Weakening Wednesday – Will We Follow Europe Lower?

Wheeeeee – what a ride!  

Looking at the Euro Stoxx 50 index, you can understand why the UK got off this sinking ship.  2,800 WAS the -20% line from 3,500 and that just failed so we're way past a bear market in EU stocks and it has little to do with the aftermath of Brexit and everything to do with what led up to Brexit in the first place.  

The EU destroyed Greece and now (as I predicted 2 years ago), Italy is next in the crosshairs and though Portugal and Spain are way ahead of the UK in line, what can you do to stop the ECB and their nightmarish policies if you remain tied to them through the EU?

The EU is killing Italy – it's killing all of them.  While Italy is a taker state and benefits from the relationship, they have now hit the cut-off point (like Greece) and suddenly Big Daddy EU starts slapping them around and taking disciplinary actions and it's no fun anymore.

BMPS (Monte Paschi) is down 75% to 0.37 and it's the 3rd largest bank in Italy.  Rather than realize the systemic importance of the bank (it is to Italy but to the ECBs board, it's competition), they are demanding BMPS cut $11Bn in bad loans which is another way to say – book the losses.  Obviously, that will crush the bank and the ECB has generously given them until Friday.  UCG (UniCredit) is the largest bank and they are down 63% and 2nd largest, ISP (Intesa Sanpaolo) are testing the -50% line.

Italian banks have $400Bn in non-performing loans, which is 20% of their GDP, that would be like our banks having $4Tn worth of bad debt that needs to be bailed out (been there, done that).  Negative rates (set…
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