What A Day

It was obvious that the European Banks who were loaded up on Greek Debt would be the ones to most benefit from the European Bailout. The only variables were when and how low would share prices fall before it happened?

Here is a list of which country’s banks own how much of the outstanding Greek Debt -

France 25%
Switzerland 20%
Germany 15%
US 5%

The CAC (the French version of the S&P 500) was up over 9% today. We were on the brink of the market imploding. To give you an idea of how bad last week was, the CAC is now trading slightly above last Tuesday’ close.

The European Bailout is effectively a mechanism by which the EU and the IMF will print money and use that money to buy the debt of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) owned by European Banks. This is the same game played in the US last year, where the FRBNY created money and used it to buy mortgages from US Banks.

Now the European Taxpayer will be left holding the bag. Make no mistake that this was a monumental crisis. I have to believe that if the EU hadn’t stepped up over the weekend, then next weekend we would be waiting to see which European Banks would end up getting nationalized. The markets are telling you that we were that close to falling into the abyss.

Now if any of the PIIGS default, then the Banking System will not feel a thing. I can’t wait to see how big the bonuses will be next quarter at the European Banks…

I wanted to see how today traded before committing all of my money. I took a large position in a US Index proxy at the open today and will scale into stuff as it breaks out.

I really think that this decision by The EU is a game changer. They will buy $1 trillion of this debt. If you figure that the average bank is leveraged 20 to 1 on assets, then you can see just how much buying power $1 trillion creates. The question now is does the US underperform, as money leaves the safe haven in search of risk? Does Gold underperform with diminished fear, or outperform on increasing Inflation expectations?

I wrote the following last Thursday –

“Everybody knows that the banks of the US and Europe are insolvent and that the only thing keeping them propped up is bs accounting and Government support via the taxpayers purchasing of bad loans. They also know that the only reason asset prices are going up is because of Government-funded leverage and Government-sponsored manipulation of asset prices. It is simply a matter of when, not if asset prices collapse again.

So the EU is left with a couple options, if it does not want a full scale collapse of the Euro Zone Economy –

Start Quantitative Easing. This is when the EU will ultimately print about $2.5 trillion in money to buy these bad loans off the books of the European Banks.”

Here are some performance numbers today for some European Banks. They gapped up to these levels (or higher) overnight, so I was unable to buy them. Don’t get upset that you were not in them on Friday, because if the EU doesn’t blink, then these banks gap DOWN the same percentages this morning.

Some of these I may end up owning.

ING +23%
STD +23%
BBVA +19%
BCS +18%
DB +11%
CS +7%

More to come later today.