From Peter Tchir of TF Market Advisors
It's A Bird, It's A Plane, No It's SUPEREFSF!
EFSF may have been the best invention ever. Although it has done very little so far, the potential for it do a lot has kept the markets upbeat time and again. The latest is the announcement out of Belgium that the EFSF will make up the shortfall of investors agreeing to the voluntary rollover. I can't even begin to understand what that means. If the EFSF doesn't hold bonds, how is it going to vote to exchange them? If they don't own bonds, where are they going to get them? Some bank that won't exchange existing bonds for a package that is claimed to only cost them 21% of par, is going to sell bonds at 50? They are going to buy bonds from hedge funds to exchange them? Okay, maybe, but it does beg the question of why hedge funds would sell a bond at 50 that can be turned into a structured asset worth 79? The obvious answer, is that the new package isn't worth 79.
So what else can the EFSF do to make up for the shortfall of voluntary rollovers? Give Greece money? As far as I can tell, SPX jumped over 0.5% on the Reuters story. It really makes no sense to me. Can just uttering the word EFSF really be worth 5-10 SPX points?
Or maybe it is the story that Ireland is going to ask the EFSF to buy its bonds? Yes, another clear indication that all is good.
It's been a long week of finding White Knight buyers of European debt. Some of the rumors may turn out to be true, but reacting to a headline like this is just another sign of how broken this market has become. Nerves are frayed and people are instantly reacting to any move on the chance that someone knows something.
In the meantime, I did pull up the Wikipedia description of the Kubler-Ross 5 Stages of Grief. Denial, Anger, Bargaining, Depression, and Acceptance. I think Greece is in Acceptance, Portugal is in Depression, and Italy, Spain, and Ireland are deep into the Bargaining phase. Personally, I'm mired in the Anger phase.