Getting shafted in Cyprus … Who’s next?
PETROS KARADJIAS / THE ASSOCIATED PRESS
Cypriots line up to use an ATM machine outside of a Laiki Bank branch in Larnaca, Cyprus, on Saturday 16 March 2013. But there is no cash available for withdrawal.
Asianmacro do not normally work (as in reading or performing any analysis on the financial markets) on weekends. Not because he is observing Sabbath but with young school going children with weekend activities, it has become his fatherly duties to become the ”Soccer Dad” on weekends! (*Sigh, that means any real ‘work’ starts only when the kids are in bed from 10 p.m. onward on Sunday evenings!)
However, politicians, governments and central bankers like to use weekends to spring their surprises onto the markets. Because this is when markets are closed and also people are supposedly having their rest and that is when they can mess around freely with less interference (if any)!
So it comes as no surprise when the supposed Cyprus bailout package was announced over this weekend that included an absolutely from-the-rear kick-in-the-ass to that country’s savers and depositors when a tax was imposed. http://www.bbc.co.uk/news/business-21812853. Already rationale is being given on why the rescue is necessary and that most of the ”savers” that will be taxed are actually non-resident Russian money (*Hint: Read as Russian mob and wealthy Oligarchs) rather than the citizens of Cyprus, if you choose to buy this story anyway.
However, this is besides the point as what about Spain? Or can Italy be next or France? Asianmacro will leave it to all the investment banks’ strategists that must be busy preparing their various pieces on what’s next and recommended trades to put on or hedges etc. My simplest take will be, have you noticed all the various FX platform and punting shops that have sprouted using Cyprus as their base to operate out from. Some examples are:
http://www.forextime.com/about-company
http://www.ironfx.com/en/about …. the list goes on
There are close to 100 FX shops operating out of Cyprus as it is a lightly regulated place. The last example of an FX shop above, Iron FX launched their FX trading competition http://youtu.be/PsuDhyytzOA in February with fancy prizes that I am not sure will be given out or claimed in the near future. I am also sure that many retail investors globally are using Cyprus based FX shops and they sure as hell better be worried what will happen to their deposits placed with these firms! That is if they are even aware that their FX shop is Cyprus domiciled and registered which many don’t even read the fineprint when they sign up online or in person in opening those accounts with a representative. This is going to get diabolically and wickedly interesting!
If there is a catalyst for a EUR/USD move lower … this will be it. SELL SELL SELL!
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.
Reblogged this on AsianMacro.
Everything about the Cyprus case smacks of conspiracy. The core Europeans are obviously trying to kill many birds with a single stone/ Cypriot. First, it is a test case on how a system can blow up if the men on the streets are barred from accessing their funds – imagine the hyperinflation to ensue from here. Second, it is used as a warning on the first tier peripheral Europeans – your citizens must pay upfront for your past binges. Last but not the least, they are obviously prepared for the Cypriots to throw in the towel and exit the Euro. The levies are very punitive. The EUR10bn bailout is said to be 50% of the country’s GDP. The country’s deposit base is as much as EUR60bn (at 3x of GDP, this country is clearly overbanked!!). A levy of an average 10% on the bank deposit base will therefore work out to more than half of the EUR10bn bailout. If the bailout is to be dished out in parcels, that’s as good as telling the Cypriots that they have to bail out their government (plus the Greeks and Russians?) upfront? It’s so clear cut to me that this aint gonna make sense to the men on the street.
@ dialastrategist, political solutions like the supposed Cyprus ”bail-in” or ”bail-out” depending whether the cup is half empty or half full when you look at it, will always be about some conspiracy of sorts between the parties. Europe have too many objectives and problems with too few instruments for them to tackle the issues at hand with a common currency EUR holding them like an unnecessary glue.