Stress Test Says No Problems With EU Banks - Just Buy, Buy, Buy!

And so the market rallied once more.

Yeah.. and again the volume isn't there. (what's new? :P)

The CNN market wrap: Stocks rally on day, week

• NEW YORK (CNNMoney.com) -- Stocks rallied Friday, with the Dow briefly turning positive for the year after a report showed that most of Europe's big banks passed their stress tests, easing investor worries about the strength of the global economy......
• "The lack of bad news in the stress tests helped the market," said Tom Schrader, managing director at Stifel Nicolaus. "Everyone was anticipating some negative news and when that didn't happen, everything popped."The test of 91 banks showed all but 7 would be able to hold on during a downturn and emerge in good shape, even if they suffered billions in asset writedowns and trading losses. However, critics contend that the tests didn't go far enough to account for how banks holding sovereign bonds might react if a particular country defaulted on its debt, say Greece or Spain.
• "The market is indicating to me that it wants to go up and we're seeing some good solid earnings and economic news to support that," said John Wilson, chief technical strategist at Morgan Keegan. "But I'd love to see some better (trading) volume come in to reinforce that." He said that the weak trading volume reflects the fact that its summer and many market pros are on vacation or are holding off on making big moves until the fall. However, it also indicates less enthusiasm on the part of buyers.

Seriously!!!!

Firstly.. apparently the EU Stress test was a NON issue... according to CNN article.

• Stocks rallied Friday, with the Dow briefly turning positive for the year after a report showed that most of Europe's big banks passed their stress tests, easing investor worries about the strength of the global economy......
• Everyone was anticipating some negative news and when that didn't happen, everything popped."The test of 91 banks showed all but 7 would be able to hold on during a downturn and emerge in good shape, even if they suffered billions in asset writedowns and trading losses

That Stress test.

Oh lord... what on earth is it testing really???

What's the main issue in the current EU crisis? Isn't it sovereign debt? I wonder what is the Greece debt crisis all about?

So what did EU Stress really test the banks on? On Bloomberg News: Stress Tests for Banks Assume Loss of 23.1% on Greek Debt, 12.3% on Spain

• The 91 banks undergoing stress tests were examined on European sovereign debt losses only for the bonds they trade, rather than those they hold to maturity, which may make the tests easier to pass.

Ahem... this so-called stress tests only test on the sovereign bonds that the EU banks traded in.

And not on the sovereign debts that they hold!

GLEE!

These buggers are assuming that the sovereign debts would NOT DEFAULT!!!!!!!!

And yeah.... no wonder only 7 out of the 91 banks tested DID NOT pass with flying colors!

No crisis huh?

• The stress tests assume a loss of 23.1 percent on Greek debt, 12.3 percent on Spanish bonds, 14 percent on Portuguese bonds and 4.7 percent on German state debt.
  “The haircuts are applied to the trading book portfolios only, as no default assumption was considered,” according to a confidential European Central Bank document obtained by Bloomberg News dated July 22 and titled “EU Stress Test Exercise: Key Messages on Methodological Issues.”

No wonder the critics are laughing their asses off on the current state of affairs. It's so outright pathetic and scandalous!

• The “lenient treatment of bank book exposures” is part of a “sugarcoating” of the stress test results, Sony Kapoor, managing director of policy group Re-Define Europe, said before the criteria was released.
• The decision “allows banks to basically underestimate their exposure to distressed peripheral debt,” Brown Brothers Harriman, the New York private bank founded almost 200 years ago, said in a note to clients today. “By leaving out stress tests on the banking book, then a true picture of bank balance sheets will clearly not be obtained.”

Seriously? Why bother with the stress test? Why the charade? Why the shenanigans?

And then tests are made so that the majority of banks would pass the test, where and how are we going to get any negative news?

No wonder. Without the negative news, the beast within the market then boldly declares "most of Europe's big banks passed their stress tests, easing investor worries about the strength of the global economy."

No problems...

Everything is fine and dandy.

LOL!

Buy! Buy! Buy!

Oh and the article made a comment on the non-existing volumes...

• He said that the weak trading volume reflects the fact that its summer and many market pros are on vacation or are holding off on making big moves until the fall.

Do you buy the summer theory? Them market pros are on vacation?

Well buy! buy! buy!

LOL!

Well.. perhaps the 'smarter' players are on vacation... but what about the most recent money outflows from the equities market?

Posted on Thursday: And The Money Keeps Flowing Out From US Equities

• Americans pulled out some 4.23 billion from equities for the period ending 7th July!
  Americans pulled out some 3.27 billion from equities for the period ending 14th July!

I wonder how many of the money pulled out from equities represent the monies from the pros?

And if this was a planned summer vacation, why only pull out in July? Isn't it leaving a bit way, way, way too late?

I do not know.... just buy, buy, buy! LOL!

Anyway, here are the European bank stress test results by country and bank (HT Calculated Risk and also from Calculated Risk: Bank Failures #97 to #101 , Bank Failure #102: SouthwestUSA Bank, Las Vegas, Nevada , Bank Failure #103: Home Valley Bank, Cave Junction, Oregon

And some interesting postings from Mish: Emergency Press Conference on Newark Budget Gap; Massive Service Cuts; No Toilet Paper for City Offices; Newark is Bankrupt ( see the clip included! No TOILET PAPER!!!!! WOW! ) Four-Week Moving Average of Weekly Unemployment Claims Holds Steady near 460,000, No Progress for Seven Months and Bell California Emails Gone Viral; Citizens Protest $800K Salaries; City Manager Resigns; Can Anything be done about $600,000 Public Pensions?

On Naked Capitalism: Bankrupt GM uses $3.5 billion of taxpayers’ money to buy subprime auto lender AmeriCredit and signal a return to the good old days for Wall Street

Life is GREAT!!

ps: With all the constant nonsense.. perhaps it's no wonder more and more people are simply taking their money out of the US equities. yeah.. let these pros 'main sendiri!' LOL!

ps: If you are a trader, you are always told to listen to what the markets are saying.... but then.. sometimes.... errr...... do you like what you are hearing? :P

ps: On the edgemalaysia: Seven banks fail Europe test, credibility questioned

• "Arguably the failure here is not the banks concerned, but the test itself. There is little evidence that the tests have been applied consistently and there is a distinct lack of credibility, making this a wasted opportunity," said Richard Cranfield, Chairman Global Corporate Group at Allen & Overy.

A wasted time too? :P

• "Despite questions about transparency and how the Euro stress tests don't measure up to the U.S. tests last year, I think these tests will start to put these euro zone concerns behind us," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.

huh Chris??????

Despite the transparency....

Despite how the Euro Stress tests don't measure up......

Despite it all.....

you think these tests will put euro zone concerns behind us????

LOL!

Chris, do you own a sotong at home? :P

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What Hugh Hendry Said About The PIIGS Back On Jan 2009

Dedicated to Solomon:

• solomon said...
  Is this Mr Hugh, the same hedge fund manager that predicted the last fall of Wall Streets?If it is, I think he is the person who bet China economy will slow too.

Regarding Mr.Hugh.

He had feared so for the PIIGS since Jan 2009! This was from a posting from ZH...

• ........ the esteemed Columbia professor, at 4:50 into the clip, asks "How long has this Greek question been on the table. Ablout 10 weeks maybe?" A rather violent explosion from Sachs follows when Hendry calls him out on his tenured stupidity. All this was discussed yesterday. However, we wanted to provide a response to the Ivy League professor, as he did pose a legitimate question. In the following FT interview from January 2009, Hugh Hendry discussed the future of the eurozone and the PIIGS, and at 24 seconds into it, he provides the response Sachs is seeking: "I fear [the collapse of the Eurozone] is becoming more likely." He follows "If we saw parity with the euro, my goodness, that would be deemed to be unthinkable." And concludes, "There is a shortage of dollars. People think I'm crazy - they are printing billions, trillions of dollars. But keep in mind America has $50 trillion of debt outstanding. And that was fine because they thought it had $50 trillion of assets. And what we are discovering is these asset prices deflate - it's vaporization..." Dear Mr. Sachs - the very person you were sitting across the table from foresaw everything to the dot, just as it would happen 16 months later, even as you were calling up old buddies to get that Teacher of the Year award, or get that extra fellowship (in demagoguery?). Our advice to you is do what your parents did, get (an honest) job sire.... which will never happen - pouring the Kool Aid is easy and pays well. So here is our second bit of advice: watch all Hendry appearances, and listen to what he says. He will always ends up right, and you will always be wrong, since you defend a broken system which is fated for implosion. And just as Hendry sees deflation first, then hyperinflation (and watch this clip for some more brilliant insight), so it shall be. And for some reason people like Sachs will once again be invited to roundtables, in which they will goundlessly claim that nobody foresaw any of ensuing Keynesian collapse... So now that we have answered your question, we have one of our own - how does Columbia allow this level of mediocrity to be publicized on national television?

23 Jan 2009.

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It's Time To Panic: Debate On European Banking Crisis

Some of the most sensible words said about the European banking crisis.

Taken from an interesting roundtable discussion shown on Newsnight.

• Seriously, says Hugh Hendry. It's time to worry. Panic.
  
  "Banks today are refusing to lend to each other. Bank share prices are collapsing. We have no ability to gauge the credit-worthiness of the banking system."
  
  "I say, let's purge this system of its rottenness," recommends Hendry. "Let's take on a recession. It's going to be tough. People are going to lose their jobs."
  
  "The banking sector is responsible for gross folly," he says. The solution is just, "Don't pay them. Don't reward folly."
  
  "We can spread this over 20 years or we can get rid of it over 3 years... You make a mistake, you pay for it." ( Source: here )

( Here's a new nice article on Hugh Hendry, hedge fund manager of Eclectica Management : here on independent.uk )

Do watch the video...

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