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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (18480)	11/29/2016 11:37:29 AM
From: John Pitera	3 Recommendations Recommended By 3bar roguedolphin sixty2nds Read Replies (1) \| Respond to of 33421

this stock rally has really been developing cracks in it's leadership, as well as the rapidity of the advance in groups like the KRE regional banks. Some of the Pharma and biotech. The Chinese Yuan has been steadily depreciating, and the capital flight out of China is severe enough that the Chinese monetary authorities have forbidden China companies from making cash purchases of overseas companies, as it's now viewed as a capital flight mechanism. That's a fairly big development, as China had been making some large acquisitions. The rally in commodities like copper and zinc have been dramatic but looking as if it's this hyper liquidity bouncing around asset classes. The fact that we have the biggest spread between 10 year treasuries and bunds going back to the 1980's is showing that is displaying teetering action, in the bigger picture. The Increase in US rates has really broken the rational for buying dividend stocks as a yield play where the underlying companies are not showing top line revenue growth or bottom line GAAP earnings growth and the Italian referendum is going to push the EUR/$ down through 1.05.... where it's been knocking on that level multiple times and will give way to a lower EUR level... Just like the USD index had hit the 100 to 100.71 area 3 times over the past 18 months and was able to break above it. ----------------------------------------------------------------------------------------------- Monte dei Paschi’s Future Hangs on Sunday Vote Italian referendum on a constitutional overhaul threatens to upend Monte dei Paschi’s rescue plan By GIOVANNI LEGORANO Nov. 29, 2016 5:30 a.m. ET MILAN—The day of reckoning for Banca Monte dei Paschi di Siena SpA, Italy’s No. 3 lender by assets and one of Europe’s most troubled, is drawing near. Long-simmering political, financial and market tensions promise to come to a head next week when it becomes clear whether Monte dei Paschi will be able to succeed in executing a make-or-break plan to bring itself back to health. This weekend will be decisive, when Italians vote on a popular referendum that could open the door to political instability and unnerve investors, threatening to derail Monte dei Paschi’s rescue plan. That in turn could force a state bailout of the lender, perhaps by year-end—deeply complicating Italy’s efforts to clean up its banking sector. Nervous investors have pummeled Italian banking stocks ahead of Sunday’s vote, sending the FTSE Italia All-Share Banks Index down 16% in the past month through Monday. Indeed, while banking stocks in much of the rest of Europe have recovered since the post-Brexit crash, *Italian banks are down 23% through Monday* since the U.K.’s June 23 vote to leave the European Union. “The Damocles’ sword of the referendum’s outcome is hanging over MPS and the Italian banking system,” said Roberto Brasca, vice president and equity fund manager at AcomeA SGR. between Dec. 7 and Dec. 31, the deadline that the European Central Bank has set for the bank to raise the additional capital. The capital increase is the bank’s third in three years and is more than seven times its market capitalization. The entire plan “is like making several holes-in-one in a row,” Monte dei Paschi Chief Executive Marco Morelli told aides recently, according to a person familiar with the matter. Now, the national referendum this Sunday in Italy on a *constitutional overhaul threatens to upend the plan entirely.* Italian Prime Minister Matteo Renzi has pledged to resign in the case of a “no” vote. With the “no” vote leading the polls, investors fear a change of government—just as *antiestablishment and euroskeptic parties are surging in Italy—could roil markets and make the capitalization impossible.* That could in turn set in motion a series of risky events that will provide the biggest test so far of the EU’s new banking rules. In case of a “no” vote, the bank and the government, which has heavily backed Monte dei Paschi’s recapitalization plan, may choose to move quickly—perhaps within days—with a new plan in order to prevent any run on deposits or a wider destabilization of Italy’s banking sector. In recent years, Monte dei Paschi has bled deposits at times of distress. The bank lost deposits last winter after the government had to rescue four small banks. However, its liquidity position remains largely solid; Monte dei Paschi’s liquidity coverage ratio stood at 153% at the end of September, well above a European requirement of 70%. More complicated would be a fresh plan to repair its precarious capital position. If its shares crumble following a “no” vote and confidence in the bank erodes even further, the government would have no choice but to step in to rescue the bank, say bankers, lawyers and officials familiar with the situation. (A caretaker government, possibly headed by Economy Minister Pier Carlo Padoan, could take over for a limited period in case of a “no” vote.) And Rome would have to abide by European rules whereby any public rescue means junior bondholders would have to suffer losses. The first step would be a loss for shareholders and the forced conversion of junior bonds into equity. In Monte dei Paschi’s case, that means mom-and-pop investors holding €*2 billion in such bonds would be left holding shares that have lost 86% this year through Monday.* On Monday, the shares lost 14%. Once the junior bondholders are left with shares, the government could be free to provide the bank with fresh capital, either via a direct injection of fresh funds or by guaranteeing a capital increase to investors. Any of these options will require approval by European authorities. A bailout of Monte dei Paschi could undermine confidence in Italy’s banking sector at large and the lenders’ ability to get a grip on their low profitability, vulnerability to low interest rates and €360 billion in bad loans. Indeed, any market turmoil stemming from Monte dei Paschi’s situation could complicate plans by UniCredit SpA, Italy’s largest bank by assets, to raise as much as €13 billion in order to strengthen its own balance sheet and unload €20 billion in bad loans. Jean-Pierre Mustier, UniCredit’s new chief executive, is slated to unveil a sweeping reorganization on Dec. 13 aimed at creating enough confidence in investors to support the huge capital increase—a tough task for a bank with €80 billion in bad loans and that has effected €94 billion in capital increases and write-downs in the past eight years. Moreover, the four small banks rescued last year still are without a buyer and may need more capital, while Veneto Banca SpA and Banca Popolare di Vicenza SpA, which were bailed out by a backstop fund for lenders, also may need fresh cash. wsj.com

To: John Pitera who wrote (18480)	11/29/2016 1:10:09 PM
From: richardred	3 Recommendations Recommended By 3bar John Pitera sixty2nds Read Replies (2) \| Respond to of 33421

I guess a better title to the story would have been. Italian Banks /The Leaning Tower of Pisa :+ ( It would be interesting to find out where the bulk of their troubled & non performing loans are concentrated. I saw what happened to Deutsche Bank on the recent scare.