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Now Cyprus: Has the Next Phase of the Global Crisis Arrived?
Minyanville ^ | 03/18/2013 | By Todd Harrison

Posted on 03/18/2013 6:58:56 AM PDT by SeekAndFind

Cyprus --- officially the Republic of Cyprus --- is an island country in the Eastern Mediterranean Sea, east of Greece, south of Turkey, west of Syria, Lebanon, northwest of Israel and north of Egypt.  I had to search Wikipedia for that information as I, like most of you, wasn't quite sure exactly where this island was.
 
This eurozone country, with population just north of one million, three-quarters of whom are Greek and most of the others Turkish, dominated the weekend financial news for those of us who were paying attention.  In a stunning shift from previous aid packages, EU Finance Ministers—the folks up north, primarily German—asked Cypriot savers to forfeit a portion of their deposits in return for a $13 billion bailout.
 
While that may not sound like a big deal, remember that few foresaw how meaningful the MicroStrategy (NASDAQ:MSTR) news was in March 2000, when SEC accusations of accounting irregularities pricked the sentiment surrounding the technology bubble.  Ditto American Home Mortgage (PINK:AHMIQ) in August 2007, when the lender opened 80% lower and triggered what would eventually morph into the sub-prime lending crisis (for a quick refresher, revisit Land Shark, which was written in real-time).
 
One could intelligently argue that both of those situations were symptoms rather than the cause of those respective crises, and the same can be said of Cyprus, which is seemingly a guinea pig for a new approach from those pulling the policy strings.  Cue the unintended consequences (the potential for bank runs across Europe) and moral hazard (word on the street is that wealthy Russian oligarchs have size holdings in the heretofore stealth, sunny island); in an interwoven finance-based global economy, credit of a different breed—that of credibility, as posited in 2007—is the issue at hand for markets at large.
 
Stateside, it’s not about the euro, per se; it’s about the possibility that risk appetites will meaningfully shift, and the potential for a massive “off-sides” in the marketplace given fund managers have chased performance into quarter-end with the perception that the upside was all but a given (sentiment readings have been off the charts).
 
The timing, of course, is a bit curious given the S&P (INDEXSP:.INX) 1580 level we’ve been monitoring so closely, per the chart below.  While I have two-sided risk on—I’m long BlackBerry (NASDAQ:BBRY) and short Facebook (NASDAQ:FB), right-sized and dollar-neutral—I have been waiting until my risk was more defined (read: we were closer to S&P 1580) before shorting the market for a trade.  
 


European markets are closed Monday for holiday—which may be why this proposal was floated on Friday—but pay attention to the vote in Cyprus as it will impact global market psychology.  If lawmakers approve the terms of the bailout, it will set a dangerous precedent that will send shivers throughout Europe.  If the Cyprus Parliament rejects the deposit tax, the aid package would be in jeopardy, potentially setting the stage for default, which would be akin to dominoes laced with dynamite given the leverage in system and the derivatives holding the global construct together.
 
We should see a stateside rally attempt at a point on Monday—old habits are hard to break—but we would be wise to remember that market psychology tends to feature three phases—denial, migration, and panic—across multiple time horizons.  The Cyprus news may not prove to be a MicroStrategy or an American Home Mortgage—bells are rarely rung at tops—but it’s most definitely a shot across the bow that should remind investors to see—and respect—both sides of the financial equation.


TOPICS: Business/Economy; Foreign Affairs; News/Current Events
KEYWORDS: bankrun; cyprus; cyprusconfiscation; eucrisis; financialcrisis

1 posted on 03/18/2013 6:58:56 AM PDT by SeekAndFind
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To: SeekAndFind

My view is this:

The Markets and the economy have at their root only two things that everything else balances on. Credibility and Trust, everything else uses those two things to some degree greater or lessor.

The credibility has been in doubt for some time now I think is the time for trust to start dissipating. Neither of them is totally gone but there is a LOT of doubt now.


2 posted on 03/18/2013 7:08:32 AM PDT by The Working Man
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To: SeekAndFind

Who ever is responsible for steeling from these folks accounts should be fearful, very fearful.
You take from my accounts and I’m coming for your sorry thieving ass.


3 posted on 03/18/2013 7:29:22 AM PDT by Joe Boucher ((FUBO))
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To: Joe Boucher
You take from my accounts and I’m coming for your sorry thieving ass.

Then you'd better start looking for somebody to go after, because what they're doing in Cyprus is no different than whan the US is doing with its printing presses.

4 posted on 03/18/2013 8:01:16 AM PDT by The Duke (We don't rent pigs, but apparently we *do* ELECT them.)
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To: SeekAndFind

Will Retirement Accounts be Nationalized by Obama and the Democrats?

Posted 2 hours ago by Gary DeMar Filed under Crime, Economics, Government, Government Spending, Liberalism, Morality, Politics, Socialism, World News

Read more: http://godfatherpolitics.com/9938/will-retirement-accounts-be-nationalized-by-obama-and-the-democrats/#ixzz2Nu6GZKk7


5 posted on 03/18/2013 8:04:41 AM PDT by KeyLargo
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To: KeyLargo

RE: Will Retirement Accounts be Nationalized by Obama and the Democrats?

You will notice that this Cyprus crisis came as a result of the country needing a bailout ( they have NO MONEY to pay their current expenses and they can’t print anything as they’re operating on the printing presses of the EU in Brussels ).

We in the US on the other hand, can continue to PRINT like there is no tomorrow. So, our Retirement Accounts don’t have to be nationalized ... America will pay her debts via DEPRECIATED Dollars.

Nationalization will only come when lenders (like China ) begin to understand that the money they are being paid back are worth LESS than they expect.


6 posted on 03/18/2013 8:13:24 AM PDT by SeekAndFind
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To: SeekAndFind
Todd Harrison was right in most aspects. But, “ it will set a dangerous precedent that will send shivers throughout Europe.” is WRONG.

The shivers will be chilblains and they will spread throughout the world. If it happens once in Europe what will prevent it from happening again and again with even higher rates of robbery? And, since the liberal/progressive/socialist/dimocratics of America want us to be “more like Europe” what will prevent it from happening here?

National financial default or seizure of private savings/ Which is worse? Long term or short term?

7 posted on 03/18/2013 9:04:27 AM PDT by Nip (BOHEICA and TANSTAAFL - both seem very appropriate today.)
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To: The Working Man

A very astute and ACCURATE assessment of the situation that’s unfolding.


8 posted on 03/18/2013 9:30:40 AM PDT by VideoDoctor
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To: SeekAndFind
I had to search Wikipedia for that information as I, like most of you, wasn't quite sure exactly where this island was.

Huh? I wonder what Todd's target audience is?

9 posted on 03/18/2013 9:46:03 AM PDT by Half Vast Conspiracy (Based on a letter from an 8 year old…school is now illegal...'cuz it’s yuckey and dumb'.)
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To: SeekAndFind

Rush discussed this today.


10 posted on 03/18/2013 9:56:17 AM PDT by KeyLargo
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To: Joe Boucher
You take from my accounts and I’m coming for your sorry thieving ass.

I accept that you are scary. These idiots are stealing from big money Russians. That's a whole nother level. Wonder how well Lagarde can metabolize plutonium?

11 posted on 03/18/2013 10:03:49 AM PDT by Stentor (Shhhh!)
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To: Stentor

Big money ruskies are not a forgiving lot I’d bet.


12 posted on 03/18/2013 10:43:14 AM PDT by Joe Boucher ((FUBO))
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