Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Stealth Bail-ins and a Weak Market Confirmed by Dow Theory

Stock-Markets / Stock Markets 2013 Oct 08, 2013 - 04:02 PM GMT

By: Christopher_Quigley

Stock-Markets

You might think now following Angela Merkel’s electoral success last month all was now stable in Euroland but nothing could be further from the truth. I have it from reliable sources that Euros continue to flood out of Europe, so much so the Mario Draghi the president of the European Central Bank stated publically immediately after the German Elections that “unlimited” amounts of “money” will be available to support the Euro.


However, more worryingly, the specter of being “Cyprused” continues to haunt Euro citizens. Every month the “bail-in” model, placed into law during the Irish presidency, becomes the option of choice to save troubled banks. This phenomenon is not being widely reported yet its use is utterly destroying the faith ordinary Europeans have in their banks. General banking liquidity levels have become so low in England that the policy has now seeped into the sterling area. As reported by The Telegraph last week:

“Bail-in of Sterling Banking System Officially Begins As UK’s Co-Operative Bank to Bail-in £1.5bn With 100% Losses!”

“In the wake of the Cyprus Popular Bank’s depositor bail-in, we alerted Telegraph readers on April 2nd to the fact that bail-ins were coming to the US and UK, as The Fed and BOE had quietly created a resolution authority for unlimited bail-ins for TBTF banks.
Less than 3 months later, the bail-in of the western banking system has officially begun, as the UK’s Co-Operative Bank is seeking a £1.5bn bail-in recapitalization with junior bond holders and investors (including pension funds) facing a complete-100% wipe-out on £370m of permanent interest bearing shares (PIBS) issued by the Co-op.

Co-operative Bank faces nationalisation if junior bondholders reject ‘haircut”.
The Co-operative Bank’s rescue recapitalisation needs the support of £1.05bn – or around 80pc – of the holders of £1.3bn of its junior debt or the lender could end up being nationalised.

Evan Sutherland, the chief executive of the Co-operative Group, called the rescue plan “good news for The Cooperative Group, The Cooperative Bank, its customers and our members.”

He said it meant both investors and the group would make “a joint contribution” to the bank’s recapitalisation, without any help from taxpayers.

However, a group of pensioners and other retail investors in the Cooperative Bank are facing massive losses under the rescue.

 Astonishingly, the banksters are taking the theft to an extreme not even seen in the Cyprus bail-in: 100% losses!:

Holders of £370m of permanent interest bearing shares (PIBS) issued by the Co-op and Britannia Building Society before its takeover are expected to have their coupons cancelled, making them effectively worthless. Roughly 7,000 retail investors will be affected and the bank said that, on average, they held less than £1,000 in these bonds.

As Diesel BOOM let out of the bag a touch early, the Cyprus bail-in was indeed a template, as bond holders will be bought out with devalued or possibly worthless equity shares:

The Co-operative Group will issue a new £500m bond, paying about 6.5pc annually, to buy out the junior creditors. They will also be given equity in the group as the bank prepares to float up to 50pc of its shares on the stock market later this year. It is the first time that bondholders have been asked to take a haircut to keep a British bank afloat.

 While some bond holders suffer 100% losses on the PIBS, Co-Operative Bank won’t have to sell any assets to raise capital:

The arrangement will spare the Co-op the pain of having to sell any of its crown jewels, such as the funerals or pharmacy business, to plug the capital hole.

 We are not the only ones apparently who can realize that bailing-in a UK bank could have drastic long term consequences on confidence in the banking system:

Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said the £1.5bn bail might be a good short term solution to keep the bank afloat, but it could create longer term problems for the bank and the UK finance sector.

“The bail in represents a profound change in the business model of the Co-op bank – from being an institution owned by members, to a bank which has shareholders. This change is likely to clash with the cooperative ethos of the bank and, in the longer term, this might undermine what has made the Co-op attractive to its staff and customers,” he said.

The bail in also represents a longer term challenge for the UK banking sector.”

Dow Theory Market Weakness:

Market weakness continues with no end in sight.

From a Dow Theory perspective the technical weakness is profound. The Dow Industrials are far weaker than the Transports. It was not until the market open last Thursday that the Trannies rolled over and joined the downtrend. Until then the indices were divergent. Both indices are now in congruence and are quite bearish.

Key technical levels on both the Dow 30 and the Dow 20 are the June lows. If these are significantly breached it will take a great deal of market strength to prevent a short term bear correction turning into a powerful bear trend.

Comparison Chart: Dow Industrials & Dow Transports: Daily

This weakness is confirmed by the Advance/Decline line. There has been one 20/50 DMA cross-over in August and it looks like we are about to get a second. This is not a sign of momentum, on the contrary it is a clear indication of market weakness.

Advance/ Decline Line: Daily

Charts Courtesy of Worden Bros.

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2013 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules