The End of the Beginning – Wall Street Underground

By Nick Guarino | April 29, 2015

Greece Will Bring Down Global Financial System With a Lot of Help From China

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Each day that goes by we get closer to the breakup of the European Union. The experiment is just about over. Talk about a Greek tragedy. Greek bonds are trading at record highs because the risk of default is so great. Yields on the Greek ten year are at a record high of 11.91%. And the safe haven German ten years now yield .17% a record low. Yes you read that right. A tiny fraction of a percent. But the really great part is yields on German government paper will soon go negative. Yes the days of negative global interest rates is soon here.

Here is the deal. The cowboy bond funds are buying up the extremely high yielding Greek paper. They are betting the ranch on their mistaken belief that Greece will be bailed out again and again. The problem is Athens will have to keep coming back to the well for more and more bailout cash. They have big payments due in June and even bigger ones in August. They need trillions more. More then the EU can or will give. The truth is someone will have to take a huge loss. In fact a lot of our funds and banker buddies will be taking massive losses.

Why is this important? Its pretty clear, by what ever name they call it and what ever spin they give it, Greek debt will never be paid back. And that means our banker buddies are going to take another hit.

That is pennies compared to the loses they are about to take in China

Remember the big Kahuna in bad debt is China. And the real estate debt defaults have already started. Here is a headline from 3 days ago:

Kaisa Group has become the first Chinese property developer to default on its overseas bond debt, which is estimated to be about $2.5bn

What you need to know is China real estate international bond market debt is somewhere north of 27 billion. And under the communist system Foreigners have no chance of any recovery when this debt goes bad.

Bloomberg reports: One thing is for sure: If things in the sector go sour, overseas investors are going to be burned especially badly. A default of Kaisa’s offshore debt could trigger domestic creditors to recall loans and credit facilities, spurring further deterioration of the company’s ability to pay its debts. In general, offshore creditors are subordinated to domestic ones in China, and have no claim to domestic assets—because mainland Chinese companies are not, technically speaking, allowed to issue foreign debt.

Here is a chart of ballooning Chinese international real estate bond market debt:

But the truth is far worse. Chinese total debt is over 100 trillion dollars. Chinese economic miracle? Shit!!! What miracle it is, is the biggest debt orgy in the history of mankind.

Total Chinese Debt Equals 282% of GDP: That’s how big China’s total debt load is, including borrowing by the government, banks, corporations and households. By the first quarter 2015 their debt was over 3 times GDP. That’s far above the average for developing countries and higher than some advanced economies including Australia, the United States, Germany and Canada.

Since 2007 China has ADDED 20.8 trillion in new debt. Its debt now stands officially over 30 trillion dollars. Its believed in reality to be much higher. China’s debt is so big when it defaults it will take down the global financial system.

China’s debt orgy is out of control. Its so big it will destabilize the global economy. Think about it. Piss ant Greece with it’s minuscule debt in comparison is creating a Euro zone crises.

Imagine what happens when the Chinese debt defaults start in mass. It will wipe out the global credit markets. It’s the elephant in the room no one wants to admit is there.

Oil.. with the global economy screeching to a halt and demand plunging oil is in trouble. We are still seeing massive build in oil inventories. We still see a further price collapse.

And here is where the spin-meisters come in with their massive disinformation campaign. They would have you believe production is dropping and inventories are being absorbed by the markets. And prices are about to soar. No way! Not now! Not yet!

Nothing could be further from the truth. All they are trying to do is bailout of, at as high a price as possible their losing oil positions. Their trading models show a lot of people are short. So they are squeezing the shorts. We show a successful short squeeze to the $60 area bases spot crude.

There is nothing to do in the $55 to $65 range. Do not get caught up in the super blow. We show inventories still rising in the US. Even the Saudis are producing the most oil ever. There are no disruptions in Middle East oil flows.

Iran has told the boys to keep things at a dull roar until the Obama nuclear sell out is done.

We are still looking for a down side plunge. We are keenly aware of what the markets are doing. We will be in touch in a moments notice when there is something to do.

Spread traders keep your positions and we will let you know what to do. People who have new positions hold your book on the short side. We will notify you when there is something to do.

Its amazing a $100 a barrel drop brought no comment but the recent $15 dollar swing in oil is all over the news. The power of spin my friends, the big boys are taking an ass kicking on this plunge.

Nick Guarino

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