SITREP: 2017’s $1.9–$2.485 Trillion Collapsing EU

A better than even-money bet today is that the Stock Market will hit a new all-time high this week.

And, as it does, we should light off the biggest short-squeeze in the history of the Universe.  Or at least the East Texas Quadrant.

How do I know this? Well, my friend Bullish Bob up in Dallas sent me a note this weekend – and when I called him back, he admitted that for now, he has changed his name to Bearish Bob.

“What gives, Bob?”

Bearish” explained to me that he’s scaling into a largish short position – and I’ll explain that to subscribers Wednesday.  But, while Bullish is Bearish, Ure-ish is Bullish – at least in the very short and short-squeeze term either bet is a winner depending on the timebase.

The problem, in a nutshell, is that too many people have been hearing the charlatans with their chanting that it’s time to go short…and too many people are over on “that side of the Titanic” for us to have a massive economic capsizing.  We can’t all just stand on that side – we need to RUN there in order to capsize an economy this big.

Besides the seasonal, this is a presidential bidding year.  Hillary will (likely) win because a) people are stupid and b) she will simply outspend on media compared to Trump.  It’s all pretty simple.

BUT what no one has been talking about  – at least not many besides us – is the notion that come next summer/fall, the ultimate peak will be reached and it will be then at Bullish Bob, now Bearish Bob will be laughing and counting his dough while Mrs. Bullish and the Ures munch on the finest steaks in Ft. Worth.

BUT, like I say, in the meantime, the clock is running slow.  And let me explain why.

As you know I forecast in January of this year (on Coast To Coast with /George Noory) that virtually everyone on the planet was wrong, except Ure’s truly and that we would set new all-time highs by May.

I was wrong.  The markets don’t move at the speed of thought.  They move at the speed of sheep – and grazing ones, at that.

Which means July or August for the new all-time highs and then the delicious short-squeeze – and then when the last of the bears has been spayed of their family jewels, along will come collapse.

I am estimating now – based on slower movement of things – that the collapse might be a mid 2017 to fall 2017 event.  Maybe Q1 ‘17 but the odds decline.

But when it comes, there will be a bail-in in Europe and the central banksters of the USA will find some way to screw Americans into a bail-in and so forth because there may not be enough money to prevent the end of the financial world, after all.

How much will it take?

Well, let’s begin this morning’s analysis with a report that says the European Union will need a bailout of $150-billion Euros, about $165.some billion of Federal Reserve Adjustable Money. (I call it that because it has been adjusted down to just 4.2% of its purchasing power since the Fed came along in 1913.)

Assuming you know how to use Google Translate, but it’s too early in the morning for such difficult work, let’s see if the machine translation over here works.  The top part of this simply says:

German Bank Chief Economist Calls 150 billion

Europa droht eine neue Bankenkrise. Europe risks a new banking crisis. David Folkerts-Landau, Chefvolkswirt der Deutschen Bank, schlägt deshalb ein gigantisches EU-Rettungsprogramm vor. David Folkerts-Landau, chief economist at Deutsche Bank, therefore, a huge EU bailout program suggests. Private Gläubiger sollen sich nicht beteiligen. Private creditors should not participate.

About 3-minutes after that crossed the wires this weekend, my consigliere was on the line with an alarming sound to his voice.

You know what this means, right?

Well, of course.  Ever since the Co-CEOs were shown the door at DB the middle of last year, we have been waiting for the other shoe to drop about the German banking situation.  Remember, this is the region of the Herstatt problem.  This only looks like a size 7 shoe.  It will grow to a size 13 to 16 shoe before it’s all over.

The Wikipedia entry on the events of June 1974 are worth reviewing because – while most people don’t realize this – the world almost collapsed into the bottomless pit of depression in 1974 when international credit locked up due to the Herstatt Bank stiffing its counter-parties…Wikipedia explains more politely:

“On 26 June 1974, German regulators forced the troubled Bank Herstatt into liquidation. That day, a number of banks had released payment of Deutsche Marks (DEM) to Herstatt in Frankfurt in exchange for US Dollars (USD) that were to be delivered in New York. Because of time zone differences, Herstatt ceased operations between the times of the respective payments. The counterparty banks did not receive their USD payments.

Responding to the cross-jurisdictional implications of the Herstatt debacle, the G-10 countries (the G-10 is actually eleven countries: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States), Luxembourg and Spain formed a standing committee under the auspices of the Bank for International Settlements (BIS). Called the Basel Committee on Banking Supervision, the committee comprises representatives from central banks and regulatory authorities. This type of settlement risk, in which one party in a foreign exchange trade pays out the currency it sold but does not receive the currency it bought, is sometimes called Herstatt risk.

With this in mind my consigliere who is also a decades-long student of long wave economics explained it:

“In my experience as a trader, you do know that the FIRST REPORTS are generally between 1/10th to 1/15th of the eventual size of the eventual bailout requirements…”

Well, shit, yeah, there is that.

So let’s run out the worst case:  15 TIMES  $150 billion Euros is  only 2.25 TRILLION Euros.  And converted to US Adjustable Value Paper at this morning’s rates, we come up with,,,uh… $2.485 trillion DOLLARS. 

What we both came out of that inspirational little phone discussion was the open question of whether “continuous settlement” – which was the “answer” in the Herstatt near-disaster in ‘74, could work under the crushing kind of systemic loads that this coming debacle will impose.

And that means we can now fairly safely predict that there will need to be a European bail-in in 2017. 

What’s worse, though, is we already know that the Central Banksters, who are above the law already anyway, will take their problem to the stupid Americans.

I say stupid Americans because Europe regularly stiffs the US on NATO bills and such, so there is no reason we would expect them to have a sudden onset of honest dealing feelings just because they fake their way through a “come to Jesus” on monetary-driven collapse.

Tigers tend not to change their stripes and the leech-class of the European Union all want to have some kind of retirement plan…so yeah, a good chunk of the bailout will be to pay off the founders of Europe’s crooked revolution and set up for the Muslim invasion.

Far from being stripped for their monumental (as history will reveal) screwed up experiment in multiculturalism, they’re about to “shake down the “vic” and skate. 

The ONLY question left on the table is whether Queen Clinton II will be able to hoodwink the American people into participating in such a bailout.  I mean, it would be the crime family-like thing to do, so we put that on the books as a likely for the 2018 period, if not before.  I really gotta set up a Ure family foundation.

Still, in the very short term, my short squeeze on markets is already gearing up for this morning as we head to the S&P 2,300 or 2,400 range along with the 20,000 plus Dow.

It’s not that we (read: little people) get to skate on collapse.  It’s just that you have to be patient like a wildlife photographer.  “Wait for it……..wait for it…..wait for it……”

Bullish (and now Bearish) Bob and his clients will get rich in the end.  But  since I’m taking lessons in patience, look for me on the long side for a while as we “Wait for it….wait for it….” 

All the while snapping pix of the bears being killed.  S&P 2,200 sound crazy?

No more so than the fairytale of $150 billion Euros.  Trust me on this.

Summer Doldrums

You can sleep in, or simply skip most of the workweek.  Until Friday.  Then you’ll be busier than the one-armed paper hanger.

Friday brings us the Consumer Price report, Retail Sales, Empire State Manufacturing data, Industrial production and business inventories.

It has the trappings of a buy the rumor set up with futures pointing up 70’ish on the Dow.

War Seems Sadly Never Obsolete

Now, after a few more troops to Afghanistan, here come hundreds more for Iraq.  Say, that’s some Nobel Peace prizer, we got, ain’t it?

Which may be why Trump is vetting General Michael Flynn, you think?  Seems Obama, et al, are fighting the wrong war.

Shake and Quake

We trust our reader in Ecuador made it through the twin quakes down that way (5.9 and 6.4) without major difficulties.  (Look for their posts later on today in the discussion side of this site).

In the meantime, has California gotten any more prepared for the big one that still lurking out there on the horizon?  Well, some improvement, says a report over here, but nowhere near ready.

The Old Stomping Grounds Work

Interesting report over here about how people with a lot of allergies might enjoy a visit to Snowflake, Arizona.

Elaine attended high school up in that area…but she says the winters are awful, or we might consider the place.  That and the fact it is too close to the failing border for my tastes, but still, worth looking into if your allergies are bad.

Not that it will last:  Phoenix used to be an allergic person’s Promised Land.  And then came the lawns and the trees and now…well…better than some cities, but falling in air quality over time in a big way.


SITREP: 2017’s $1.9–$2.485 Trillion Collapsing EU — 13 Comments

  1. If Trump wins-and gets his tax plan through Congress-Doomsday may disappear as millions will be taken off of tax rolls,and will now spend to send us into a revival of the Roaring Twenties.

  2. U.S.A….Under Socialist Agenda….as we prepare to hear from our dictator-in-chief as to what he wants for the people of t/his country…and what he will do to correct the atrocities inflicted upon some members of his choosing… only he can right the wrongs instilled in the founding’s of this nation….lame duck is not in his vocabulary….destroyer of civilization is more like it….and he will pass that baton to “Queen Clinton II” …imho

  3. George, read the piece on General Flynn hoping to find something new. Unless the article did not do him justice, all I found was: attack them and then stay indefinitely. And he ticked off numerous countries to do this too. Well, of course no conventional force on earth can withstand our military power, but then you have to face the price to stay indefinitely in blood and treasure? We invaded Iraq over 13 years ago, losing 5000 young soldiers and putting $8-$10 Trillion on the national debt. So, under his plan are we talking about another 100,000 dead? Is he talking about putting another $50-$100 Trillion on the national debt? So I ask, isn’t it time to stop being mad, and time to start using our heads?

  4. You are far too generous…. They always lie by a factor of at LEAST 20.

    The first 700 billion turned into 1.4 trillion almost overnight.

  5. “…will take their problem to the stupid Americans.”

    EDITOR CORRECTION: “….will take their problem to the bought and paid for American polticians.” (who make the votes that count, not the stoopid ‘mercans)

  6. I’M not so sure that the EU and NATO are stiffing us, after all NATO is our baby and the EU are our colonies, and without them you would have to put American troops on the Russian borders well if we dared to that is.As far as the American people being stupid well you will no argument from me on that one!!

    • Alternative, we could sell Putin Europe on a net net basis, take the cash, zero our national debt and let him live with the invasion. Just sayin

      • Putin is like the contractor who buys a derelict house: He’s fully equipped and prepared to repel and eliminate the invasion. We’ve never made a point out of winning since WW2.

  7. “A billion here, a billion there, pretty soon, you’re talking real money.” Everett Dirksen.

    Sorry. Somebody had to say it.

  8. I remember reading about Herstatt and thinking WTF! No honor among thieves, eh?