Guest Post: The Market Is Up, So Investors Are Bullish; And Why Eurobonds Won't Work

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Mon, 08/15/2011 - 11:44 | 1561678 oogs66
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Maybe they could fund a Euro Army with Eurobonds.   That would be fun.

Mon, 08/15/2011 - 11:45 | 1561682 DormRoom
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leading indicators out Thursday.  That'll be a Hemingway moment for the bulls.

Mon, 08/15/2011 - 11:51 | 1561704 Tyler Durden
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Don't forget the recent explosion in M2 due to the scramble to safety of deposit accounts. This will be a major non-recurring push to LEI.

Mon, 08/15/2011 - 12:06 | 1561752 Id fight Gandhi
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Which one, his last?

Mon, 08/15/2011 - 11:45 | 1561688 TradingJoe
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One more time for the late come'rs: S&P below 1000 at week's end! IMHO of course:))!

Mon, 08/15/2011 - 11:48 | 1561699 oogs66
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one can only hope :)

Mon, 08/15/2011 - 11:55 | 1561716 machineh
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European 'leaders' are on holiday, lolling at the beach.

The notion that their parliaments are going to return in September and approve a huge expansion of the EFSF is delusional.

You're on your own, Soc Gen.

Mon, 08/15/2011 - 13:59 | 1562254 Spirit Of Truth
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Per the historical seasonal pattern, September/October is when there's the greatest potential for mass panic IMHO.

The "Fall" Is Approaching

Mon, 08/15/2011 - 11:58 | 1561726 SheepDog-One
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Markets up, 'investors' bullish, calm and confident as Hindu cows...no need for any QE at all. Party on!

Mon, 08/15/2011 - 17:20 | 1563021 Don Keot
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Obama meets with Bernanke and Geithner, stock market makes robust reversal erasing last weeks action, reached the bottom and all experts are saying the bull has returned.  Never, never bet against the FED.  I want to know more about the hedge funds that blew up last week that were caught swimming without bathing suits.

Mon, 08/15/2011 - 12:01 | 1561732 LoneStarHog
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"Investors" are NOT "bullish" ... Silicone-based have no FEELINGS, while carbon-based have LEFT the RIGGED markets long ago.

Mon, 08/15/2011 - 12:02 | 1561736 SheepDog-One
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Right, so whats the point to any of this.

Mon, 08/15/2011 - 12:04 | 1561739 falak pema
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As the french say : Les grands travaux...making the NEW DEAL of Euroland the new horizon of the energy change/consumer paradigm change age..heady stuff...

Mon, 08/15/2011 - 12:11 | 1561758 Caviar Emptor
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Wondering about how the market can be this crazy,  rallying at record speed and hovering just below all time records despite a crappy economy and spooky geopolitical developments? Well the crazy market rally ain't good news, and it ain't crazy. It's a reflection of monetary collapse. An ocean of dollars sloshing around seeking something, anything at all. Unfortunately, that's a vicious cycle where even trading profits get degraded and the economy sours even more at every turn. 

Unfortunately, stocks are fickle and prone to incredibly rapid reversals. The setup is extremely poor for price support in this climate. Just look at the number and severity of collapses we've had recently: 00-03, 07-09, flash crash and other mini-crashes. The net direction has been flat, but the pain in between was large. If you're not out when the wind starts to change direction, you lose in the blink of an eye. 

Remember: a fool is always smiling

Mon, 08/15/2011 - 12:30 | 1561835 shushup
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If everyone is so bullish then why is there no volume today?

Mon, 08/15/2011 - 12:49 | 1561903 SheepDog-One
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Well 2 trading robots are bullish, the 3rd not so much.

Mon, 08/15/2011 - 12:40 | 1561856 steve from virginia
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Peter Tchir hits the eurobond nail on the head RE taxing authority. However, the difficulties with taxing authorities don't mean Eurobonds are a bad idea.

The bonds would spread risk around and remove some of the repayment onus from the weakest economies. What is the alternative? Right now it is direct debt replacement of one country's bonds with another country's (by way of EFSF) or by a direct purchase of bonds by a lender of last resort (the Fed???), or default. Not much of a choice.

The ECB could also directly subsidize coupons.

The individual EU countries' individual borrowing horsepower isn't enough to support the whole, Imagine Pennsylvania's and S. Carolina's borrowing for the other 48 states?

Keep in mind is that any 'sovereign' borrowing in its own currency -- as the Euro- Treasury would be doing in euros -- would be self-financing ot a large degree. In other words, lending by the Euro-Treasury would reward its lenders the same way US Treasury does, by instantly crediting accounts- plus coupon payment. At low enough rates, the cost of Euro-Treasury borrowing drop -- as long as the E-T was borrowing and the economy in Europe remains weak (forever).

This works for the US and Japan, both having extremely low rates, as long as they keep borrowing.

The problem has nothing to do with bonds, actually. The EU (and the US, China, Japan, etc.) keep buying time over and over  ... and do nothing with the time they've bought!

The need is to quell the ongoing panic so that structural reform has the opportunity to take place.

Ha haha ha ha haahaahaa!

If the stupid Europeans figure out a better way to finance themselves they won't reform anything but instead will roll back into the same wasteful consumption and growth as always and wind up right where they started.

Mon, 08/15/2011 - 14:13 | 1562324 oogs66
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maybe eurobonds will be the greatest ponzi scheme ever....they will issue them and say we have no intention of every paying them off except by issuing new debt to roll existing debt....

scary that it could actually work

Mon, 08/15/2011 - 17:27 | 1563046 Don Keot
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Why not just make them 100 year bonds.  Print as required to pay interest.  Generational bonds to protect your family for years, hell why not make them inflation protected?

Mon, 08/15/2011 - 13:18 | 1562037 sitenine
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Guest Post: The Market Is Up, So Computers Are Bullish; And Why Eurobonds Won't Work

There, fixed it.

Mon, 08/15/2011 - 13:30 | 1562121 Fuh Querada
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The PIIGS are insolvent or close to it and effectively incapable of servicing any bond, Euro or otherwise. Why should renaming an unpayable debt suddenly make it payable?

Mon, 08/15/2011 - 14:10 | 1562310 oogs66
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the old wall street adage, slap some lipstick on them PIIGS and sell 'em!

Mon, 08/15/2011 - 13:46 | 1562177 PulauHantu29
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Why won't EuroBonds work? Timmy said he would guarantee them....right? I mean, backing Debt with more Debt backed the ole' Full Faith and Credit thing.....that will work right?

Mon, 08/15/2011 - 14:58 | 1562539 janus
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tchir is sage

Mon, 08/15/2011 - 18:52 | 1563299 tradewithdave
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Eurobonds most certainly will work... it's all based on what you were expecting to get for your bank bonds.  We even have the video from Jim Rickards to prove that we have finally gained price discovery on the proverbial pound of flesh. 

Boys and girls, the word for today is.... cram-down. 

 

http://tradewithdave.com/?p=7745

 

Dave Harrison

www.tradewithdave.com

 

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