FW: OUT OF THE BOX: THE RISE AND FALL OF EMPIRES

Oy Vey! This is some bad sounding stuff. But probably very easily within the realm of possibility.


Boudin Chaud. Cous Cous Froide. Allons Tigres--Poussez Poussez Poussez

John Broussard
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury
Ph: 225-342-0013

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Subject: FW: OUT OF THE BOX: THE RISE AND FALL OF EMPIRES


---- Original Message

From: MARK GRANT (SOUTHWEST SECURITIES) At: 11/29
8:04:46

"This storm will be magnificent. All the electrical secrets of Heaven. And this time we're ready, eh Fritz? Ready." -Herr Frankenstein

You can hear the winds howl. You can hear the tirades, the promises with all of the substance of some hollow reed, you can watch the play of charades at the Great Houses and I invite you to stand back, way back, because massive fireworks are about to begin and the pushing and shoving will achieve nothing because forward momentum is locked down by the tribal differences of two thousand years that will not be resolved, has not been resolved, and cannot be resolved. It may not be tanks and rifles but it is capital and power and dominance that is to be pushed upon the European stage now in a game of conquest that will determine who is to succeed and who is to be left by the wayside. The agenda will be pushed by Germany and France but this is the Game of Nations and the age of Kings is long past so that the rulers are responsible to those that elected them and, as Finland stated yesterday, not so fast.

I advise you not to lose your bearings here. It has been promises of a levered EFSF, promises of a Greek 50% haircut leading to a 120% debt to GDP for Greece and promises of some Germanic bazooka that have led to naught and less than naught as the Great Expectations have surpassed anything written by Charles Dickens and they all lay now in the dustbin of political farce. As the Finance Ministers meet today in Europe it is to be more proclamations heralding the wondrous days ahead, more schemes promising everything short of Nirvana and more Federalism for the greater good but do not be taken in by the rhetoric, do not allow yourself to be led down the garden path because it will all be folly and I predict that all of the presented illusions will take you nowhere because agreement will not transpire so first the rally, then the realization and then the hard swing back down as the "Nowhere Men" lead the procession into the void.

It was some months back when I stated that my group would no longer transact business in the European bank credits. I first took this position about hybrids, trups and subordinated debt and later decided that we would do nothing at all in the European banks. I have my own standards and ethics and I do not wish to be involved in bonds that I believe will hurt people and perhaps quite badly. I have not wavered from this position nor have we transacted in these names. Today Moodys is out warning of one and two notch downgrades of all of the major banks in Europe for their subordinated debt, junior-sub debt and their Tier III bonds. Utilizing Bank of America's EUR Corporate Banking Index I note that spreads are out to +424 bps as compared to +336 bps on October 31 which is a 21% widening in just one month and the widest spread since May 2009. Serious investors are fleeing from both European sovereign and European bank debt in droves as the financials of both classes are in question and as nothing of substance has been achieved to correct the problems and quell the European crisis.

The Rise and Fall of Empire

Edward Gibbons points to A.D. 476 as the Fall of the Roman Empire which is when the East separated from the West. It must have been something to be in Rome at the time as citizens watched their once glorious enterprise slide into decay and decadence. As one peers back at history there seem to be some similarities between then and now. I note the much too rapid expansion of the Empire where so many diverse tribes with huge differences in culture were admitted to the Empire so that the divergence in morals and values could not be sustained. Gibbons also points to the economy of the Empire where Rome flourished but the further flung parts of the Empire were bankrupt as Rome demanded more taxes and more "austerity measures" to try to bring the Empire back under control. Gibbons also notes the high level of unemployment in the working classes where the Romans instituted a policy of unrestricted trade but this lead to many parts of the Empire not being able to compete with the wealthier parts of the Empire so that various regions had to live on the sustenance provided by Rome. This then lead to bloated regional governments where many citizens worked for the government until it could no longer be afforded and then cut-backs lead to social unrest as Rome could no longer afford to pay the bill.

"Here is the glory, the greed and grandeur that was Rome. Here is the story of personal lust for power, and the shattering effects of that power's loss. Here is the tale of the plight of a people living on the brink of a political abyss." -The Rise and Fall of the Roman Empire

Leaving motives aside; it is clear that Berlin is trying to dictate the terms and conditions for the European Union and using Brussels as the guise for their desires. In return the poorer nations are calling upon Germany to use their capital to pay the bills for the entire Union and here is where the metal meets the road as the economy of Germany is not sufficient for the task. Not only that but the standard of living and the cost of funding would decline for Germany to some average for all of Europe if this were to come to pass so that Federalist statements for political reasons to the back; Germany cannot politically or economically abide by what is being asked of them. Consequently the stalemate, the lack of forward motion because the vise is now clamped shut and it will only be a very violent shudder now that turns the tide one way or another and either direction will not only be dangerous but it will cause economic calamity far past what we have seen to date.
There is no good way out any longer and some bad way out will come, no doubt, and the consequences will be dire. I warn, I warn again, I warn as much as I can because what is to come will be most unpleasant!

"Delay always breeds danger and to protract a great design is often to ruin it." -Cervantes

Mark J. Grant
Managing Director
Corporate Syndicate
Structured Products
Southwest Securities