Do you remember when there was a European banking crisis? It was a “whole” several weeks ago (not years) so that makes it quite difficult to remember. Hmm, what was it that almost “brought the global banking system to its knees?” Was it Greece? I can’t seem to recall; after all, March 2012 was a long time ago – don’t you agree?

That’s right! It was Greece. It was insolvent, then it was saved, then it was insolvent again, then it was saved, then it was insolvent again…then the banking mafia literally rewrote the rules of the game (bond sales) and screwed bond holders out of ~80% of their money and issued newer bonds to replace the old insolvent ones. Oh, and the new bonds are already nearly worthless.

During that time, if you recall, I constantly reminded everyone that this so-called “ring fencing” and/or “savior” plan wouldn’t last (again, the new bonds are in a huge loss position) and that there was worse news out there: Portugal, Spain, Ireland, and possibly Italy.

Well, the on-again off-again insolvency game is perking up in Spain and this is one country that is said to be too big for the ECB to save.

For over three years now the sole source of “stimulus” for European and US economies, and thus the stock market rally, has been from money printing and central planning of the respective central banks. The market was scared today when it looked like the spigot of “free” money may be shutting off. Spain held a bond auction and the best word to describe it is “caca.” I guess in Europe they were saying “STOP! Don’t touch that (auction), it’s caca.”

The auction was so bad it caused Spain’s 10-YR bond yield to spike 4.46% today. This is turn spooked equity investors as they wondered “Why aren’t the central planners buying up this garbage? Don’t they know they have to buy this worthless paper to keep me happy so we’ll stay long equities?”

Bloomberg had the I placed at the top.

Also from Bloomberg today “Spanish Yields Reach 12-Week High on Auction

Spain sold 2.6 billion euros ($3.4 billion) of bonds, near the minimum planned, and borrowing costs rose as the impact of European Central Bank’s emergency lending waned. Bonds and the euro declined.

…Spain’s financing costs had been held down by the ECB’s 1 trillion euros of three-year loans to banks, known as the LTRO, some of which have been recycled into high-yielding government debt. Yields had declined as much as 95 basis points after ECB President Mario Draghi announced the policy on Dec. 8 and Spanish banks’ holdings of government debt jumped to 220 billion euros in January from 178 billion euros in November.

“It’s back to reality now, the auction shows the LTRO effect has been exhausted and now demand for Spanish paper is becoming much more price sensitive,” Peter Chatwell, a London-based fixed-income strategist at Credit Agricole Investment Bank, said in a telephone interview. – Keith Jenkins, Bloomberg.

By the way, Italian bonds spiked today too (+4.13%) and it is an even bigger financial mess than Spain.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846

Larry Levin's Trading Advantage is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results.

Trading Signals from the Electronic (ES) mini-SP 500

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Algorithm positions (4)

“Reading the Tape” positions (3) …combined Secret’s, Algo, & “Reading the Tape” total… -4.00

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YM 13020 / 12966
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