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Reading Between The Lines

Tyler Durden's picture




 

Via Mark J. Grant, author of Out of the Box,

Tomorrow the Wizard turns 620. I was out with him last night in a little pre-birthday celebration and I asked him how it felt to have that many years under his belt. He laughed and replied that being a Wizard had it occurred to me that he might not have started at one? No, I admit, I had not thought of that, which opened up a realm of possibilities that the old codger could actually be far older or far younger than was generally presumed. I then asked him if he planned to be around for his 630th birthday day and he replied that the odds were good. He said he had done a whole statistical model and that very few people died between 620 and 630 and so he was likely to make it to the next milestone. At the end of the evening, with a twinkle in his eye, he informed me that he would not be here on Saturday in any event. He said that he had learned something from the Europeans and that he was going to follow their lead. He informed me that he was going to get on his broomstick, fly across the international dateline and so never have an actual birthday. Then he will return to America and claim that the damn thing never happened. I guess he is still learning a thing or two!
 
Reading Between the Lines
 
One of the great faults with paying attention to Europe is to take what they tell you as factual. The media trumpets what they are given by the various sources of information in Europe but a quite skeptical eye is what is needed. They claim that they do not have the “Final Troika Report” on Greece because they have not stamped it “Final” yet and so they blame their indecision on the magic trick that they are performing. Everyone on the Continent has the report but since they can agree on almost nothing they have blamed the lack of the rubber stamp as the culprit. They should just come out and say that, “It is the rubber stamp’s fault” and be done with it.
 
Red Lines
 
Every easy trick has now been exhausted when it comes to Greece. You may feel worn out and tired by the length of time this process has taken but that is a remarkably short-sighted viewpoint. You should be happy that you have had the time to carefully consider and plan for what is about to take place because ugly is about to get uglier and you will see retching in the streets; not just in Athens but in Berlin and Madrid. I would say that the odds are about 60/40 that what is happening is that the European Union is trying to force Greece out of the EU by having Greece refuse any more of the austerity measures and not get funded. It is a “Game of Houses” because Germany does not want to take the blame and they want Greece to throw up their hands and leave so Berlin can say, “What can we do?” To actually force Greece out would be a violation of principles that Germany cannot politically afford and so a quite complicated ruse is underway. The severity of the situation is indicated now by the Red Lines that have been drawn by all of the major constituencies so that there is no compromise to be found. As I have stated before we are at the Crossroads, at Breakpoint, because every proposal is met with a hard line drawn in concrete by someone in some corner of the deliberations.
 
The IMF will not provide any more funds without a 120% debt to GDP ratio by 2020 they claim but what this really means, and what they have come closer to saying recently, is that they will not dish out any more money unless they feel that they will get paid back (Red Line). The IMF has suggested that perhaps the ECB could take the loss and Mr. Draghi has said while they might forego the profits on their Greek Bonds, estimated at about $16 billion, that they will not take a loss as it would violate their charter of not financing individual nations (Red Line). The IMF has suggested that the Stabilization Funds could take a hit which Germany and several other countries have said is impossible because it would probably cause several governments to fall in Europe (Red Line). The Greeks have asked for a two year extension in payments which would require another $40 billion to be handed to Greece as Austria, the Netherlands and Finland have all publically stated “No more money for Greece” and another wall (Red Line). The markets all think that it is just another moment to muddle through but I am telling you, having examined the evidence and considered all of the possibilities, that this is not the case and that my conclusion will very soon prove to be correct. The length of time this process has taken may have numbed some people’s sensitivity to the danger but with $1.5 trillion in total debts that could go into default; the danger is quite real and the shock will be systemic. The ticking time bomb has been loaded and it is about to explode whether you realize it or not.
 
It is going to be either “debt forgiveness” or “more money” or “brute force” and there are quite serious consequences for many nations and many governments whichever path is chosen. “Debt forgiveness” is a sacred promise broken and “more money” is politically impossible in some countries at this point. Europe may have concluded that it is far better to force Greece out by continual demands and ever increasing austerity measures and that the losses from a Greek Exit, which would be borne by all, are a better alternative to the other two roads as the Germans and others could blame the Greeks and not take the responsibility. Three roads, all ugly, which is why the length of the delay and the hesitation to engage. Any of these three paths will lead to extensive pain and a lot of contagion and so I conclude that the Greeks will get forced out by increasing European demands as that is the least politically damaging alternative for many of the nations in Europe. “Blame it on the Greeks” will be the secret password while the Greeks will call Berlin every name in the book.
 
“The summer day is closed - the sun is set:
Well they have done their office, those bright hours,
The latest of whose train goes softly out
In the red west. The green blade of the ground
Has risen, and herds have cropped it; the young twig
Has spread its plaited tissues to the sun;
Flowers of the garden and the waste have blown
And withered; seeds have fallen upon the soil,
From bursting cells, and in their graves await
Their resurrection. Insects from the pools
Have filled the air awhile with humming wings,
That now are still forever; painted moths
Have wandered the blue sky, and died again”
 
                   -William Cullen Bryant

 

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Fri, 11/09/2012 - 14:35 | 2965293 JLee2027
JLee2027's picture

Shitstorm dead ahead?

Fri, 11/09/2012 - 15:07 | 2965478 CrashisOptimistic
CrashisOptimistic's picture

"Any of these three paths will lead to extensive pain and a lot of contagion and so I conclude that the Greeks will get forced out by increasing European demands as that is the least politically damaging alternative for many of the nations in Europe."

 

Pretty darn good analysis in this article.  This bolded segment is dead on.  They will increase the demands from Greece until Greece's government coalition collapses, Szirisa takes over and exits the EU.  The EU can say oh well (though it will still cost 1.5 Trillion Euros, and the swaps will do who knows what).

 


Fri, 11/09/2012 - 14:35 | 2965294 -1Delta
-1Delta's picture

Kick the  can 14.0. QEternity will fix greec you damn pesimists!!!!!

Fri, 11/09/2012 - 14:38 | 2965313 Jack Sheet
Jack Sheet's picture

When will you guys capeesh that Greece will not leave the Euro?

Fri, 11/09/2012 - 14:44 | 2965339 RSBriggs
RSBriggs's picture

On November 21st they have an interest payment due.  If they can't make the payment, they default in the true "trillions of dollars worth of Credit Default Derivatives going boom" sense of the word.  No matter if they want to leave the Euro or not, it's SHTF time in another 12 days.

Fri, 11/09/2012 - 14:48 | 2965373 francis_sawyer
francis_sawyer's picture

Don't get any of that flying fecal matter on my turkey dinner...

Fri, 11/09/2012 - 14:50 | 2965383 I Am Not a Copp...
I Am Not a Copper Top's picture

Nope.  ISDA will come out and say it's not a default event.  Move along - nothing to see here.

Fri, 11/09/2012 - 15:07 | 2965473 RSBriggs
RSBriggs's picture

They can twist things around all they want about "voluntary haircuts and write-downs" not being defaults.  However, a default on an interest payment is, by definition of the derivatives themselves, a default.  No wiggle room available for this one - it's written as "if I don't get my payment exactly when due then I get to collect the insurance."

Fri, 11/09/2012 - 15:23 | 2965552 forexskin
forexskin's picture

@ i am not a copp..

probably right, then the question will be 'why the hell would anybody spend money on default hedges?', which hopefully kills the market for the very worst kind of derivatives - those akin to buying insurance on your neighbor's house while whispering suggestions to the local pyromaniac.

Sat, 11/10/2012 - 01:28 | 2967237 smiler03
smiler03's picture

I call BS. Everytime the Troika threaten to delay payment they have paid out as required.

On this occasion the Greeks have even done exactly as ordered and passed it in Parliament.

A day here or there is irrelevant. Deutsche Bank will get their €billions. There are months of can kicking to go yet.

 

Sat, 11/10/2012 - 10:20 | 2967538 Griffin
Griffin's picture

There is a new risk element that may be added to the credit default derivatives minefield.

Sometime next month there will be a ruling in EFTA court case regarding Icesave. Its a dispute where Iceland is up against the United Kingdom and the Netherlands in a argument whether there is a state guarantee on all savings accounts in privately owned banks.

The argument in short  http://www.eftacourt.int/images/uploads/16_11_PR_OH.pdf

Interestingly the EU has decided to intervene.

http://www.advice.is/wp-content/uploads/2012/04/17_European-Commission-r...

Iceland is a member of the EEA and there for uses a large part of EU laws.

This is Icelands defence http://www.mfa.is/media/icesave-2011-12/Speech-Government-of-Iceland.pdf

If Iceland looses this case it will mean that all the states in the EEA and EU are bound to guarantee all deposits made in every bank and its subsidiaries in the entire EU and EEA.

A state guarantee like this will create enormous systemic risk and will certainly draw the attention of rating agencys.

The way is see it this is a fight where Iceland defends the sovereign rights of European states against those who would like to see those sovereign rights dilluted or terminated.

This is a double edged sword that can cut the sovereign rights of states on one hand and cut the EU down on the other hand, given that much of the western world is in a rather perilious situation, to say the very least.

 

 

 

Fri, 11/09/2012 - 14:41 | 2965331 Cole Younger
Cole Younger's picture

Unless the market completely collapses, nothing is going to get fixed..not in Europe and certainly not in the U.S. Until the 401K and market based pensions take a hit, status quo and quid pro quo continues.

Fri, 11/09/2012 - 14:41 | 2965333 dracos_ghost
dracos_ghost's picture

Mo money, Mo money Mo Money

http://www.youtube.com/watch?v=7jukQX2pl2Q

Fri, 11/09/2012 - 15:06 | 2965357 Cognitive Dissonance
Cognitive Dissonance's picture

The art of politics (political manipulation and mind control actually) is telling lies people want to hear after telling them what they should want to hear.

It really is as simple as that.

Fri, 11/09/2012 - 15:44 | 2965654 crusty curmudgeon
crusty curmudgeon's picture

Interesting.  Do you have any suggested reading where I can learn more on this topic?  Thanks.

Fri, 11/09/2012 - 16:23 | 2965863 pods
pods's picture

Yep, and America's top politician crafted his skills right at home:

"No honey, that dress does NOT make your ass look big!"

pods 

Fri, 11/09/2012 - 14:51 | 2965386 timbo_em
timbo_em's picture

By law the German governent and the budget committee of the Bundestag are not allowed to support an entity that is or will be unable to repay the loans. On the one hand this is of course pretty ridiculous when it comes to de-facto insolvent Greece but on the other hand this makes it impossible for the German government to accept taking a hit on its loans and release further bailout tranches at the very same time. And while Merkel and company have been quite successful in bending laws, constitutions and international treaties, this would be too much.

Fri, 11/09/2012 - 21:45 | 2966872 Urban Redneck
Urban Redneck's picture

So what about supporting the entities that are or will be unable to repay the gold loans?

Fri, 11/09/2012 - 14:55 | 2965403 lasvegaspersona
lasvegaspersona's picture

can we have a do-over...on everything? To whom do I petition?

Universal debt forgiveness = US$ hyperinflation

mabe I should buy that new Jag (on credit of course) today.......just thinking

Fri, 11/09/2012 - 15:03 | 2965452 edb5s
edb5s's picture

What just happened to futures?

 

http://finviz.com/futures_charts.ashx?t=YM&p=m5

Fri, 11/09/2012 - 15:22 | 2965549 RSBriggs
RSBriggs's picture

Nothing that didn't un-happen in the next 10 minutes....

Fri, 11/09/2012 - 15:25 | 2965565 CuriousPasserby
CuriousPasserby's picture

While at the bank today I noticed a news stream on their wall video moniitor announcing that after 3 years Europe was now fixed and the crisis is over! I think it was AP.

Bwahahahahahaha!!!!!!!!

Fri, 11/09/2012 - 15:39 | 2965629 jjsilver
Fri, 11/09/2012 - 15:44 | 2965657 machineh
machineh's picture

If Grexit does occur, then what?

Presumably Draghi must print a trillion in a hurry to patch liquidity holes and stop a domino effect.

Euro down, gold up, stocks up? Stranger things have happened ...

 

Fri, 11/09/2012 - 15:55 | 2965702 Haus-Targaryen
Haus-Targaryen's picture

I wish this fucker would die already. 

Fri, 11/09/2012 - 15:57 | 2965705 BigPerm
BigPerm's picture

What is this Wizard sht all about?

Fri, 11/09/2012 - 15:57 | 2965706 Peterus
Peterus's picture

Only thing to "save" Greece now would be reveal of the good aliens on 21.12.12 like prophetized in Annunaki/Ancient Aliens mythos. They needed to make very sharp turn, negotiated kinda-sorta turn and until now are realizing nudging the steering wheel. This country would be unsustainable with no debt whatsoever, lending them more could never work. At this stage of debt addiction you've got to just stop injecting. Not tomorrow, today - right now. If UE wanted to "save" them, they would stop lending and than possibly send humanitarian aid to individual people... I think this article is right - and they want to step over any blame, or maybe banksters want too teach debtors a lesson. Break Greece's knees so all the others better pay their god damn dues on time.

Fri, 11/09/2012 - 17:35 | 2966170 No Euros please...
No Euros please we're British's picture

There is no mystery about Europe. The unelected pols lie through their teeth in order to get the market to fund bankrupt states by buying bonds at low interest rates.

At the end of the day, anyone buying (bonds) into this needs a soon to be forthcoming reaiity check and a decent haircut.

Fri, 11/09/2012 - 18:12 | 2966316 rvremi
rvremi's picture

I don't understand how they will find a Greek to assume an exit from EuroZone. It's so more easy to do nothing... Doing nothing means a default. A default doesn't means an exit from Greece event if an exit from Greece means a default.

I'm sure it will ne ugly but i don't understand why Greece would exit... Can you help ?

Fri, 11/09/2012 - 22:56 | 2967000 Roger Knights
Roger Knights's picture

The sharp drop in stocks supports the author's thesis that things are really getting serious Over There. The big boys are clued into the inside dope on these negotiations. There was no negative "news" to account for the drop.

Sat, 11/10/2012 - 01:16 | 2967225 smiler03
smiler03's picture

Great article Mark but WTF is with the poetry? It doesn't fit. You don't need it to make you look intellectual, you already are.

Mary had a little skirt

It was split right up the front

And everytime that she sat down

You could see her little hole in Athens

Sat, 11/10/2012 - 04:13 | 2967372 Offthebeach
Offthebeach's picture

Musing on Public Choice theory, and good paying, pseudo feeling jobs that seem to have a bright future, the people in the center ring have a bit of incentive to keep this going.
I don't see much to incentivize a solution. From a govey view they all look unclear, risky.
Status quo.

Sat, 11/10/2012 - 09:19 | 2967499 smacker
smacker's picture

Time is of the essence when it comes to dealing with Greece.

There is every possibility that it is simply drip-feeding/delaying/stalling for as long as possible in its negotiations with the Troika to extract as much money from the EZ as it can to keep its wheels rolling. Until its cashflows begin rolling in from the so-called massive oil/gas reserves in the seas around it. When this happens it will just default on its huge debts and wave bye-bye to the EU.

The Troika could pre-empt this huge con-trick by getting Greece to sign off that all money lent to it will be repaid from energy revenues in the 4+ years ahead. That would call the Greek's bluff.

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