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Posts tagged ‘Reggie Middleton’

UltraCoin: The Great Financial Disintermediator

Is The ECB Implementing ZIRP or ZEURP: Zero European Union Return on Potential

By Reggie Middleton

I’ve been very bearish on the EU and their banks and sovereign debt in particular, since Q! 2010 – way before most – reference Pan-European sovereign debt crisis. Yesterday morning if you were to Google the term EU recovery, you would see something like this in return…

Well, somebody better tell Draghi, as per Bloomberg: ECB Cuts Key Rate to Record Low to Fight Deflation Threat

The European Central Bank cut its benchmark interest rate to a record low after a drop in inflation to the slowest pace in four years threatened its mission to keep prices stable.

Policy makers meeting in Frankfurt today reduced the main refinancing rate by a quarter point to 0.25 percent. The decision was predicted by three of 70 economists in a Bloomberg News survey. The ECB kept its deposit rate at zero and trimmed the marginal lending rate to 0.75 percent. ECB President Mario Draghi will hold a press conference at 2:30 p.m.

The ECB now has just one more quarter-point cut left before reaching zero, increasing the likelihood of unconventional tools such as quantitative easing or a negative deposit rate if prices slow further or the economic recovery stalls. Euro-area inflation is less than half the ECB’s target and unemployment is at the highest level since the currency bloc was formed in 1999.

“There comes a point where inflation is so weak, and coming in weaker than anticipated, that the case for loosening policy becomes too hard to resist,” said Richard Barwell, senior European economist at Royal Bank of Scotland Group Plc in London, who predicted the cut. “Bad unemployment numbers only make the case stronger.”

Does it seem like I’ve predicted the future hear once again as that Financial Nostradamus Dude???……………………………

full article at source: http://boombustblog.com/blog/item/9171-is-the-ecb-implementing-zirp-or-zeurp-zero-european-union-return-on-potential

Comment:

If you are trading in this market you need to be listening to this guy !

The markets are been pushed up and there is nothing underneath to keep them there or at current values! The art of trading has all but vanished as we are now pit against algorithms and super computers and to survive you must be hedged at all times and well informed .This site (boombustblog.com) is a great start!

AIB And ‘Fraud Of The Highest Order’

scam

This bank [AIB], which is still trading in the US/Ireland and is still accepting deposits and making loans, appears to have some pretty fishy underpinnings.

So begins a an alarming if somewhat baffling blog post by Trading analyst Reggie Middleton posted on Monday night.

In which he claims AIB is falsifying it’s true value through the misuse of one word.

And may be the next bank to be “Cyprus’d”.

Vincent Lebraun explains:

The trouble with this high-level fraud is that it’s so “out-there” that people won’t be able to understand how serious this is.

In the charge document registered with the Irish Company Registration Office, it says that it is in respect of “all present and future liabilities whatsoever” of AIB.

And the charge itself is over “eligible securities”.

However, in AIB’s 2008 annual accounts and the files to the U.S. Securities & Exchange Commission, document 20F (page 223 – 2), it states that the charge was placed in favour of the Central Bank and Financial Services Authority of Ireland over all of AIB’s ‘right, title, interest and benefit present and future in and to certain segregated securities.’

Using the description ‘certain segregated securities’ is completely different to the description all ‘eligible securities.’ This is fraud of the highest order, and it’s so simple (yet so complicated) that they were hoping no-one would notice.

And we don’t have to take this guy’s word for it: he has both documents posted on his site (although he initially posted an Anglo document but has since rectified it and posted the AIB one)…

Anyone?

article source: http://www.broadsheet.ie/2013/04/03/aib-and-fraud-of-the-highest-order/

Comment:

You have been warned get you money out to-day!

Comments from Eurocalypse, the resident BoomBustBlog credit trading guru…

 

By ReggieMiddleton:

Trendline broken in French bonds ,today again Italy coming in but France is still moving out… hardly surprising.  Just as i said… and stocks i think will break out up, even if that seems contradictory.

Update: I wrote this this morning. Markets react really fast. Huge move in French yields today. See charts on Mish blog. The declining trend line broken now 10yr 3.47. 3.75 or even 4.00 in a matter of few days. 4.80 is where France starts to spiral out like Italy, Greece, etc… Now the ECB monetizes massively or its massive defaults. Time is running out. My 2 cent guess is EFSF won’t even have time to do anything significant before the ECB steps in massively…

picsay-1319726495The most important development is that the Eurocalypse is in full panic mode and Italy blowing up. The inferno machine is now running full speed and there is little way back for it to now. When Italian bonds yields rise 70bp a day, roughly getting hit 4% in price, worse than stock indexes, its game over. VAR is too high, all traders, portfolio managers MUST exit, ECB is the only real bid in size (for how long ?); and sooner or later Italy has to show the white flag and ask for a bailout

full article at source: http://boombustblog.com/BoomBustBlog/The-Eurocalypse-Rant-The-Consequences-of-Foolish-Monetary-Policy.html

Reggie Middleton on the banks again so listen up !

Jesus Reggie this is just what the doctor ordered for my trading senarios .This only goes to show  that you must be hedged at all times when trading!

Reggie Middleton “Western Europe On The Brink Of Bank Collapse”

by ReggieMiddleton

Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.

The existence of a “Plan B” underscores German concerns that Greece’s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.

Greece is “on a knife’s edge,” German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.

Full article at source: http://boombustblog.com/BoomBustBlog/The-Germans-Italians-French…-Most-Of-Western-Europe-On-The-Brink-Of-Bank-Collapse.html

Reggie on the ECB’s Continued Solvency After Sovereign Debt Buying Binge, Guess What!

By Reggie Middleton

There has been a lot of noise in both the alternative and the mainstream financial press regarding potential risk to the ECB regarding its exposure at roughly 48 to 72 cents on the dollar to sovereign debt purchases through leverage, and at par at that. This concern is quite well founded, if not just over a year or so too late. In January, I penned The ECB Loads Up On Increasingly Devalued Portuguese Bonds, Ensuring That They Will Get Hit Hard When Portugal Defaults. The title is self explanatory, but expound I shall. Before we get to the big boy media’s “year too late” take, let’s do a deep dive into how thoroughly we at BoomBustBlog foretold and warned of the insolvency of both European private banks and central banks, including the big Kahuna itself, the ECB! The kicker is that this risk was quite apparent well over a year ago. On April 27th, 2010 I penned the piece “How Greece Killed Its Own Banks!“. It went a little something like this:

Yes, you read that correctly! Greece killed its own banks. You see, many knew as far back as January (if not last year) that Greece would have a singificant problem floating its debt. As a safeguard, they had their banks purchase a large amount of their debt offerings which gave the perception of much stronger demand than what I believe was actually in the market. So, what happens when these relatively small banks gobble up all of this debt that is summarily downgraded 15 ways from Idaho.

Well, the answer is…. Insolvency! The gorging on quickly to be devalued debt was the absolutely last thing the Greek banks needed as they were suffering from a classic run on the bank due to deposits being pulled out at a record pace. So assuming the aforementioned drain on liquidity from a bank run (mitigated in part or in full by support from the ECB), imagine what happens when a very significant portion of your bond portfolio performs as follows (please note that these numbers were drawn before the bond market route of the 27th)…

The same hypothetical leveraged positions expressed as a percentage gain or loss…

Relevant subscription material for BoomBustBlog paying members:

  1. Greece Public Finances Projections
  2. Banks exposed to Central and Eastern Europe
  3. Greek Banking Fundamental Tear Sheet

Online Spreadsheets (professional and institutional subscribers only)

       Greek Default Restructuring Scenario Analysis

       Greek Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts

Several months later I posted several follow-up pieces along the same vein:

To Cut or Not to Cut, The Irish Threaten To Play Rough With Those Clippers: Threats of Haircuts Rattle the ECB! Thursday, March 31st, 2011

       A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina Wednesday, May 26th, 2010

For our professional and institutional subscribers, the Ireland Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts are available online. All subscribers have access to the  Irish Bank Strategy Note which adequately warned before Irish banks dropped 85% in value. The  Ireland public finances projectionsis also available to all paying members.

To continue reading the full article and much more please follow link to source:

 http://boombustblog.com/reggie-middleton/2011/06/09/over-a-year-after-being-dismissed-as-sensationalist-for-questioning-the-ecbs-continued-solvency-after-sovereign-debt-buying-binge-guess-what/

Comment:

The Irish government spends millions every year on financial advisers I suggest they instead pay Reggie to advise then better still Reggie should be Finance Minster. I have been following his observations and conclusions for three years now and I only wish I had heard of him earlier. There is no substitute for the real facts and the truth!

Thank God there are people like this man around; otherwise the small investors would be history. Great article Reggie and Thank you .

Goldman Sells Nearly Half $Billion Of Apple Stock

Goldman Sells Nearly Half $Billion Of Apple Stock Directly Into Their Client’s Conviction Buy Recommendation: Guess Who Really Agrees With Reggie Now!

Reggie Middleton

Oh, this is getting good. For those investors and technology consumers who feel emotional attachment to publicly traded C corporations, brace your ass hairs, ’cause the truth is about to come barging out of your screen. Yesterday I posted the most recent of a long string of articles detailing the impending and inevitable margin compression coming to Apple. It is my opinion that the analysis and the logic behind the analysis is unassailable. Granted, most of the analysis is behind a paywall, but the logic is laid bare for all to see,  as excerpted:

Last week I posed the question, “Is The Evidence For An Apple Margin Collapse Now Incontrovertible?“. I received some interesting, albeit, rather passionate answers – many of which failed to address the core core issue, which is can “Apple compete with the rapidly rising technological bar that is simultaneously facing rapidly dropping prices without suffering a hit to margins?”.  Phrased differently, “Can Apple’s brand allow it to charge materially more for less product in the face of over 400 competing devices connected by the fastest growing and most diverse ecosystem in the business?” Sounds like a tough sell, doesn’t it? This is not about who is better, who is worse, who will win, and who will lose. It is about margins. Apple may not even be in the race if it doesn’t run, and to run may very well mean margin compression.

 

Well, if margin compression wasn’t “Incontrovertible” last week, it certainly should be this week. Let’s walk through margin compression as a result of excessive competition step-by-step, starting by solidifying the thesis behind the recommended updates to the Apple Margin Compression Thesis & Google’s valuation model. Subscribers, adjust your BoomBustBlog Valuation Models Accordingly:

full article here at source:http://boombustblog.com/reggie-middleton/2011/05/27/goldman-sells-nearly-half-billion-of-apple-stock-directly-into-their-clients-conviction-buy-recommendation-guess-who-really-agrees-with-reggie-now/

Comment :

I think Reggie has a point!

The True Cause Of The 2008 Market Crash……….

The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance

By Reggie Middleton

Summary: I said it! Bill Gross said it (and put his money where his mouth was by selling off all US treasuries)! Common sense says it… Central Bank manipulated interest rates are too low. They will rise. What happens when they rise during a supply glut of real estate, foreclosure issues and a slow economy??? Put it this way… What made the markets crash in 2008: unemployment, slow economy, snow… Or real estate prices getting in touch with reality?

As I sit back and contemplate the content and delivery style that would be best suited for my upcoming keynote speech at the ING Real Estate Valuation Conference in Amsterdam (this is my first presentation to a large group where English is not the primary language), I am bombarded with news bits and bytes that confirm what I’ve been modeling, warning, fearing and preparing for – for nearly 2 years. That is almost 23 months to the date. What is it, you ask? It is the market’s return to the adherence of fundamentals and global macro forces versus following the whims of the concerted efforts of central banks around the world to openly manipulate real asset, equity and bond markets on a global basis.

Really, sit back and think about it. Put some thought into figuring out how difficult it is to successfully manipulate real estate (commercial and residential), stock and bond markets in just one major country. Then give the same thought to how difficult it would be to do the same in nearly all of the developed nations who participated in this crisis. The mere attempt to do so has loaded them up with debt at a time of marginal if not negative GDP and economic upside, a disgruntled populace ripe to ripple from the causes of social unrest rising from the rife economic conditions that the aftermath of incessant bubble blowing has wrought, and last but not least – fundamentally overvalued investment markets.

Was it really worth it? Is it going to last? I believe, and am rather confident in this belief, that we will be FORCED to finish what was started in 2008 – and that is the (re)commencement of the down leg of a major asset cycle. We had several concurrent booms (real estate – both residential and commercial, credit, fixed income, and equity) and an incomplete bust that failed to totally let the air out of the bubble. To make matters substantially worse, governments (on a global basis, mind you) wasted the resources of their countries and taxpayers in an attempt to fight the markets and the normal economic cycle by both re-inflating said bubbles (all of them to some extent) while simultaneously indemnifying and pumping full of undeserved capital, the massive agents of leverage which initially were the conduits of the bubble blowing pressure. As a result of being the conduits, they were also the foci of the deleveraging forces that culminated in the bust. These agents, at least a very large portion of them, have proven themselves to be financially incompetent and undeserving to remain as an ongoing concern from an economic perspective. Their political and lobbying clout said otherwise, and they have siphoned capital and staying power from the public sector through regulatory capture and now the poison that was the over-leveraged, “new guard” FIRE sector has now infiltrated entire countries and sovereign nations.

Those who may not follow me may think this is naught but fancy prose on a down day in the markets. Well, I have been preaching this publicly since 2007 and before the markets broke. I have named, on an individual basis and months ahead of the event, those agents that should have fallen – and for the most part did fall if not for massive government intervention, ex. Bear Stearns, Lehman, GGP, Countrywide, WaMu, etc. – see Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?, and I am saying now that the last two years of faux, government/central bank “purchased” recovery is simply unsustainable while the majority of the underlying issues that caused 2008 to happen are still present, and most of them are worse now than they were back then.

The market collapse commenced in 2007, and gained momentum in 2008, maximizing its velocity and strength in the 1st quarter of 2009. This collapse was not the result of the indicators that we hear bandied about so often in the mainstream media. It was not borne from stagnating GDP, slow retail sales, lots of snow nor high unemployment. As a matter of fact, all of these factors were literally on fire in 2006 through 2007. The market collapsed because the overinflated real asset market had finally reached its peak. Since this overinflated market was financed primarily with debt, upon its deflation accelerated destruction of equity and capital commenced. Once you lose 10% of market value on a cash investment, you lose 10% of your equity as well. If you are levered 2x, that 10% market drop equated to a 20% wealth loss. 5% downpayment housing deals, equate to deeply negative equity values at a 10% market correction. So, if one were to sit back and realize that 125% LTV (or a negative 25% down) housing deals didn’t just exist, they were relatively plentiful by historical standards, and derivative structures allowed certain corporate players (ex. the monoline insurers) to employ 90x+ leverage, there is no wonder what happened when the housing market dropped 36% and the CRE market dropped 42%. Believe me, dear readers. They are not finished falling.

Then .GOV got into the bubble blowing business, and all of a sudden all is well…

Commercial real estate is literally close to its bubble highs. Hard to believe, but just glance at the chart.

With the US, much of Europe and major portions of Asia stuck in a liquidity trap borne from a developed reliance on unsustainably low and highly manipulated interest rates, the direction of yields really have no way to go but up. If I am correct in that plunging real assets brought upon the recession and associated market collapses, and manipulated interest rates worldwide have no where to go but up while said real asset prices have been artificially elevated at levels that defy the fundamentals, then what happens if when said rates break  the chains of their erstwhile wanna be masters and resume their march to the north?

Gross Dumping Treasuries Leads Managers Calling Three-Decade Rally’s End

“It’s not a question of dissing the United States or questioning the credit of the United States, but simply a maturity reflection,” Gross said. Treasurys are “mispriced relative to the inflationary environment and the growth we see ahead and there are better alternatives in order to capture yield.”

Gross primarily based his evaluation on the reduction in yields caused by the Federal Reserve’s buying of close to $2 trillion in Treasurys, with more slated before the second leg of the program—often called QE 2—comes to an end.

 

“When a trillion and a half dollars worth of annualized purchasing power disappears I simply question as to who will buy them and at what yield,” he said. “We’re suggesting at these yields it might be problematic.”

Anybody who has the least bit of doubt regarding this assertion needs to read this article immediately: As excerpted…

As you can see above, CRE drops in value whenever yields spike more than the + delta in NOI. Looking below, you can see that US CRE actually runs to the inverse of the 30 year Treasury.

That visual relationship is corroborated by running the statistical correlations…

The relationship is obvious and evident! In addition, we have been in a Goldilocks fantasy land for both interest rates and CRE for about 30 years. CRE culminated in the 2007 bubble pop, but was reblown by .gov policies and machinations. The same with rates. Ever hear of NEGATIVE interest rates where YOU have to PAY someone to LEND THEM MONEY!!!

So, BoomBustBloggers, where do YOU think rates are going to go from here? Up of Down???

Put simply, residential mortgages become less affordable leading to housing becoming less affordable. Cap rates skyrocket, save a commensurate increase in NOI, which I really don’t see happening in an era of rampant unemployment and stagnant economic growth.

What many may not realize is that the housing market and the CRE are inextricably linked. The 10 city Case Shiller index and the CoStar US Cap Rate Index have a startly -94% correlation. That’s as close to perfectly symmetrical as one can expect to get (lower cap rates mean higher prices, and vice versa, while higher Case Shiller numbers mean higher prices). If CRE and residential real estate are really that tightly correlated, then realize what we are in for in terms of residential real estate, besides higher interest rates.

In preparation for the ING conference, I have codified and modeled all of the various elements that I discuss on BoomBustBlog, namely the import and export of financial, economic and sovereign risk contagion. We adjust the pathways of apparent pure financial contagion and correlation with a plethora of real world factors.

Then we plugged them into our proprietary cross-exposure model, and then used global cap rate analysis to transform said risks into a spread over the risk free rate of each respective county, and finally plugged said figures into individual discounted NOI style models. I went into the process in a little more depth here: The Coming Interest Rate Volatility, Sovereign Contagion, Geo-political Unrest & Double-Dip Recessions: Here’s The Answer To Valuing Global Real Estate Through This Mess.

We back tested the results with regression analysis, and the accuracy of the results shocked even me – and I’m a pretty confident fellow…

It would appear that we are on to something here… That is, unless… You know, “This time is different!” I will go into this topic depth (and in English) in Amsterdam on April 8th. Anybody interested in attending should contact Jacob at the following link: www.seminar.ingref.com.

source:http://boombustblog.com/

Comment.

Reggie Middleton’s take on Moody’s very late, appropriate Greek downgrade

Moody’s Very Late, But Nevertheless Quite Appropriate Greek Downgrade Inches Us Closer To the Rate Volatility Storm

For the past two years, and particularly over the last couple of months,  I have been harping on the coming interest rate volatility storm. Things are now moving in lockstep, precisely as I have forecast. In the news this morning from the mainstream media…

Moody’s Downgrades Greek Sovereign Debt by 3 Notches:

Moody’s rating agency downgraded Greece’s sovereign debt on Monday from B1 to Ba1 and assigned it a negative outlook, citing significant risks to its fiscal restructuring program.

Moody’s now has the lowest rating for Greece of all the major credit agencies and is the first to classify Greek government debt as ‘highly speculative’.

“The fiscal consolidation measures and structural reforms that are needed to stabilize the country’s debt metrics remain very ambitious and are subject to significant implementation risks,” Moody’s said in a statement. It added that it saw risks that conditions attached to continuing financial aid after 2013 will reflect solvency criteria that the country may not satisfy, and result in a restructuring of existing debt.

“At a time when the global economy is fragile and market sentiment is sensitive, unbalanced and unjustified rating decisions such as Moody’s today can initiate damaging self-fulfilling prophecies and certainly strengthen the arguments for tighter regulation of the rating agencies themselves,” it said.

So, the Greek officials threaten to “regulate” those who FINALLY come out with the truth. Did you guys ever see that movie called the “Adjustment Bureau”? The Greek government wants the truth “Adjusted”, and will even go so far as to do it themselves – see the Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! excerpt below.

In addition, Moody’s is soooooo late to the party. As illustrated in explicit detail nearly a year ago, this event is practically a foregone conclusion. See What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates and look as Greece’s situation before and after any restructuring after 2013 (Professional and Institutional level subscribers (click here to upgrade) may access the live spreadsheet behind the document by clicking here (scroll down after for full summary, spreadsheet and charts).

image017

… and that is with their “pie in the sky” estimates, as clearly pointed out in Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

…try taking a look at what the govenment of Greece has done with these fairy tale forecasts, as excerpted from the blog post Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!

greek_debt_forecast.png

Think about it! With a .5% revisions, the EC was still 3 full points to the optimistic side on GDP, that puts the possibility of Greek  government forecasts, which are much more optimistic than both the EU and the slightly more stringent but still mostly erroneous IMF numbers, being anywhere near realistic somewhere between zero and no way in hell (tartarus, hades, purgatory…).

Now, if the Greek government’s macroeconomic assumptions are overstated when compared with EU estimates, and the EU estimates are overstated when compared to the IMF estimates, and the IMF estimates are overstated when compared to reality…. Just who the hell can you trust these days??? Never fear, Reggie’s here. Download our “unbiased, non-captured, empirically driven” forecast of the REAL Greek economy – (subscribers only,click here to subscribeGreece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb.

The  Greek Restructuring and Haircut Analysis that linked to above goes into explicit detail, showing the NPV of cashflows to investors after a a wide scenario analysis of prospective default and restructuring scenarios. It ain’t pretty!

greek debt restructuring spreadsheet

We have performed similar analysis for the usual suspects: Portugal, Spain, Italy and Ireland. Portugal is currently at record high funding rates – and that’s AFTER the bailout!

This is Portugal’s path as of today.

Even if we add in EU/IMF emergency funding, the inevitability of restructuring is not altered. As a matter of fact, the scenario gets worse because the debt is piled on.

Let it be known that there are larger sovereign states that are worse off. Ireland is a prime example. If one were to look at the cumulated funding requirement of Ireland over the next 15 years as clearly illustrated in Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor! Monday, November 29th, 2010

There are other states that are not in as bad a shape but are poised to do much more damage,  and then there are a plethora of states that will get dragged down through contagion. Yet, the natural manner of pricing risk in the equity markets does not transmit these facts because of the unprecedented amount of liquidity stemming from central bankers around the world doing the Bernanke/Japanse QE thing.

Keep in mind that the German’s game plan is to kick this down the road till 2013, at which point it will be unsustainable butthe mechanisms will be in place to force bondholders to take haircuts in front of the tax payers…

Sounds like a plan, doesn’t it? Except for the high probability that you will probably have a rate storm well before 2013. If rate volatility and/or levels spike for the more developed nations before then, all hell breaks loose. In the US, we’re damn near zero now. Hey, what happens to residential and commercial real estate valuations when rates spike higher? See  The Coming Interest Rate Volatility, Sovereign Contagion, Geo-political Unrest & Double-Dip Recessions: Here’s The Answer To Valuing Global Real Estate Through This Mess.

Revisiting the Topic of Haircuts

Now, let’s return to the post “The ECB Loads Up On Increasingly Devalued Portuguese Bonds, Ensuring That They Will Get Hit Hard When Portugal Defaults“. All readers should open this link in a new window, scroll down to the spreadsheet at the bottom of the post, and reference the first column with the cell labeled “Decline in present value of cash flow for creditors” under the label “Haircut in the principal amount”. Now, scroll over the to the column labeled “Restructuring by Maturity Extension & Coupon Reduction w/Haircut”, which is the second to last column in blue highlight and carefully read the figure for the “Decline in present value of cash flow for creditors”. Booyah! And that’s the unlevered losses. 5x leverage wipes you out several times over. It is rumored that the ECB is levered over 90x, just for the sake of discussion. I strongly suggest anyone interested in this space study this spreadsheet very closely. This level of analysis is probably not available anywhere else on the free Web

source:http://boombustblog.com/reggie-middleton/2011/03/07/moodys-very-late-but-nevertheless-quite-appropriate-greek-downgrade-inches-us-closer-to-the-rate-volatility-storm/#more-4944

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