Keystone's Weekend Reconnaissance 3/17/13

The Cyprus drama has the planet in a tizzy this evening. The S&P futures are down 16, Dow is off 120 and the Nasdaq is down about 25.  As part of the Cyprus bailout package the wealthier citizens (mainly Russian money that uses Cyprus banks to launder money) will have 10% of their money confiscated. The regular Cyprus citizens will have about 7% of their money confiscated. The concern is that this will create bank runs and chaos this week.  Euro leaders are already scrambling to possibly change the percentages to 12.5% for the wealthy and 3% for the Cyprus citizens.

Cyprus is reminiscent of Lehman Brothers in the Fall of 2008 as the stock market crashed. Paulson and company back then let LEH (Lehman) go bankrupt and it created chaos that forced the Fed to destroy capitalism and rush in with QE1 to save the day in March 2009.  If Europe remains somewhat calm as a result of the Cyprus confiscation (one would wonder how it could remain calm) then the Euro leaders will be happy, and all citizens of Europe need to make arrangements since you all will lose 10% of your money in the near future. The other outcome is the bank runs grow out of control this week and Europe falls into chaos. Quite a start to the week. Looks like an event came along.

Everyone now realizes that money is not even safe in a bank. This behavior shows what is in store for the U.S. although the money confiscation may not occur in the U.S. in the months ahead since WW III may be underway by then and all attention will be fixated on that event. The euro is dropping strongly now at 1.2915. Perhaps this week the lower euro = higher dollar = lower copper and commodities = lower equities will move back into sync. The 10-year yield is 1.99%.   Gold is up over 1600 again. The dollar/yen falls under 95, yen strenghtening, so the Nikkei will be down overnight. Australia is having difficulties as well as the commodity currencies suffer. Copper is falling, the Doctor is very ill. It will be interesting to see how things hold up overnight. S&P's -17. Dow -117.  Nasdaq -27.

Note Added 3/17/13 at 7:56 PM:  Australia down 2%.  New Zealand down 1%.  Japan set to open now and slated to drop 2%. Crude oil and copper down about 1%.

Note Added 3/17/13 at 8:50 PM:  Nikkei down 1.8%.  The 10-year yield is 1.92%. S&P's -17. Dow -115.  Nasdaq -29.  Euro hanging on to 1.29. If the 1.29 fails, the S&P's will likely drop to -20's. Moody's rating agency is signaling trouble ahead for Europe bank ratings. Traders will have to put the funny green hats away and sober up from all the green beer this weekend. The new week of trading will be interesting. Nassim Taleb, author of the Black Swan, is likely pressing his suit this evening since the cable news shows will probably search out his comments tomorrow. Just as folks in the States say, as they try to delay the aging process, that 60 years old is the new 40, Cyprus may be the new Lehman.

Note Added 3/18/13 at 4:01 AM:  European markets open with a 2% loss across the board, Italy and Spain are down close to 3%. Banks are sold off. Greece and Cyprus markets are closed due to the bank holiday. Markets are concerned over contagion from the Cyprus decision to confiscate depositor's money. Talks continue to reduce the percentage that regular Cypriots will pay form about 7% down to about 3%. The euro is beaten against all other currencies. The euro/dollar fell through 1.29 but recovered now at 1.2925. Copper is collapsing down about 2.5%. The 10-year Treasury is 1.92%.  Italy 10-year yield is up about 14 basis points to 4.73%. Spain 10-year yield is 5.06% up about 14 bips. Money is seeking safety with the Germany 10-year yield dropping to 1.38%. The S&P futures are -19.  Dow -110. Nasdaq -35. 

Note Added 3/18/13 at 4:15 AM:  S&P's -15. Dow -82. Nasdaq -31. Futures continue to recover with S&P's coming back from -20 to -15 in the last half hour. The 10-year yield is 1.94%.

Note Added 3/18/13 at 5:23 AM:  Stabilization continues. S&P's -13.30.  Dow -76.  Nasdaq -27.5.  Euro 1.2966. European equity markets are down about one percent with Italy and Spain now down about 2%, off the initial lows. The 10-year Treasury yield is 1.95%. Markets may be holding steady for now waiting on the Cyprus vote at 10 AM EST.

Note Added 3/18/13 at 6:27 AM:  Cyprus may now extend the bank holiday into tomorrow and also postpone the parliament vote.  The S&P's drop two handles on the news. S&P's -14.30.  Dow -87.  Nasdaq -29.50.  Euro 1.2943. 10-year yield 1.93%. Copper now printing further lows, crumbling to down -2.6%. Medic! Medic! Dr. Copper needs admitted into intensive care.

Note Added 3/18/13 at 6:31 AM:  The Cyprus vote is cancelled. Further negotiations are required. S&P's -15.60.  Dow -93.  Nasdaq -31. Euro 1.2941. The Cyprus banks do appear to have frozen all accounts and all banking action; that is why there are no lines at the ATM's.