2%
Cyprus	NO	0.1%
Estonia	NO	0.1%
Malta	NO	0.07%

To summate the above chart succinctly… only four of the required 17 countries have even ratified the ESM (it’s supposed to be completely ratified in July 2012).

Moreover, you’ll note that the PIIGS as a whole are meant to contribute 36% of the ESM’s FUNDING!!!! Spain and Italy alone are meant to contribute 30%!!!!

So… Spain is supposedly going to be bailed out by an entitythat doesn’t even exist yet… for which Spain is mean to contribute 12% of the funding. And to top it off… Spain hasn’t even ratified the fund itself!!!

More importantly, neither has Germany. And it’s not clear that it will either.

To whit, Germany’s ratification of the ESM is buried in legislature that includes, among other things, the proposal of a financial transaction tax, which is extremely popular with the Social Democrat Party (SPD), the main opposition party to Chancellor Angela Merkel’s Christian Democratic Union (CDU).

Thanks to recent elections, which saw Merkel’s CDU party get trounced (again, German voters are FED UP with bailouts), the SPD now controls 11 of Germany’s 16 states.

This is a big deal because the SPD is playing hardball regarding the passage of the ESM legislation due to the fact that Merkel is not viewed to have been serious about implementing the transaction tax proposal (which the SPD is pushing for along with various other growth measures for the Germany economy).

Merkel is scheduled to meet with the opposition leaders tomorrow. If they cannot strike a deal it is quite possible that Germany won’t be able to ratify the ESM legislation before the July 1 deadline.

The SPD made it clear that it is willing to risk this just a few weeks ago:

German SPD Pushes Growth Saying Merkel’s Crisis Policy Failed

The timetable for passing the fiscal pact and associated legislation to set up the permanent bailout fund, the European Stability Mechanism, is “completely unrealistic,” Steinmeier told reporters in Berlin today. The government underestimated the mechanics of getting the two-thirds majority in parliament needed to pass the legislation and it is “very ambitious to assume” both bills pass before the summer recess, he said.

http://www.bloomberg.com/news/2012-05-15/german-spd-pushes-growth-saying-merkel-s-crisis-policy-failed.html

As I have stated many times in the past, politics trumps financial and economic issues in Europe. Germany’s next Federal Election is scheduled for the autumn of 2013. And it is clear that the SPD is viewing the ongoing EU Crisis as a platform with which to claim Merkel’s policies have failed (much as Francois Hollande did to Nicolas Sarkozy in France).

So, we have to consider that the SPD may in fact be willing to let Germany get an international black eye by failing to ratify the ESM legislation by its required deadline (in order to further tarnish Merkel’s image).

By the look of things, this may be the case:

German court may delay Europe’s new bailout fund

The German government and opposition reached a deal on Thursday on growth that will allow parliament to approve the euro zone’s permanent bailout scheme next week, but Germany’s top court may delay the rescue fund’s start date scheduled for July 1.

http://www.reuters.com/article/2012/06/21/us-eurozone-germany-esm-idUSBRE85K0LU20120621

Folks, this is not gloom and doom… it is reality. The mega-bailout fund which is supposed to backstop the EU doesn’t exist yet and is likely not to exist for several months as various countries legislative bodies work through the paperwork and legal ramifications.

I don’t know how else to put this, but Europe is finished. There simply is not enough capital to meet the demands (Spain alone needs €300+ billion just to recapitalize its banks). And that’s just Spain. Throw in Italy, Greece (which continues to be a blackhole for bailout funds) and France (which is going to be facing its own fiscal cliff in the near future) and it’s GAME OVER.

Months ago, I forecast that Germany will walk before it goes “all in” on the EU to prop up everyone else. I believe that day is fast approaching. Unless Angela Merkel wants to commit political suicide, she will be forced to protect Germany’s domestic issues. Whether this comes as a result of Germany pre-emptively leaving the Euro or doing so after one of the PIIGS has already left remains to be seen. But in the end, Germany WILL WALK IF IT HAS TO.

On that note I believe we have at most a month or two and possibly even as little as a few weeks to prepare for the next round of the EU Crisis.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 30 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

Indeed, we two of our latest picks are up 6% and 8% respectively… in just one week.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

Indeed, interest is growing to the point that we’re not considering closing the doors on this newsletter and starting a waiting list. So if you’ve been putting off subscribing, you need to get a move on to reserve on of the remaining open slots.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

Last year I wrote a piece in which I noted that the EU would implode before the end of 2012. The reason for this was clear as day: EU banks needed to roll over hundreds of billions of Euros’ worth of debt (possibly trillions) at a time when interest rates would be rising as sovereign bonds fell in value:

At that time I wrote:

This is not a question of “if,” it is a question of “when.” And it will very likely happen within the next 10-12 months if not sooner depending on how soon Greece defaults.

The reason that this is guaranteed to happen before the end of 2012 is that a HUGE percentage of European bank debt needs to be rolled over by the end of 2012.

Between now (autumn 2011) and then (end of 2012)…

• French banks need to roll over 30% of their TOTAL debt.
• Spanish banks and Italian banks need to rollover more than 33% of their TOTAL debt.
• German banks need to roll over nearly 40% of their TOTAL debt.
• Irish banks need to roll over almost HALF (50%) of their TOTAL debt.

Let’s fast forward to today to focus on Spain’s current predicament:

Consider the following…

1)   Spain’s banking system is roughly €3 trillion in size (3X Spain’s GDP).

2)   Spanish banks’ gross borrowing from the ECB was €316 billion in April.

3)   Spanish banks need to roll over 20% of their bonds (roughly) €600 billion this year.

Anyone can see by this a simple “back of the envelope analysis “that Spain will need a lot more than €100 billion to recapitalize its banks.

How on earth Spanish banks can roll over €600 billion in bonds at a time when the global bond market has just learned that all private bondholders will be subordinate to the ESM is beyond me (read: it won’t happen).

And thanks to a €100 billion bailout which has put Spain’s REAL Debt to GDP at 146%, Spain is now facing both a banking crisis AND a sovereign crisis simultaneously. There is no entity on this planet that can shore up both the Spanish banking system as well as the Spanish Sovereign bond market.

To be blunt, I fully believe that this €100 billion bailout for Spain’s banks has put Spain in a “checkmate” position. With total unemployment at 25%, a housing bubble that continues to collapse, and an official Debt to GDP ratio of 146%, there is no way Spain will be able to grow its way out of this mess.

Put another way, Spain is a financial tsunami and the €100 billion is an emergency levy made of questionable materials built unqualified engineers: the move has bought some time, but the relief will be brief.

This is why Spain’s Credit Default Swaps (essentially bets that Spain will default)

have nearly doubled in 2012 alone. And the bailout has done nothing to assuage investors’ beliefs that Spain is in BIG TROUBLE. Indeed, we’re heading back towards all time highs already within one week of the bailout.

Put another way, Spain is toast. I’ve already assessed that none of the key players (the IMF, the ECB, the EFSF, or the ESM) has the firepower to prop up Spain whose real capital needs are more in the ballpark of €300 billion -€500 billion.

Thus, it’s GAME OVER for the EU. Sure it may take a while for this to manifest as politicians offer various hair-brained schemes to attempt to put off the inevitable debt collapse, but that debt collapse is coming and it will hit before the end of 2012.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 20 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

Indeed, we just closed out latest winner: a 7% gain in two weeks’ time, last week.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

Indeed, interest is growing to the point that we’re not considering closing the doors on this newsletter and starting a waiting list. So if you’ve been putting off subscribing, you need to get a move on to reserve on of the remaining open slots.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

The following is an excerpt from my most recent issue of Private Wealth Advisory, my newsletter for private clients. In it, I lay in clear unassailable terms why the Spanish “bailout” not only failed to help Spain but in fact has sped the EU even more quickly towards a Crisis that could easily bring its entire banking system down. To learn more about Private Wealth Advisory, and how it can help you profit in any market (we’ve locked in 63 straight winners and NO losers since July 2011)… Click Here Now!!!

While everyone else is focusing on the Greek elections, the REAL issues pertaining to the EU (namely where the funding for Spain’s bailout as well as future bailouts will come from) continues to be ignored.

Indeed, no one seems to be asking THE key question regarding the EU: Just WHERE is the money for this bailout going to come from?

There are essentially four key options for this: the IMF, the EFSF, the ECB, and the ESM (the Fed won’t do it).

Unfortunately, NONE of them are viable options.

The IMF?

As noted earlier, the answer here is a resounding “NO!” as Obama won’t propose a European bailout during an election year (hence his desperate pleas to Angela Merkel to hold the EU together for the next six months).

The EFSF?

Germany won’t allow the EFSF to fund the Spanish bailout as it would increase Germany’s exposure to the Spanish fall-out. The public outrage regarding the EU is growing in Germany by the day (55% of Germans believe they would have been better off keeping the Deutschmark while another 78% believe the worst of the Euro is ahead)

The ECB?

The ECB has completely avoided any notion that it would fund the bailout. Indeed, at the ECB’s most recent press conference, ECB head Mario Draghi stated,

Draghi Says ECB is Ready to Act as Growth Outlook Worsens

“We monitor all developments closely and we stand ready to act,” Draghi told reporters in Frankfurt after the ECB left its benchmark rate at 1 percent. Downside risks to the economic outlook have increased and “a few” of the ECB’s Governing Council members called for rate cut at today’s meeting, he said…

“I don’t think it would be right for the ECB to fill other institutions’ lack of action,” he said.

http://www.businessweek.com/news/2012-06-06/draghi-says-ecb-is-ready-to-act-as-growth-outlook-worsens

An additional item I want to note regarding the ECB… it hasn’t actually bought any EU bonds in 13 weeks, signaling that while it may act in terms of providing liquidity to banks… it has ceased actually monetizing EU sovereign bonds (another indication that Germany is the REAL EU backstop as Germany was completely against monetization).

ECB keeps bond programme on ice, pressure on govts

The European Central Bankbought no government bonds for the 13th week running last week, ECB data showed on Monday as the bank judges the controversial programme of diminishing benefit in the face of the deepening euro zone debt crisis…

 Two of the bank’s German policymakers quit last year over the purchases, which critics say treads dangerously close to the ultimate ECB taboo of financing governments. The ECB also fears that its interventions give countries less of an incentive to implement the necessary and sometimes painful reforms.            

http://in.reuters.com/article/2012/06/11/ecb-bonds-idINL5E8HBA6420120611

This ultimately leaves the ESM, the permanent European Stability Mechanism… which technically doesn’t even exist yet (it’s supposed to be ratified by July 2012).

Indeed, in order for the ESM to be ratified it needs the individual EU member states that will contribute 90% of its capitalization to first ratify it on an individual basis.

Here’s the list of countries that represent that 90% of capital as well as the status of their individual ratifications and the percentage of funding they are to provide:

Country	Ratified?	Percentage of Capital
Germany	NO	27%
France	YES	20%
Italy	NO	18%
Spain	NO	12%
Netherlands	YES	6%
Belgium	NO	3%
Greece	YES	3%
Austria	NO	3%
Portugal	NO	2%
Finland	NO	2%
Ireland	NO	1%
Slovakia	NO	0.8%
Slovenia	YES	0.5%
Luxembourg	NO	0.2%
Cyprus	NO	0.1%
Estonia	NO	0.1%
Malta	NO	0.07%

To summarize the above chart succinctly… only four of the required 17 countries have even ratified the ESM (it’s supposed to be completely ratified in July 2012).

Moreover, you’ll note that the PIIGS as a whole are meant to contribute 36% of the ESM’s FUNDING!!!! Spain and Italy alone are meant to contribute 30%!!!!

So… Spain is supposedly going to be bailed out by an entity that doesn’t even exist yet… for which Spain is mean to contribute 12% of the funding. And to top it off… Spain hasn’t even ratified the fund itself!!!

More importantly, neither has Germany. And it’s not clear that it will either.

Folks, the real deal is that Europe is out of money. End of story. The only entity that could prop up Spain is the ESM… which doesn’t even exist yet.

So if you’re banking on the fact that the Greek elections mean the EU will survive or that Spain’s “bailout” has solved its banking issues, you’re going to be in for a very rude surprise before the summer’s end.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 20 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

Indeed, we just closed out latest winner: a 7% gain in two weeks’ time, last week.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

Indeed, interest is growing to the point that we’re not considering closing the doors on this newsletter and starting a waiting list. So if you’ve been putting off subscribing, you need to get a move on to reserve on of the remaining open slots.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

The following is an excerpt from my most recent issue of Private Wealth Advisory, my newsletter for private clients. In it, I lay in clear unassailable terms why the Spanish “bailout” not only failed to help Spain but in fact has sped the EU even more quickly towards a Crisis that could easily bring its entire banking system down. To learn more about Private Wealth Advisory, and how it can help you profit in any market (we’ve locked in 63 straight winners and NO losers since July 2011)… Click Here Now!!!

The big news that the markets are attempting to digest this week is the €100 billion Spanish bailout.  This action and the upcoming Fed FOMC meeting on June 19-20 will dictate the market’s action over the next two weeks and possibly for the remainder of the year.

The first of these topics, the Spanish bailout, is an extremely complicated affair. The key takeaway issues that need to be considered are:

1. How the bailout was performed: who was involved and who wasn’t.
2. The details of the bailout structure itself.
3. The financial implications of the bailout.
4. The political implications of the bailout.

Let’s dive in.

Spain has been denying the need for a bailout for months now. Indeed, a mere two weeks ago, Prime Minister Mariano Rajoy stated that Spain would not need outside assistance. In fact, when France’s President Francois Hollande implied that Spanish banks might need outside funds at an EU summit last month, Rajoy retorted, “Hollande does not know the state of Spanish banks,”

What’s peculiar about this statement was that it was made when the Bankia nationalization was already underway. Indeed, two days after Rajoy’s comment, Bankia asked Spain for €19 billion in bail out funds.

So we now know that’s Spain’s political leaders will lie right up until the point of systemic collapse. We also know that both Spanish banks and politicians are highly incentivized to not quantify the true extent of the risks inherent in the Spanish banking system (remember, Bankia was discussing paying its dividend in April… just one month before it requested a bailout and revised its 2011 €309 million profit to a €3 billion loss).

Thus, I would change the common phrase applied to the EU’s political/ financial policies from “extend and pretend” to “lie until you are about to die.”

This notion is illustrated by the fact that on May 28th, a mere week before Spain requested a bailout, Prime Minister Rajoy continued to maintain that Spain would not need a outside funding, stating, “there will be no rescue of the Spanish banking sector.”

At this point, Bankia had already requested its bailout and Spanish banks’ shares were in a free-fall. Moreover, Spain itself was just days away from requesting outside aid from the EU.

The timeline says it all:

May 9th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
May 21st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
May 23rd:  Bankia’s bailout needs grows to €11 billion/ Rajoy retorts to France’s Hollande, “Hollande does not know the state of Spanish banks.”
May 24th: Bankia’s bailout needs grow to €15 billion
May 25th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)… the Spanish Bailout Fund has just €5 billion in cash.
May 28th: Rajoy comments, “there will be no rescue of the Spanish banking sector.”
Weekend of June 8-10th: Rajoy texts to his finance minister: “Aguanta, we are the fourth European power. Spain is not Uganda… If they want to force the rescue of Spain, they need to start getting ready €500 billion and another €750 billion for Italy, which will have to be rescued afterwards.”/ Spain informally asks for €100 billion bailout/ EU Finance Ministers OK the bailout.
Sunday June 10th: Rajoy states that the bailout is a “victory” before commenting, “This year is going to be a bad one: Growth is going to be negative by 1.7 percent, and also unemployment is going to increase.”

Thus, in just one month’s time, Spain implements the largest bank nationalization in its history and requests €100 billion from the EU to recapitalize its banks. And yet, throughout this time, Spanish politicians maintain that Spain’s banking system is “solvent” or in great shape… right up until they get the €100 billion at which point the truth comes out: “This year is going to be a bad one.”

As I said before, “Lie until you are about to die.”

With that in mind, I fully believe the EU is on the verge of a systemic collapse. How can a €100 billion bailout for (from a currently non-existent entity, the ESM, no less) save Spain when even its Prime Minister admits the real needs could be in the ballpark of €500 BILLION.

Ignore this week’s move, this is just the usual options expiration nonsense. The Spanish bailout (assuming it even occurs) has done nothing to address the underlying problems in the EU banking system (hence why Spain’s CDS and 10 year bond yields continue to explode higher).

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 20 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

Indeed, we just closed out latest winner: a 7% gain in two weeks’ time, this morning.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

Spain’s Bailout is one big lie.

I know, I know… Spain is “saved” thanks to a €100 billion bailout.

But no one is asking just where this money will come from?

The IMF isn’t involved. Nor is the ECB.

The EFSF, which can’t even raise €10 billion without having to step in to insure it doesn’t have a failed bond auction isn’t a possibility (Germany doesn’t want it).

That leaves just the European Stability Mechanism (ESM)… except for the little known fact that only FOUR of the necessary 17 EU members have ratified legislation to even CREATE the ESM.

That’s right… the ESM doesn’t even EXIST yet.

On top of this, Spain and Italy make up 30% of the ESM’s supposed “funding.” That’s right, nearly one third of the mega-bailout fund’s capital will come from countries that are bankrupt themselves and are either already requesting bailouts (Spain) or soon will be (Italy).

Finally, and this is the REAL problem with the ESM… Germany hasn’t OK’d it yet.

In fact, German opposition leaders have stated point blank that hoping for Germany to ratify the ESM before its due date (July 1) is “completely unrealistic.”

So… Spain is going to be bailed out by a non-existent entity whose leading member likely won’t even have ratified its formation… before July 1.

Sure things could play out differently. But wasn’t Spain literally on the verge of a systemic Crisis? And we’re talking about weeks… possibly months before it gets a single Euro in bailout funds (assuming the funds even show up at all).

So I ask again… WHERE is the money going to come from? It doesn’t exist. The whole Bailout is one big lie. The funds simply are not there.

Even if they were, €100 billion is NOTHING compared to the REAL capital needs of Spanish banks. Heck, Bankia alone needs €24 billion… and that’s just ONE BANK out of Spain’s €3 trillion banking system.

Folks, if you think we’re out of the storm yet in Europe, you’re in for a very VERY rude surprise. It’s quite likely the EU won’t even exist in its current form before the summer ends.

The simple reason… THERE AREN’T ANY FUNDS LEFT TO PROP UP the €46 TRILLION toxic sewer that is the EU banking system. End of story.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 20 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

The Euro and stocks both gapped sharply up over the weekend on news that EU finance ministers are moving forward with a €100 billion Spanish bailout.

A few thoughts on this move:

1)   Where is the money coming from? (most EU Governments are broke)

2)   What precedent is this setting? (Ireland is already clamoring for a rewrite to its bailout rules)

3)   How desperate are things that they’re making such a large move so quickly?

Regarding this last point, Spanish political leaders have routinely denied needing a bailout for months. This whole bailout feels more than a little rushed given that Spain only formally requested a bailout (if you can even truly claim that) over the weekend: the same period during which a bailout was granted.

Moreover, it’s very difficult to believe that this will “solve” Spain’s problems. Let us consider the example of its recently nationalized bank, Bankia.

Bankia was formed in 2010 when the Spanish Government merged seven insolvent cajas (regional banks). In plain terms, Bankia was a trainwreck waiting to happen… at least to anyone with a working brain. However, both the bank itself and the Spanish Government decided to maintain a charade that the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying its dividend).

Today, Bankia has been nationalized after its initial bailout request ballooned from €5 billion to €24 billion. Moreover, it has also revised its 2011 results from a €309 million profit to a €3 billion LOSS.

The point I’m making here is that both the Spanish Government and the Spanish Banks will play “extend and pretend” as long as possible right up until they’re on the brink of collapse.

With that in mind, I sincerely doubt €100 billion is going to solve Spain’s problems. The whole bailout reeks of desperation. And it likely will have political and financial implications that will quickly render the benefits of this move moot. Of course, when you’re facing systemic collapse, you don’t have time to debate implications and consequences. But I highly doubt that this move will do much to address Spain’s true problems.

Indeed, stocks and the Euro are already coming off their over the weekend highs. This week will be critical for discerning the future of the markets. If risk assets remain aloft, then investors are still willing to believe that the Powers That Be can save/ maintain the markets.

But if stocks and the Euro tank this week… after a major bailout move such as this… then watch out, because the REAL Crisis has begun: the Crisis of faith in the actual financial system and the institutions meant to prop it up.

If this happens, then it’s GAME OVER for the Euro at the very least.

While I hate to admit it, there is a good chance that this is indeed the more likely outcome. The Fed meets on June 19-20 so we could see risk assets remain afloat until then. But if Bernanke doesn’t pull a rabbit out of a hat at that meeting then watch out because things could get very ugly very, very fast.

With that in mind, I’ve begun positioning subscribers of my Private Wealth Advisory for this very possibility. We’ve already locked in over 20 winning trades this year by finding “out of the way” investments few investors know about and timing our positions to benefit from the various developments in Europe.  When you combine this with our 2011 track record, we’ve had 63 straight winners and not one closed loser since July 2011.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. I’ve been helping investors navigate risk and profit from the markets for years. I can do the same for you. Indeed, my research has been featured in RollingStone Magazine, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include analysts and strategists at many of the largest financial firms in the world.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

 

 

The following is an excerpt from my latest issue of Private Wealth Advisory. In it I outline two key developments in Europe which virtually NO ONE is talking about: the creation of border controls and capital controls. The political elite are doing this for only one reason: they know it’s GAME OVER in the EU. To learn more about Private Wealth Advisory and how it can help you make money in any market… Click Here Now!

The EU in its current form is finished. Done. Game Over. I’ve been saying this for months. But it’s a fact. Europe has literally run out of money. Indeed, the ECB’s interventions are now not only toxic for those participating in them (those banks taking money via the LTRO have been crushed in the credit market) but are losing their impact (LTRO bought only one month of market gains).

Again, the EU is finished. And the powers that be know this. Indeed, the following should give you an idea of how serious things are getting:

A Vote of No Confidence in Europe

Germany and France’s joint proposal to allow Schengen-zone countries to temporarily reintroduce border controls as a means of last resort might sound harmless. But doing so would damage one of the strongest symbols of European unity and perhaps even contribute to the EU’s demise.

Germany and France are serious this time. During next week’s meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as “an ultima ratio” — that is, measure of last resort — “and for a limited period of time.” They reportedly go on to recommend 30-days for the period.

http://www.spiegel.de/international/europe/german-and-french-proposal-for-border-controls-endangers-european-unity-a-828815.html

This story has been almost completely ignored by the mainstream media. Let me ask you this… do you think Germany and others are really concerned about an influx of migrants? Of course not, the whole idea is ridiculous. Italy was supposedly upset about 25,000 migrants from North Africa… Italy has a population of 65 MILLION!

No, the move to create border controls is about one thing only: stopping people from fleeing with their money when the collapse comes. The political elite in Europe are watching the bank runs in Spain and Greece and know that when the big Crash comes similar runs will occur throughout the EU.

Consider the following story and you’ll see what I mean:

Swiss eye capital controls if Greece goes

The Swiss National Bank is considering imposing capital controls on foreign deposits if Greece leaves the euro, as the franc comes under heavy demand from investors seeking a haven in Europe.

Speaking to Swiss media, Thomas Jordan, head of the Swiss central bank, said the Swiss government and the SNB were looking at ways of dealing with an expected flood of foreign money into the country in the event of a Greek exit from the eurozone.

http://www.ft.com/cms/s/0/d7678676-a810-11e1-8fbb-00144feabdc0.html#axzz1wNKR2leW

Potential border controls in the EU and capital controls in safe haven Switzerland to stop inflows of funds? If that doesn’t tell you point blank that the political elite in the EU are scared stiff, nothing will.

Indeed, Germany has made a massive power grab to control most of Europe’s finances… but under one condition: it be given access to other members’ gold reserves as collateral.

Europe’s debtors must pawn their gold for Eurobond Redemption

Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a €2.3 trillion stabilisation plan gaining momentum in Germany. 

The German scheme — known as the European Redemption Pact — offers a form of “Eurobonds Lite” that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble.

The plan is drafted by the German Council of Economic Experts and inspired by Alexander Hamilton’s Sinking Fund in the United States — created in 1790 to clean up the morass of debts left by the Revolutionary War. Flourishing Virginia was comparable to Germany today…

The plan splits the public debts of EMU states. Anything up to the Maastricht limit of 60pc of GDP would remain sovereign. Anything over 60pc would be transfered gradually into the redemption fund. This would be covered by joint bonds.

Italy would switch €958bn, Germany €578bn, France €498bn, and so forth. The total was €2.326 trillion as of November but is rising fast as Europe’s slump corrupts debt dynamics. The sinking fund would slowly retire debt over twenty years, using designated tithes akin to Germany’s “Solidarity Surcharge”.

In effect, Germany would share its credit card to slash debt costs for Italy, Spain and others. Yet it is the exact opposition of fiscal union. While eurobonds are a federalising catalyst, the fund would be temporary and self-extinguishing. “The fund is a return to the discipline of Maastricht with sovereign control over budgets,” said Dr Benjamin Weigert, the Council of Experts’s general-secretary…

The fund implies a big sacrifice for Germany. Its interest costs on joint debt would be much higher than today’s safe-haven rate of 1.37pc on 10-year Bunds. Jefferies Fixed Income says it would cost 0.6pc of German GDP annually. The Council of Experts — or `Five Wise Men’ — argue that this would be modest compared to the growth adrenaline of rescusitating monetary union.

Yet it is not charity either. One official said a key motive is to relieve the European Central Bank of its duties as chief fire-fighter. “We have got to get the ECB out of the game of distributing money, and separate fiscal and monetary policy. Germany has only two votes on the ECB Council and has no way to control consolidation,” he said.

Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. “The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations,” said the proposal.

http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html

Folks, the EU End Game is now officially in play. Germany has played its hand: if you want us to foot the bill we want your Gold. This tells us:

1)   Germany is aware that most EU Sovereign bonds and paper are garbage (this is confirmed by the fact that Germany has passed legislation allowing its own banks to dump EU Sovereign bonds into a bailout fund during a Crisis).

2)   Germany will only put up more money if it’s granted fiscal control of the EU and Gold bullion as collateral.

3)   Germany is the REAL monetary power in Europe (not the ECB).

I believe this is Germany’s final push for EU control. If this fails and Germany ceases to offer additional bailout funds in some form then the EU will collapse (as noted earlier, the ECB, IMF, and US Fed cannot prop the EU up nor will the ESM mega bailout fund work). Spain’s literally on the verge of seeing a bank holiday. Germany is the only one who might have the funds to prop it up. And Germany wants gold.

In plain terms, the EU will likely not last through the summer. It’s literally GAME OVER time. Various proposals will crop up (such as Germany’s “cash for Gold” program), but no one (not even Germany) actually has the funds to support the avalanche of banking failures that is coming.

THIS is why various countries are moving to put border and capital controls in place. They know the game is up. It’s now just a matter of time before things go from ugly to truly disastrous.

With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.

And we’re just getting started. Indeed, we just closed our 63rd straight winner last week: an 8% gain.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 63 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

 

 

Talk of QE and rumors of coming Central Bank Intervention pushed stocks and Gold higher on Monday. It’s odd to hear these rumors when every major Central Bank has in fact been clearly stating NO new stimulus is coming any time soon

Indeed, as the Fed has proved now for eight consecutive FOMC meetings, it is not going to announce more QE unless another systemic Crisis erupts. Instead the Fed continues to reiterate its talk of maintaining low interest rates, which is largely a symbolic gesture as it changes nothing

From the April 27 FOMC minutes

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

http://www.federalreserve.gov/newsevents/press/monetary/20120425a.htm

The Bank of Japan is joining this strategy of pulling back on its liquidity measures…

BOJ eased to ensure recovery, won’t act “automatically”

Bank of Japan policymakers agreed to ease monetary policy in April to ensure the economy resumes a recovery, but signaled a pause by complaining of “misunderstanding” in markets that they will keep offering monetary stimulus automatically until 1 percent inflation was in sight, minutes of the meeting showed.

At the April 27 meeting, the BOJ boosted asset purchases by 10 trillion yen ($126 billion), offering its second stimulus in just over two months in a show of its determination to achieve its 1 percent inflation target set in February.

Central bank policymakers agreed that Japan’s economy was gradually heading for a recovery with consumer prices expected to rise as a trend, minutes of the meeting showed on Monday.

But they decided to act to ensure that such positive momentum in the economy is sustained given various uncertainties over the outlook, such as the chance of tensions over Europe’s sovereign debt crisis triggering a renewed yen rise, it showed.

http://www.reuters.com/article/2012/05/28/us-japan-economy-boj-minutes-idUSBRE84R01020120528

So has the ECB…

Nowotny Says ECB Not Discussing Reviving Bond Purchases

European Central Bank Governing Council member Ewald Nowotny said the bank isn’t considering restarting its bond-purchase program to stem rising borrowing costs for governments in the euro area.

“This for the time being is not a matter of discussion,” Nowotny told reporters in Belgrade today, when asked if bond purchases are something the ECB is contemplating. “The ECB has done a number of measures that were very helpful and efficient for the economy. We are now in a situation where we have to see how these measures have worked in the economy, especially in long-term operations.”

http://www.businessweek.com/news/2012-05-29/ecb-s-nowotny-says-reviving-bond-purchases-not-being-discussed

 Stocks lose shine as ECB signals no new stimulus

Stocks turned lower on Thursday after the European Central Bank indicated it would not, for now, ease its monetary policies further to fight the debt crisis and a U.S. services survey disappointed expectations.

Though the ECB’s decision to keep its main interest rate unchanged at 1 percent was expected, there was disappointment in the markets that the bank’s president Mario Draghi gave no indication it might offer more long-term super-cheap loans to banks or that monetary policy could be made more accommodative.

            http://www.businessweek.com/ap/2012-05/D9UHB7381.htm

Even China, which has shown itself to be one of the biggest proponents of economic intervention of the last four years is curbing its stimulus efforts and signaling a slowdown.

China Has No Plan For Large Stimulus To Counter Slowdown

China has no plan to introduce stimulus measures to support growth on the scale unleashed during the depths of the global credit crisis in 2008, according to the nation’s state-run Xinhua News Agency.

“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said yesterday in the seventh paragraph of an article on economic policy, without attributing the information. “Current efforts for stabilizing growth will not repeat the old way of three years ago.” In 2008, policy makers unveiled a fiscal stimulus of 4 trillion yuan ($586 billion at the time).

http://www.bloomberg.com/news/2012-05-29/china-has-no-intention-for-large-scale-stimulus-xinhua-reports.html

Thus we have the world’s three most important Central banks as well as the global economy’s “economic miracle” retreating from aggressive monetary intervention.

The reality is that Central Banks are all realizing that:

1)   Their interventions thus far (QE in the US and LTRO in the EU) have failed to solve the global banking crisis.

2)   The consequences of their interventions (namely inflation) are now outweighing the benefits (heck Bernanke was admitting this as far back as May 2011… and now even uber-dove New York Fed President Bill Dudley is admitting it).

This is an extremely dangerous environment: one in which the primary prop for the markets (central bank intervention) is becoming both less effective and politically toxic. Indeed, it’s clear at this point that the EU is beyond intervention since neither the ECB, IMF, nor the ESM have the firepower to hold things together.

Indeed, the one and only entity that might possibly hold up the EU would be Germany. However, if Germany were to go for this it would lose its AAA rating. The EU without a AAA rated Germany is not a pretty sight.

And it’s not even clear Germany could prop up the EU’s banking system. After all, when you include unfunded liabilities, Germany’s sporting a REAL debt to GDP north of 200%.

In plain terms, the EU is fast approaching its End Game. Germany and the other political leaders will stall for time and engage in verbal intervention, but in the end, there simply isn’t enough capital in the world to hold up the over leveraged (26 to 1) toxic sewer that is the EU banking system.

With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.

And we’re just getting started. Indeed, we just closed our 63rd straight winner last week: an 8% gain.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 63 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

 

 

 

 

Europe will collapse before the end of the year and very likely before the end of the summer. When this Crisis hits it will be worse than 2008. And the world Central Banks will not be able to control the damage.

What makes this time different?

Several items:

1)   The Crisis coming from Europe will be far, far larger in scope than anything the Fed has dealt with before.

2)   The Fed is now politically toxic and cannot engage in aggressive monetary policy without experiencing severe political backlash (this is an election year).

3)   The Fed’s resources are spent to the point that the only thing the Fed could do would be to announce an ENORMOUS monetary program which would cause a Crisis in of itself.

Let me walk through each of these one at a time.

Regarding #1, we have several facts that we need to remember. They are:

1)   According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.

2)   The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

3)   The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

4)   Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

As bad as the above points may be, they don’t even come close to describing the REAL situation in Europe. Case in point, regarding leverage levels, PIMCO’s Co-CIO Mohammad El-Erian (one of the most connected insiders in the financial elite) recently noted that French banks (not Greece or Spain) currently have 1-1.5% capital relative to their assets, putting them at leverage levels of nearly 100-to-1.

http://www.marketwatch.com/story/sovereign-debt-spiral-seen-imperiling-europe-2011-09-23?pagenumber=2

And that’s France we’re talking about: one of the alleged key backstops for the EU as a whole.

To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a problem the size of the coming EU’s Banking Crisis. There are already signs that bank runs are in progress in the PIIGS and now spreading to France (see El-Erian’s comments in the article above).

I want to stress all of these facts because I am often labeled as being just “doom and gloom” all the time. But I am not in fact doom and gloom. I am a realist. And EU is a colossal mess beyond the scope of anyone’s imagination. The World’s Central Banks cannot possibly hope to contain it. They literally have one of two choices:

1)   Monetize everything (hyperinflation)

2)   Allow the defaults and collapse to happen (mega-deflation)

If they opt for #1, Germany will leave the Euro. End of story. So even the initial impact of a massive coordinated effort to monetize debt would be rendered moot as the Euro currency would enter a free-fall, forcing the US dollar sharply higher which in turn would trigger a 2008 type event at the minimum.

Moreover, we need to consider that the Fed is now so politically toxic that Ben Bernanke is literally going on the campaign trail to attempt to convince the American people that the Fed is an honest and helpful organization. Put another way, there is NO CHANCE the Fed can announce a large-scale monetary policy unless a massive Crisis hits and stocks fall at least 15%.

Finally, regarding my third point… if the Fed were to announce a new policy it would have to be MASSIVE, as in more than $2 trillion in scope. Remember, the $600 billion spent during QE 2 barely bought three months of improved economic data in the US and that was a pre-emptive move by the Fed (the system wasn’t collapsing at the time).

So given that the Fed will only be able to announce a large scale program in reaction to a Crisis, whatever it did announce would have to be ENORMOUS, a kind of shock and awe, attempt to rein in the markets.

Moreover, it would literally be THE LAST QE the Fed could hope to ever announce as political outrage from the ensuing Dollar collapse and inflationary pressures would likely see the open riots and/or the Fed dismantled (this has happened twice before in the US’s history).

In simple terms, the Fed’s hands are tied until a huge Crisis hits. And then, if the Fed acts it’s going to have to go “all in” with a massive program. If it does, we will still experience a Crisis, as the Dollar would collapse pushing inflation through the roof as well as interest rates (which in turn would destroy the banks as well as the US economy).

In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.

Again, this time it is different. I realize most people believe the Fed can just hit “print” and solve everything, but they’re wrong. The last time the Fed hit “print” food prices hit records and revolutions began spreading in emerging markets. If the Fed does it again, especially in a more aggressive manner as it would have to, we would indeed enter a dark period in the world and the capital markets.

 

Country	GDP
European Union	$16 trillion
United States of America	$14.5 trillion
China	$5.8 trillion
Japan	$5.4 trillion
European Central Bank	$3.8 trillion
Germany	$3.2 trillion
US Federal Reserve	$2.8 trillion
France	$2.5 trillion
United Kingdom	$2.2 trillion

 

Banking System	Total Assets	Total Assets Relative to GDP	Total Assets Relative to Central Bank Balance Sheet
Europe	$46 trillion	287%	1,210%
US	$12 trillion	82%	428%

This is not Doom and Gloom, this is reality.

With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.

And we’re just getting started. Indeed, we just closed our 63rd straight winner last week: an 8% gain.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 63 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research

 

Once again the US economy is tanking and everyone is talking QE 3. Sorry folks, it ain’t coming. Bernanke said point blank that it was less attractive as a monetary tool as far back as May ‘11!!!

Q. Since both housing and unemployment have not recovered sufficiently, why are you not instantly embarking on QE3? — Michael A. Kamperman, Waco, Tex.

Mr. Bernanke: “Going forward, we’ll have to continue to make judgments about whether additional steps are warranted, but as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate…

“The trade-offs are getting — are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It’s not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we’re going to have success in creating a long-run, sustainable recovery with lots of job growth, we’ve got to keep inflation under control. So we’ve got to look at both of those — both parts of the mandate as we — as we choose policy”

http://economix.blogs.nytimes.com/2011/04/28/how-bernanke-answered-your-questions/

Even the biggest monetary doves are now agreeing with Bernanke. Bill Dudley, of the New York Fed, who’s been braying for more QE for over a year had the following to say on Wednesday:

Fed’s Dudley: If Growth Continues, More Fed Stimulus Unwarranted

The leader of the Federal Reserve Bank of New York repeated Wednesday his expectation that the U.S. central bank will not need to provide additional stimulus to the economy, even as he left the door open to further action.

Acknowledging the options before the central bank each have costs and benefits, New York Fed president William Dudley said “as long as the U.S. economy continues to grow sufficiently fast to cut into the nation’s unused economic resources at a meaningful pace, I think the benefits from further action are unlikely to exceed the costs.”

http://online.wsj.com/article/BT-CO-20120530-712819.html

Folks if you’re buying into the whole QE 3 is coming on June 6^th  argument you’re out of your minds. This is an election year. If the Fed announces QE 3 now, Obama is done. Do you really think this is going to happen when even the Fed’s biggest doves are noting that the consequences of QE outweigh the benefits?

With that in mind, Europe will be collapsing as no one (not the ECB, not the IMF, not the ESM, and not even the Fed) will be stepping in to prop it up. The reason? NONE of these entities have the funds (Europe’s banking system is $46 trillion in size) to do so (bank runs are pushing leverage levels even higher in Spain, Greece and elsewhere).

Moreover, the political environments for their organizations (the US for the Fed and IMF and Germany for the ECB and ESM) will not permit a massive intervention. If the Fed cranks up the printing press, Obama loses any hope of re-election. If the ECB cranks up the printing press, Germany walks. End of story.

With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.

And we’re just getting started. Indeed, we just closed our 63rd straight winner last week: an 8% gain.

So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 63 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.

To learn more about Private Wealth Advisory and how it can help you make money in any market…

Click Here Now!!!

Best Regards,

Graham Summers
Chief Market Strategist
Phoenix Capital Research