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The Breathless (And Baseless) Bailout Hope
Earlier we noted that while the rhetoric on a European debacle is particularly negative, it appears positioning for it is actually considerably less bearish in FX markets. From a credit perspective, based on Citi's investor survey, it appears we have a similar picture of breathless anticipation and front-running of some central-planning solution to save the day. As they note, almost all respondents expected spreads, even in USD credit, to widen notably in the event of Spanish and Italian bond yields continuing to crack higher; and yet there was relatively little change in investors' overall net long position - and in USD credit it actually increased. One piece of reality is in European banks where real-money remains notably underweighted, and while leveraged money (hedgies) remains overweight, they have reduced their exposure somewhat recently. Leveraged accounts have reduced their short positions recently in peripheral Europe while real-money accounts are still avoiding it like the plague. The point being that fast money is certainly not going to be the ammo for a short-squeeze in European credit (or FX) that everyone appears to believe it to be.
Overall exposure in credit has surged long in USD, is flat in EUR, and has dropped a little in GBP - despite every one and their mom 'knowing' how bad the situation is in Europe (and its contagious impact)...
But hedgies remain long European banks (althgough have reduced a little recently) while real-money has retrenched notably...
What moderate position reduction occurred in Europe seems to have taken place more through selling of names in the core, rather than in the periphery (where shorts seem to have been partially covered). This may be a rational reflection of the likelihood of a bailout being around the corner, or may alternatively just be a reflection of liquidity: you sell what you can, not necessarily what you want to.
And peripheral European short exposure has been reduced dramatically by the hedge fund (leveraged) community (even as real-money remains more in the core)...
The reported short covering was clearly not sufficient to prevent a sharp widening in Spanish and Italian names this month.
In sum, Citi suggests the survey shows several areas of technical support, but equally shows little sign that investors are really positioned for the sovereign crisis again becoming systemic. As several investors put it, “You’d expect a policy response, wouldn’t you?”
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ATHENS – Gunmen driving a van packed with gas canisters firebombed the Athens headquarters of Microsoft on Wednesday, underscoring the threat of instability as Greece asks for more time and less hardship in cutting its crippling debt.
Fire gutted the ground floor of the blue four-storey HQ of the U.S. software giant, blackening its walls with flames, on the eve of yet another European summit seeking a solution to a regional debt crisis first unleashed by Greece.
At least two attackers were involved in the sophisticated assault at 4.45 a.m. (0145 GMT) in Maroussi, a northern suburb of the sprawling Greek capital, police said.
Brandishing pistols and an automatic rifle, they kept security guards at bay and set fire to the van carrying three gas canisters and five cans of gasoline. No one was hurt in the early morning assault.
Sooo the Greeks are pissed off because their lives have gone down the crapper.....I am surprised it has not gotten a lot worse...
Athens headquarters of Microsoft?! Why not the Greek Ministry of Finance?
Two possibilities:
A. Google maps took them to the wrong address
B. It has nothing whatsoever to do with the financial crisis. They just hate Vista real bad.
No, these are pissed off Mac users who are attacking Micrsoft in retalliation for being overcharged by Orbitz!!!
Because people will blame what's happening in Greece on capitalism and to them, MS = capitalism. Retarded.
My guess is that they do support for Windows7, and the universally hated Outlook 2010.
Gas? That has to be an expensive and wasteful use of that precious commodity. Why would the firebomb Microsoft? I find Windows cumbersome but I wouldn't take it to the extreme.
It is getting to where I don't think a global "reset" is gonna fix anything.
The Bernank didn't give them the assumed policy response, so get ready to be surprised again. :)
"But hedgies remain long European banks (althgough have reduced a little recently) while real-money has retrenched notably..."
I'm almost afraid to ask what "real-money" is in this case. Should I assume it's money someone can't afford to lose, meaning not OPM - Other People's Money?
"Real Money" see: JP Morgan's CIO Desk. Home of the London Whale.
There was a massive short position in the euro. JP Morgan "took the 9 Billion dollar hit"...the other JP "bought the sheiks place" for a huge sum. My view "best loss taken in Morgan history" but we'll see. The Euro shorts/traders smell an end game and a massive of a long shot as it is I think they're right.
“You’d expect a policy response, wouldn’t you?”
DAMN STRAIGHT i WOULD. NOTHING BAD CAN EVER HAPPEN.
@midgetrannyporn
Yays! Any more bad things have been outlawed! Can never happen again! Thank you, central planners! Ms. July will be so happy to read that mean people have been outlawed too.
but a policy response wont do a damn thing, as they havent the multiple times they were used before.
Im having a crack, bought some around 1.45. Not expecting it to last long though(thats if we even see a pop), every big risk event this month has been sold hard, and unless they pull some serious rabbit out of the hat, i cant see this being any different.
There will be no bailout, because there is no bailout to be had. Germany is as much in trouble as everyone else, people just choose to ignore the fact that Buba's claims against all the other CBs would be in jeopardy were the EZ to break up. And when it is told that it will not be repaid on its credit lines, guess what will happen - Bunds will be repaid in DEMs indeed, but only if the holder is German. For everybody else, well, too bad you bought some piece of paper promising a whopping 1,5% yield over ten years in hopes of cashing in on some currency revaluation. If I remember well, the same thing happened with East-German DEMs.
As it segregates against non-German residents, the rest of Europe will retaliate and close its borders. Too bad for an economy relying so much on exports. They would never, ever see such willingness to buy their products (with money they are lending themselves, but hey, that works for Ford & GM as well) ever again.
So it's time to man up and realise that everybody has to give in. Schauble's interview in Der Spiegel was excellent - Europe needs full integration. That means Germans have to accept a lot of sharing as well (liabilities included).
Only Cub's fans are more nieve.
Just get used to the idea that the Euro will keep falling until the REAL economy in Europe bottoms out. All they will do is to keep on giving just enough in oreder to try and avoid the melt down.
If that fails Germany will leave the Euro and you will se the Euro in free fall.
Yesterdays rethortic said it all: Monti: "I will resign if the German Chancellor does not change regarding Eurobonds"
Merkel: " There till be no Euro bonds as long as I live"
One of them have the power to stand by his/hers words....
Just get used to the idea that the Euro will keep falling until the REAL economy in Europe bottoms out. All they will do is to keep on giving just enough in oreder to try and avoid the melt down.
If that fails Germany will leave the Euro and you will se the Euro in free fall.
Yesterdays rethortic said it all: Monti: "I will resign if the German Chancellor does not change regarding Eurobonds"
Merkel: " There till be no Euro bonds as long as I live"
One of them have the power to stand by his/hers words....
Of course the Italian voters will be up in arms if Monti resigns as they did vote for him to get things straightned out and...
Oh, wait.