Monthly ArchivesJuly 2016

Italy’s Banking Crisis image

As Europe struggles to understand the fallout of Brexit, there is a real crisis brewing. A very large and real concern in Europe are non-performing loans sitting on Italian banks balance sheets. These loans represent roughly 17% of the market which equates to €400 billion (at today's exchange rate comes to 25% of Italian GDP!).  The future for Italian banks will either be a bail-in (think what happened to Cyprus depositors) or a bail-out which is harder under EU guidelines.  The bail-in is, of course, a formula for bank runs.  And this will not only affect Italy.  Italian loans are packaged and resold as others, and Italian banks take loans from other European banks. These banks in turn have borrowed ...

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June 2016 Update image

  June was an exciting month in the markets with all eyes on Europe and Britain's vote to remain or leave the EU.  In looking at the market decline, it is clear that the investment community was surprised at the outcome of the referendum in the U.K. What is most surprising is that they were surprised. Going into the referendum, polls showed remain vs. leave were about even with 10% or so undecided.  The money bets seemed to be significantly in favor of staying which could be a reason why the selloff was so severe from institutions reversing positions. Brexit Breaking up is hard to do, especially when it involves relationships among key players in the global economy. After a referendum on ...

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