Since the start of the European Crisis, talking heads and investors alike have been yelling "Buy Buy Buy" European Stocks. European Banks are now about as safe as a piggy bank in somalia. I would short everyone of the EU Banks if I could, click to find out what is wrong with the EU Banking System.

1. European Banks: As Safe as a Piggy Bank in
Somalia
Danny Russell, Oso Capital Research, October 2013

2. European Hopium
Since 2010, the pundits have continued to bang the drums insisting the
European Stocks were a buy
This includes: HSBC, MarketWatch, Forbes , Jim Cramer’s TheStreet.Com ,
USA Today , and many others
Even the famous Warren Buffett was buying European Stocks at the end of
2011
All this enthusiasm, based on hope and optimism that hasn’t come to fruition
with the Euro STOXX 50 growing at a 4.25% clip while the Dow Jones
growing at 19.64% a year
European Hopium Results
25.00%
20.00%
19.64%
15.00%
CAGR
10.00%
4.25%
5.00%
0.00%
DJIA
Source:StockCharts,
FEZ

3. European Banks Versus The World
The World’s Non-Performing Loans
(NPL) are about half of what Greece’s
and Italy’s NPL’s are
Average NPL's 2009-2012
14.00%
12.00%
10.00%
8.00%
BNP Paribas self reports its NPL’s ex
Greek Debt
6.00%
Average NPL as
% of Gross Loans
4.00%
World
2.00%
0.00%
That should tell you all you need to know to
short every bank in Europe you can
The Capital to Asset Ratio in the
Eurozone is about ¾ that of the World
average and almost half of the US
capital ratios
Notes: BNP Paribas is ex Greek Debt,
Banco Santander self-reported data
If 2012 Data wasn;t listed the 2011 Numbers were used
Source: WorldBank
Average Bank Capital-to-Asset Ratio 2009-2012
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Source: BNP Paribas, Banco Santander, World Bank, ,
Average Bank
capital to assets
ratio (%)
World Average
Bank capital to
assets ratio (%)

4. Spanish Banking System
Since the beginning of the Euro crisis Spanish Banks have continued to have
exponential growth in bad debts
Adding to the bad debts the loans as a percent of deposits took a large hit in
2010, now at the lowest yearly level since 1998
Without loans NIM’s get hit and the entire banking system spirals downwards
100%
80%
60%
40%
20%
0%
Spain Credit
System
Domestic
Loans to
Credit System
Domestic
Deposits
1,200
1,000
$250.00
$200.00
800
$150.00
Millions
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
120%
Spanish Doubtful Debts & Mortgage Loans
Millions
Spanish Loans to Deposits and Doubtful Loans
Mortgage Loans
(LHS)
600
$100.00
400
Spain Doubtful
Assets to Total
Deposits
200
0
$50.00
Doubtful Debtors
(RHS)
$0.00
Source: Banco De Espàna
Source: Banco de España,

5. Italian Banking System
Italian Banks had a grace period with the initiation of the EUR
When the crisis hit the EUR deprecated and the Bad Debts skyrocketed
Currently the EUR is in a range while the Bad Debts to Deposits keep climbing, this
would be partially the ECB and Fed printing an inordinate amount of money
Fixed Assets of Banks has decreased to it’s lowest level since 1998
Lowering retail banking locations through lower fixed assets, makes it hard to gather deposits
With no deposits how do Italian Banks expect to make loans?
Italian Banks- Bad Debts to Total Loans & EURUSD
12.00%
Italian Loans and Fixed Assets
0
6.00%
0.2
10.00%
0.4
8.00%
0.6
5.00%
4.00%
0.8
6.00%
1
4.00%
3.00%
Banks - Total
Loans to BanksTotal Liabilities
1.2
2.00%
1.4
2.00%
1.6
0.00%
1.00%
1.8
0.00%
Italian Banks- Bad Debts to Total Loans
Source: Banca d’Italia
EURUSD (Inverted)
Italian Banks Fixed Assets to
Banks-Total
Liabilities

6. U.S.A. Banking System – Best of the Worst?
Where European Banking systems have an exponential move up in Bad
Debts as a Percent of Loans the US Banks are moving in the opposite
direction
The Total Mortgages are at the lowest nominal level since 4Q2005
The US is the best of the worst or the cleanest shirt in a dirty basket
Source: Federal Reserve FRED

7. European Macro Deviates from European Markets
Since June 2013 the EU Macro Data has correlated very closely with EU
Stocks
In early October 2013, the Macro data and EU Markets deviated from each other
The Eurozone private-sector loan growth came out recently and it was
incredibly disappointing, coming in at -2% YOY
Source: ZeroHedge, Bloomberg, ECB

8. The Obvious Trade
I have been short EUFN since June
2013 and have been down almost the
entire trade
I believe this trade is the right and you
should continue to short the EUFN
(European Banks)
The top 10 holdings of EUFN make up
42% of the fund and include some of
the worst European Banks
Spain
11%
France
12%
Source: Ishares, StockCharts.com
Switzerland
13%
4.02%
3.84%
BANCO BILBAO VIZCAYA
ARGENTA
3.70%
3.56%
STANDARD CHARTERED PLC
3.07%
LLOYDS BANKING GROUP PLC
Germany
11%
United Kingdom
33%
4.08%
BARCLAYS PLC
Sweden
7%
5.40%
ALLIANZ SE-REG
Italy
6%
BANCO SANTANDER SA
BNP PARIBAS
4%
Finland
1%
10.85%
UBS AG-REG
EUFN Geographic Breakdown
Percentage of Fund
HSBC HOLDINGS PLC
Belgium
2% Netherlands
Company
3.02%
PRUDENTIAL PLC
2.71%

9. Disclosure
This is not a recommendation, this presentation is purely for educational
purposes
For more disclosures and to read more about the Global Macro Environment
please visit www.OsoCapitalResearch.com
Oso Capital Research
A Bearish Voice in a Forest Full of Bulls