Large multi-national banks, insurance companies, and pension funds, those with the greatest exposure to public sector debts, are the most vulnerable and should be avoided or shorted. The financial sector's significant underperformance to the broader market since 2009 suggests that the invisible hand recognizes the 'vulnerabe' players and crisis ahead (chart). Financial's underperformance comes as US trader near all-time highs.
Headline: Bad Debt Piled in Italian Banks Looms as Next Crisis
MILAN—Britain’s vote to leave the EU has produced dire predictions for the U.K. economy. The damage to the rest of Europe could be more immediate and potentially more serious. Nowhere is the risk concentrated more heavily than in the Italian banking sector.
In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly...
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