Tuesday, April 21, 2015

Greek Deposits dwindling

When Greece imposes capital controls, the run on Greek banks will already have taken its toll. Deposits have already declined sharply since late last year.






















Source ECB, Barclays Research

The Greek banks are replacing these lost deposits with emergency funds (ELA) from the Bank of Greece, who is in turn borrowing from the Eurosystem via Target2. With these banks increasingly dependent on central bank support, valuations are collapsing as the need for more bailouts becomes imminent. This is especially the case when Greece defaults on its bonds which are widely held by Greek banks.

Nearly 70% of Bundesbank's assets are in TARGET2 claims - a half a trillion euro exposure to periphery nations' central banks. What will the Germans do once they realize that a large portion of their central bank's assets could be at risk? A Grexit will reveal the TARGET2 exposure in all its glory !

As Greece imposes currency controls, depositors in other periphery nations are likely to also begin moving capital out of their domestic banking system. Portugal, Spain, and Italy are vulnerable. Such actions will of course end up increasing TARGET2 imbalances further, putting more of Bundesbank's balance sheet at risk.

Geir Solem

Elliott Wave Technician
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Wednesday, February 25, 2015

Greek Stockmarket - The feast of the bears continues

This is an update to our earlier Elliott Wave analysis of the Greek stock market which has followed our forecast to a tea and declined steadely over the years.

Another substantial decline is coming that will take the market well under the 2012 low. We label the coming waterfall decline as wave 3 of the final wave 5 marked in blue colour.

























Technical analysis of the Greek stock market.  Source: Elliott Wave Technician

We think that current decline of the Greek stock market in wave "5" could last until June 2016.

As we have said many times before, "This has implications for the Greek banking system. Will a another collapse of the Greek stock market to new record lows put the banks in a similar situation as banks in Cyprus or even worse, and will Greece exit the Euro ?"

Geir Solem

Elliott Wave Technician
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Friday, January 16, 2015

The Stock Market of Russia - Elliott Wave Update

This is an update to our former forecast 'The Stock Market of Russia - Collapse is imminent' published 3rd of April 2014. It was a bold forecast, let us take a look at how it played itself out so far.

Here is an updated chart of the RTSI Index which represent the Russian Stock Market in USD.

























Weekly chart of the Russian Trading System Index with technical analysis and Elliott Wave count. Source Elliott Wave Technician

Back in our April 2014 forecast we wrote the following, 

"The Russian Bear is back and will soon show his anger in full force. A large wave
"(2)" rally topped early 2011, since then the Russian stockmarket has displayed a number of  "1" and  "2" waves of different degrees of trend.

Currently a small rally up to the horizontal resistance line marked in red color on the chart is topping.

The next should be a devasting decline in wave  "3" of  "3", most likely with large price gaps as the stock market of Russia collapse.

The implication of increasing negative social mood will be terrible, expect a more agresive and assertive Russian government, the current conflicts will escalate, chaos, destruction and further economic deterioration will follow.

The economic deterioration will soon hit the core European countries like France and Germany with full force."

Our forecast is playing itself out well so far and is unchanged. We expect the decline to continue in the Russian stock market priced in USD, as well as further deterioration in the core European countries like France, Italy and Germany.

Geir Solem

Elliott Wave Technician
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Thursday, December 4, 2014

Debt Explosion

Global debt-to-GDP has continued its upward rise, even as slowing growth and persistent disinflation (both logical side-effects of rising debt) detract from the ability of major economies to service those debts in the future.

 

 *Data based on OECD, IMF, and national accounts data. Source: Buttiglione, Lane, Reichlin, & Reinhart. “Deleveraging, What Deleveraging?” 16th Geneva Report on the Global Economy, September 29, 2014.

An ugly set up for the future !

Geir Solem

Elliott Wave Technician
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Monday, November 3, 2014

Velocity of Money fading

We showed this graph about a year ago. Money velocity is still falling, and now it indeed look like a "Deja vu" of the period 1918 to 1945.




















Source Federal Reserve Board

The velocity of money from 1900. And as the graph over shows, in deflationary periods velocity can slow even more than it has recently.

When money velocity is rising, it usually means the economy is expanding. When money velocity starts to fall as we saw after 1918 it usually means the economy is slowing down or even worse contracting.

Much of the developed world is at the very the end of a 60-year-long Debt Cycle. This time the cycle is longer than previous ones due to the reckless economic policy measures by the central banks and governments using enormous credit expansion to finance over investment and over indebtedness. This has prolonged the cycle and at the same time has left the Western world uncompetitive. The culmination of decades of  borrowing is upon us.

Geir Solem

Elliott Wave Technician
Copyright (C) all rights reserved