Sand Spring Advisors LLC
The Most Uncovered Story
August 29, 2003
by, Barclay T. Leib
The chart above is a 5-year perspective of the DJ Stoxx Euro Bank Index. Not that long ago, there was a consistent buzz emanating between savvy European investors (rarely even mentioned by the American media) that a major liquidity crisis was developing amidst German banks. But then, from the fall of 2002 onwards, a hefty A-B-C equity rally period transpired, and the capital adequacy problems of German banks were largely forgotten.
Yet as recently as this July, HVB Group was still seen scrambling to sell assets in an effort to re-liquefy itself. West LB and Commerzbank have also remained within the rumor mill concerning derivatives losses that may have occured at these institutions over time, and July's turmoil in global fixed income markets likely did not help improve past problems. In general, despite low media coverage, there is little doubt that the German bank illiquidity problem lingers.
Then, when we look at a longer-term chart shown below of the German DAX Index, a very clear and large Head & Shoulders top still presents itself -- the recent rally period continuing to appear simply as a minor bounce back to kiss the underside of the neckline.
Could a currently unforeseen financial accident be developing in Europe -- in addition to the more focused-upon mortgage debt bubble in America?
More will likely follow on this topic in subscriber-only monthly analysis -- the next of which we are targeting for release September 7th.
Non-subscribers are invited to access our August 2nd article, "Debt Bubble Unwind & a Market of Stocks vs. a Stock Market" together with other past articles, by signing up for a quarterly Sandspring.com subscription below.
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