On Jamie Dimon's Track Record Of Predicting Greek Outcomes

Tyler Durden's picture

The US market appears modestly enthused by earlier remarks from Jamie Dimon (who ironically is of Greek descent) who told CNBC that "The direct impact of a Greek default is almost zero."  Note the phrase "Greek default" because it takes us back to that long ago June of 2011 when Jamie Dimon was again giving predictions about events in Greece. In this case, the summary goes to Bloomberg, which penned a piece titled: "JPMorgan’s Dimon Says Greece Won’t Default, Australian Reports."  That's not all. He added the following, from The Australian: "I don't think they will default. I think the more likely outcome is that the European authorities and politicians will find a way to keep Greece from defaulting." It gets better: "It does reverberate because a lot of European banks own Greek debt and investors hold European bank debt. From all of the numbers I have seen, the European banks have enough capital to withstand it." We can only suppose that all the numbers probably excluded the $100 billion in FX swaps that the Fed conducted days after it told Congress it would not bail out Europe, or the OIS+100 to OIS+50 cut in interbank lending rates, because the banks had "enough capital" oh yes, and that €490 billion LTRO, that kinda, sorta indicates that the European banks did not actually have enough capital to withstand either "it" or pretty much any of the events in Q4 of 2011.

So we should suddenly believe that Jamie Dimon was correct? Well maybe in part: "There’s a teeny chance of a catastrophic outcome, which is why the muddle-through is the only good strategy. There is no other good strategy."

Probably the teeny chance here is that Dimon will be right this time, where he was wrong 6 months ago, inasmuch as the "catastrophic outcome" is concerned. He is also spot on with the following: "Not wanting to diminish Europe’s problems, Dimon said Greece, Portugal and Ireland were not the main issue. "The real issue is Spain and Italy,” he said." They are indeed. And yet the main reason why Portugal probably should not be mentioned is that as was noted here, and as the bond market has come to realize, with the bulk of Portuguese bonds having "negative pledge" clauses under UK law, the IMF bailout whereby the Troika loan comes as a dip to prime everything below it, simply won't work. And the same is true for Spain... and Italy.

So maybe it is time to assume that, like last time around, Dimon is actually wrong... again?