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BNP Paribas: The Global Meltdown Catalyst?.

  • Written by Syndicated Publisher 305 Comments305 Comments Comments
    September 14, 2011

    This post, in and of itself, should demonstrate to the entire sell side of Wall Street, the mainstream/popular media outlets and all who may follow them that BoomBustBlog forensic research and analysis is simply superior to much of what is significantly overpaid for in terms of investment advice and opinion. Even more, what’s ironic is that as I type this, the ZeroHedge newsticker flashes “Because The First Amendment Does Not Reach Across The Atlantic…

    The idiocy just hit record highs:

      • BNP PARIBAS SAYS IT ASKED AMF TO INVESTIGATE WSJ OPINION PIECE – BLOOMBERG

    What next: the AMF dispatches black choppers to round up all those trop-beaucoup criminal bloggers?

    Hmmm… Speaking of bloggers… Well, I don’t consider myself to be the average blogger with a wordpress account. I come to the table with a full place setting of analytics. For those who don’t embrace this new medium of dynamic, chaos theory embracing, distributed method of knowledge dissemination, all I can say is… Let’s dance!

    Bloomberg reports: BNP Paribas, SocGen Rebound After Rejecting Money-Market Funding Concerns and Company Bond Risk Falls From Two-Year High as French Banks Reject Concerns

    BNP Paribas SA, France’s biggest bank, and Societe Generale (GLE)SA rebounded in Paris trading after rejecting concerns over their access to funding.

    BNP Paribas, which plunged as much as 12 percent, closed 7.2 percent higher, the biggest gain in more than a year. Societe Generale, which slid as much 8.1 percent, jumped almost 15 percent after Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds.

    “For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money- market fund exposure.”

    The two banks dropped more than 10 percent yesterday on a possible ratings cut by Moody’s Investors Service because of their holdings in Greece. French lenders top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Basel, Switzerland-based Bank for International Settlements.

    Repeat quote, “Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds.“For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money- market fund exposure.”” 

     Okay, let’s dance! Keep in mind as you read the balance of this post and the inevitable attempt at trying to disparage my opinion, I am the very same guy that publcily and quite accurately predicted (in detail) the:

    1. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?
    2. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008
    3. The housing market crash in the spring of 2006 and publicly in September of 2007: Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
    4. Home builders falling and their grossly misleading use of off balance sheet structures to conceal excessive debt in November of 2007 (not a single sell side analyst that we know of made mention of this very material point in the industry): Lennar, Voodoo Accounting & Other Things of Mystery and Myth!
    5. The fall of commercial real estate in general (September of 2007) and the collapse of General Growth Properties [nation’s 2nd largest mall owner] in particular (November 2007):BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming…(among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
    6. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
    7. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton,Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
    8. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis

    Bear Stearns/Lehman Deja vu?

    Yesterday, in my post ‘As The French Bank Runs….“, I queried of the sell side, “What the hell took you so long to come to these rather astute observations, dude?” Well, in continuing my crusade of truth against the potential insolvency of French banks, I reference the WSJ article titlled “BNP Paribas Denies Funding Problem

    PARIS—BNP Paribas SA on Tuesday denied it is facing a dollar-liquidity problem, as reported in an opinion column in The Wall Street Journal. BNP Paribas said it is fully able to obtain U.S. dollar funding in the “normal course of business,” either directly or through swaps. In a column published in The Wall Street Journal Tuesday, Nicolas Lecaussin, director of development at France’s Institute for Economic and Fiscal Research, cited an unidentified BNP executive saying the bank “can no longer borrow dollars.”

    A Wall Street Journal representative wasn’t immediately available to comment. BNP Paribas said its has abundant euro short-term funding and has a net dollar short-term funding with maturity shorter than a year worth €60 billion. The bank has €135 billion in “unencumbered assets after haircuts” that are eligible to central banks. The bank also said it is using foreign-exchange swaps to more than offset the recent reduction and “shortening” of funding from U.S. money market funds. French banks, in particular BNP Paribas and Société Générale SA, have been hurt by a perception that they face difficulties in tapping short-term funding in the U.S., as money-market funds cut their exposure to the banks amid fears about potential contagion from the Greek and broader European sovereign debt crisis. Shares of BNP Paribas were down 8.3% at €23.97 recently, the biggest loser on the Paris stock exchange, where the benchmark index was down 1.8%. SocGen was down 3%.”

    Hey, Big Wall Street Bank Execs Always Tell the Truth When They’re in Trouble, RIIIIGHT????

    Here’s more of Alan Schwartz lying on TV in March of 2008

    Like I said above, it’s not as if upper management of these Wall Street banks would ever mislead us, RIGHT????

    Erin Callan, CFO of Lehman Brothers Lying giving an interview on TV in March andagain in June of 2008.

    Even if the big Wall Street banks would lie to us, we have expert analysts at hot shot, white shoe firms such as Goldman Sachs, who of course not only are “Doing God’s Work” but also happen to be the smartest of the smart and the “bestest” of the best, RIIIGHT!!!??? Below we have both Erin from Lehman AND Goldman lyingon TV in a single screen shot. Ain’t a picture worth a thousand words???

    We even had the inscrutable Meredith Whitney say “To suggest that Lehman Brothers is going out of business is a real stretch!” (She OBVIOUSLY DOESN’T READ THE BOOMBUST) as well as Erin Callan, the CFO of this big Wall Street bank on TV lying interviewing again…

    But that damn blogger guy Reggie Middleton put his “put parade”short combo on Lehman right about that time, and had all of these additional negative things to say…

    Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008

    So, does BNP have a funding problem, or is it at risk of the same?

    BoomBustBlog subscribers know full well the answer to this question. I’m also going to be unusually generous this morning being that our prime French bank run candidate has approached my “crisis” scenario valuation band. So, as to answer the question as to BNP, let’s reference File Icon Bank Run Liquidity Candidate Forensic Opinion – A full forensic note for professional and institutional subscribers, and otherwise known as BNP Paribas, First Thoughts…

    The WSJ article excerpted above quotes BNP management as saying: “The bank has €135 billion in “unencumbered assets after haircuts” that are eligible to central banks.”

    OK, I’ll bite. Excactly how did BNP get to this €135 billion figure? Was it by using Lehman math? Methinks so, as clearly delineated in my resarch report on the very first page:

    BNP_Paribus_First_Thoughts_4_Page_01

    The following two pages of this report go on to reveal the games being played to potentially come up with a figure such as the 135 billion quoted above. Boys and girls, I fear those may be Lehman bucks! 

    For those not familiar with the banking book vs trading book markdown game, I urge you to review this keynote presentation given in Amsterdam which predicted this very scenario, and reference the blog post and research of the same:

    But wait, there’s more – much more!

    BNP_Paribus_First_Thoughts_4_Page_04

    BNP_Paribus_First_Thoughts_4_Page_05

    BNP_Paribus_First_Thoughts_4_Page_06

    BNP_Paribus_First_Thoughts_4_Page_07

    This document is 19 pages full of stuff that BNP management may have forgotten to tell you, as well as valuation for both “crisis” and bailout scenarios. What you have before is an anecdotal 5 pages. To put this in perspective particularly since no on the sell side warned about French bank risk before the fact, let’s look at the chart as of the day this research was released and I’ll let you tell me if it was worth the subscription…

    image004

    Roughly 50% and falling as Vol and gamma explode!

    Just to add a sense of chronological depth to this post, let’s revisit the timeline from yesterday’s piece, “As The French Bank Runs….“:

    Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding

    image012

    Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

    I identify specific bank run candidates and offer illustrative trade setups to capture alpha from such an event. The options quoted were unfortunately unavailable to American investors, and enjoyed a literal explosion in gamma and implied volatility. Not to fear, fruits of those juicy premiums were able to be tasted elsewhere as plain vanilla shorts and even single stock futures threw off insane profits.

    Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

    In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.

    I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

    I also provided a very informative document for public consumption which clearly detailed exactly how this French bank collapse thing is likely to go down: File Icon French Bank Run Forensic Thoughts – pubic preview for Blog – A freebie, to illustrate what all of you non-subscribers are missing!

    So, What’s the Next Shoe To Drop? Read on…

    For those who claim I may be Euro bashing, rest assured – I am not. Just a week or two later, I released research on a big US bank that will quite possibly catch Franco-Italiano Ponzi Collapse fever, with the pro document containing all types of juicy details. This is the next big thing, for when (not if, but when) European banks blow up, it WILL affect us stateside! Subscribers, be sure to be prepared. Puts are already quite costly, but there are other methods if you haven’t taken your positions when the research was first released. For those who wish to subscribe, click here.

     

    From Investment research | This Is Why BoomBustBlog Is THE Place To Go For Hard Hitting Research: BoomBust BNP Parisbas? | Reggie Mi.

    Images: Flickr (licence/attribution)

    About The Author

    Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record
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