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Time To Schedule The Next Summit?

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors

The G-20 is almost over and it looks likely to end with some indications that the IMF will put more money into Europe in some form and that all the leaders will pledge to continue to work together to resolve the debt crisis.

Since resolve doesn't involve letting Greece default and remain in the Euro (the best solution for that country) we will have to continue to guess at what resolve means.

Greece may soon have a new government or no government, joining Belgium the home of Dexia. That is somehow better than letting then just default, restructure within the Eurozone and move on. Commerzbank took a decent sized write-down on their Greek debt and the world didn't end. In a true default the hit would be bigger, but being able to move past Greece and all these half baked Greek bailout plans has to be worth something. Bank stocks might get hurt - but if the EU could demonstrate that the problem is contained and that the CDS could trigger and not cause a cascade of counterparty defaults we would be much better off.  No doubt there would be some white knuckle moments but seriously, living with that has to be better than this endless attempt at can nudging (it's not even being kicked just nudged a little further with each new futile plan). The ECB's bonds are one of the biggest roadblocks.

Speaking of the "grand plan" it has been over a week and the IIF is still figuring out how to structure a 50% haircut? It just isn't that hard. For every 100 euro - you get 50 of a new amortizing 30 year bond with a 5% coupon. Amortizing ensures a smooth payment schedule for Greece and it might not trade at par, but if the 200 billion the IIF talks about is real, then Greece would be in much better shape. Not as good as real default but something. I think the Debt to GDP almost laughable goal of "120 by 2020" could be bettered.  But alas, because there is some free EFSF money for the banks and it is all based on some NPV calculation, we still don't have an actual proposal. Any people wonder why Greece is questioning the wisdom of proceeding? The bailout is worse than default for Greece, and Greeks are just getting the first inklings that default could be the preferred solution.

Any mention of the D-word is met with cries of poverty, dark ages, hyper inflation, but any reasonable analysis of what Greece would look like post default is not so bad and is probably better than what it will look like after another year of the TROIKA diet.  Europeans seems to enjoy rhetoric more than calculations but as more people realize default is inevitable and start doing some calculations and evaluations they may decide that default is preferable. We are at the early stages but it finally seems like people are trying to move beyond the panic and plan what a default would look like. Bad for banks and France, but good for Greece and maybe not so bad, after an initial shock, for the rest of Europe.

The EFSF is still not designed - probably because the flaws in their plans become apparent every time they try to structure it, but that hasn't stopped them from asking for money. What is China supposed to say, you don't even have a vehicle and you want them to commit money? China didn't get a surplus by being that stupid - Europe may be in a deep hole from having been so stupid. EFSF needs to be designed - though how they get anything close to a trillion out of 250 billion of AAA guarantees is confusing. KISS would be my advice to them, but we are likely to get more complexity rather than less because they have figured out the end result and now just need to twist their limited resources to a point that they say they got there.

With more noise of IMF funds and new quick access programs from the IMF, I can only assume they realize they over promised on EFSF and need more help. The inability to price a simple deal this week was shocking. There had to be enough demand for 3 billion, so it had to be about price. If EFSF is going to quibble over a few bps or pull deals in tough market conditions, they will struggle to meet their mandate.

Italy has asked the IMF for advice.  That seems funny on so many levels. The IMF involvement with Greece has achieved nothing. As far as I know, all the successful IMF programs involved hard restructuring and losses for bondholders (Greece is almost there) and Italy would rather ask for advice than take it.

The economic data out of Europe was weak. Europe is already in a recession. Using every ounce of political energy and available funds to prop up the price of bank shares, seems a horrible waste and is unlikely to do much for real companies and the economy.

In the end it still seems like default or print are the most likely options and all these games that are being played to nudge the can a bit further are draining scarce and valuable resources from projects that might be a lot better for everyone in the medium to long term. (the banks have already complained via the IIF about the capital raising issue and possible dilution - so why funnel all this money where they benefit the most and aren't even grateful?)   Lend to Siemens and fiat directly and let them do something. There have to be companies that could do great things if the politicians dedicated even a fraction of the resources to them - especially once Greece and the weakest banks default and can stop acting as an anchor on everyone else.

April 2012 bonds are offered at 47 - that is one heck of a yield given all the plans to save them.

 

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Fri, 11/04/2011 - 08:22 | 1844484 HD
HD's picture

If they have the next summit at Chucky Cheese - at least they will get some free game tokens...

Fri, 11/04/2011 - 08:25 | 1844503 paarsons
paarsons's picture

Let's face it.

It's all bullshit.

We're waiting for the employment numbers.

I'm guessing a drop of 0.1 percent due to people falling out of the work force.

The books are cooked.

But what's a boy to do?

http://fucklloydblankfein.blogspot.com

Fri, 11/04/2011 - 08:28 | 1844513 HD
HD's picture

"It's all bullshit"

Agreed. However, once the bull starts to starve - the shit stops.

Fri, 11/04/2011 - 08:33 | 1844527 Ancona
Ancona's picture

Can't they just eat cake? Well.....OK......baklava...

Fri, 11/04/2011 - 08:41 | 1844565 Mike2756
Mike2756's picture

Mit champale for the socialists.

Fri, 11/04/2011 - 11:52 | 1845370 Hard1
Hard1's picture

All the "leaders" should live in a summit.  Just lock them up an transmit in closed circuit to themselves whatever they say á la Floyd's Final cut.  You can invite a couple of equally well managed african countries and give them the appropriate name of Fucking Pigs

France

Usa

Cambodia

Kenya

Italy

Greece

 

Portugal

Ireland

Greece (again or Germany)

Spain

Fri, 11/04/2011 - 09:57 | 1844903 Dealer
Dealer's picture

default or print, bitchez

Fri, 11/04/2011 - 08:23 | 1844496 cossack55
cossack55's picture

But can-kicking allows the corrupt and buffoonish gum-flappers on CNBS to remain employed and having MF Global scum on to offer good deals.

Fri, 11/04/2011 - 08:24 | 1844497 TooBearish
TooBearish's picture

HA! Ty just conflicted previous headline - EUROLAND= dazed and confuzzled

Fri, 11/04/2011 - 08:31 | 1844525 Stax Edwards
Stax Edwards's picture

I noticed that also but the previous post is claimed by TD and this one by PT

Fri, 11/04/2011 - 09:01 | 1844655 Sudden Debt
Sudden Debt's picture

Let's talk about it.

Fri, 11/04/2011 - 09:14 | 1844715 Melin
Melin's picture

your glee at what you erroneously perceive to be a mistake on Tyler's part is quite telling.

Fri, 11/04/2011 - 08:26 | 1844504 Messianic
Messianic's picture

Europe needs more McRibs and IPads

Fri, 11/04/2011 - 08:27 | 1844511 tim73
tim73's picture

Meanwhile, American politicians just print more money and hope for Tinkerbell to solve everything. British politicians pretend there is no crisis, the island defenses are all ok except there is none and print also more money. Chinese politicians just order 25 million more washing machines and pretend there is no crisis.

Fri, 11/04/2011 - 08:28 | 1844514 Boilermaker
Boilermaker's picture

Futures down almost 1/3%!

Fri, 11/04/2011 - 08:29 | 1844515 Clowns on Acid
Clowns on Acid's picture

Not exactly conflicting headlines....but more importantly...

EU's Barroso says "Financial markets are overpricing risk". Senor Barroso please call Jon Corzine in regard to pricing of European Sovereign risk you feckin' retard.

 

Fri, 11/04/2011 - 08:33 | 1844528 gravitas
gravitas's picture

Resolve = They're working toward a 'plan'

Hooray!!!

Fri, 11/04/2011 - 08:34 | 1844532 edmondantes
edmondantes's picture

I fail to understand how defaulting and remaining in the Euro is the best outcome for Greece.  It would be the worst of both worlds.  Having defaulted it is only by leaving the Euro that they will have them the freedom to rebuild their economy which has become a debtor's prison in which German industry and banks have picked off every last remaining morsel and sucked dry.  They need to return all local factors of production to local prices... the right very low price for banana republic labour, low budget tourism and very cheap very basic low grade manufacturing. 

If they default they have to leave the Euro.

Fri, 11/04/2011 - 08:53 | 1844612 tim73
tim73's picture

It does not work like that. Most businesses today import a lot of stuff from abroad, maybe 50-70 percent of the total value of their products. So any local currency devaluation will crash your domestic demand, the most important demand for most, thanks to prices rising in local currency.

Tourism is only 19 percent of GDP in Greece so it will not compensate enough when the domestic demand crashes. You might expand in the export sector but in most cases the price advantage is not so great (less than ten percent in case of 70 percent of components imported for 30 percent devaluation) and disappear soon.

Fri, 11/04/2011 - 08:42 | 1844571 hollowbody
hollowbody's picture

Remember these letters... S....D....R

Fri, 11/04/2011 - 08:43 | 1844574 ziggy59
ziggy59's picture

Resolve... It's a carpet cleaner, which they need lots of for all the shit they have been sweeping under the giant rug for years.

Fri, 11/04/2011 - 08:54 | 1844616 Sudden Debt
Sudden Debt's picture

 

 

YEAH!

THE FOOD WAS GREAT!

THE HOOKERS REALLY SUCKED, SO THAT WAS GREAT!

AND THE ENTERTAINMENT WAS SUPER!

SEE YOU'LL NEXT TIME IF YOU SURVIVE THE ELECTIOSN BRO'S AND HO'S!

 

Fri, 11/04/2011 - 09:22 | 1844754 sbenard
sbenard's picture

Ie., blah, blah, blah!

Fri, 11/04/2011 - 09:49 | 1844873 Sudden Debt
Sudden Debt's picture

Only If we get 10 billion!

Fri, 11/04/2011 - 10:08 | 1844958 Anne Ominous
Anne Ominous's picture

DOOM...

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