Sin_of_Onin posted:
I thought the whole point of the massive amount of CDS was to bet against Greece. In fact the amount of CDS outstanding seem to suggest that the market is less about insurance and more about high stakes gambling.
At this point it is like everyone is just waiting for the implosion to occur and spread. Those who have risk exposure have had plenty of time to address that risk which should help.
The US is exposed to the European crisis but not to the same degree Europe is exposed to our own economic hardships.
/shrug
Rosaria posted:
Sorry, just got back and am typing this with an eye patch on, so please excuse typos and the occasional burst of Tourette's.
There's a squillion words already printed about Greece but overall I think its a mistake to just say its a case of throwing good money after bad, because the money being spent on Greece is not going to the Greek people, its being diluted across hundreds of international banks and its 'their' money that is magically being guaranteed, not the welfare of the Greek people. This has nothing to do with people because in the final analysis no one gives a shit about Greece. This is about Greek bond swaps that in effect will have the ECB paying far far more than the initial cost of the bond issuance to begin with. Its going to be voted on before anyone even knows if Greece has complied, or has any intention of complying with, the restructuring provisos or not. No one cares, its the shifting of money that matters. Greece has not even made the debt swap offer, and can, after making the offer, withdraw it at any time!
To answer Sin directly, I do not believe there is an LTRO nor a Fed discount window large enough to support international banks who have dreadful risk exposure not only to Greece, but to Spain, Italy, and Portugal in that order. Greece is just one tiny example or portend of four other disasters with abysmally high employment waiting for their turn whose impact is far greater on the overall EU economy.
I simply do not believe any of this action is sustainable, and its going to impact the US in waves because there are no firewalls in place to protect US interests from the financial drama I believe will take place over the next several months. The Mother of All Credit Events is unfolding before us and its infantile to presume that its all because of those 'fatuous and selfish' Greek people.
Sorry, just got back and am typing this with an eye patch on, so please excuse typos and the occasional burst of Tourette's.
There's a squillion words already printed about Greece but overall I think its a mistake to just say its a case of throwing good money after bad, because the money being spent on Greece is not going to the Greek people, its being diluted across hundreds of international banks and its 'their' money that is magically being guaranteed, not the welfare of the Greek people. This has nothing to do with people because in the final analysis no one gives a shit about Greece. This is about Greek bond swaps that in effect will have the ECB paying far far more than the initial cost of the bond issuance to begin with. Its going to be voted on before anyone even knows if Greece has complied, or has any intention of complying with, the restructuring provisos or not. No one cares, its the shifting of money that matters. Greece has not even made the debt swap offer, and can, after making the offer, withdraw it at any time!
To answer Sin directly, I do not believe there is an LTRO nor a Fed discount window large enough to support international banks who have dreadful risk exposure not only to Greece, but to Spain, Italy, and Portugal in that order. Greece is just one tiny example or portend of four other disasters with abysmally high employment waiting for their turn whose impact is far greater on the overall EU economy.
I simply do not believe any of this action is sustainable, and its going to impact the US in waves because there are no firewalls in place to protect US interests from the financial drama I believe will take place over the next several months. The Mother of All Credit Events is unfolding before us and its infantile to presume that its all because of those 'fatuous and selfish' Greek people.
I thought the whole point of the massive amount of CDS was to bet against Greece. In fact the amount of CDS outstanding seem to suggest that the market is less about insurance and more about high stakes gambling.
At this point it is like everyone is just waiting for the implosion to occur and spread. Those who have risk exposure have had plenty of time to address that risk which should help.
The US is exposed to the European crisis but not to the same degree Europe is exposed to our own economic hardships.
/shrug
Its all about high stakes gambling. You are exactly right including sovereign bonds and otherwise, purchasing of public debt by private banks, etc with the appearance of risk management or assurance being offered by entities that simply cannot provide it. I don't believe at any time this was about the welfare of the Greek people nor the welfare of the Greek economy, but rather Greece provided the venue and has been an unwilling participant throughout it. Germany is being identified as the financial aggressor but Germany's economy contracted last quarter, and if it does so again, will signal its inability to further prop up an EU economy that is going to receive further shock waves in the form of the aforementioned countries. In order for the US to proceed with economic gains it has made it must have a functioning and strong EU. You probably think otherwise. Its not going to get that, I fear. The coupling of the USD and EURO has also not helped.
I don't know what's going to happen to the EURO if Greece defaults, which I think it will. That's going to be another shock wave through the currency markets. I agree there has been plenty of time to make necessary arrangements in the event of a Greek default. I don't have a lot of faith though that those were made to the degree they will be needed. There has been significant obfuscation of the entire process that has led to enormous amounts of money changing hands with the belief that Greece would succeed. I am speaking of an 'all in" attitude that has permeated international banking which speaks well to your statement about high stakes gambling. Major large EU banks have tremendously high exposure and also have strong ties to the international operations of US banks.
I also agree that US exposure to a EU crisis does not equal EU exposure to a US crisis in degree of impact. What I do think is in the event of a Greek default there will be a strong negative feedback loop that will perpetuate any risks that do arise. Yes, I speak of financial institutions like Goldman Sachs but I have to admit I am strongly negatively biased against them so take that with a grain of salt.
Anyway, that is one of the wicked headwinds I was referring to. There are others like global commmodities prices, oil, possible war with Iran, trade wars with China, etc. that have the potential to be at the very least unsettling. Coupled with our own structural difficulties, I am not as optimistic as most of our MSM and general public seem to be. I'm hoping very much that I'm wrong but planning as if I'm right.
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"Them Bollinger Bands on the DJIA are starting to look like columns of projectile vomit." ~ Red Pill
