This page has been archived and commenting is disabled.
On Walking The Maginot Line
Via Peter Tchir of TF Market Advisors
Over the weekend I wrote about what I thought the EU and the ECB needed to do to in order to prepare for a Greek default. Nothing that has been said or done this week goes against the view that Europe is preparing for Greece to default.
In the past week someone went into all the EU officials' speeches and did a replace all and "default" became "controlled default". Notice how they have backed off how bad a Greek default would be and try and narrow it down to the fact that a default without adult supervision would be bad.
After yesterdays conference call they said that Greece would remain in the Euro. They never said Greece wouldn't default. That conference call was as likely to be scripting out the roles for the next few weeks to control the default and arrange post default financing for Greece. The language was not that strong and I don't believe their words were chosen by accident.
If Greece defaults the first obvious panic will be how do the European banks get funding, especially in dollars. Well, that question has been answered. The mechanism to avert short term liquidity problems after Greece defaults is now in place.
Well, what about the equity for banks. Won't some need money? Geithner has already suggested a TARP like function for the EFSF. China said they were less interested in bonds than investments. Warren Buffett and BAC have set the pricing. Investors should be happy to take deals with terms similar to Buffett - at least that is what politicians will tell them. Banks will be told to accept the deal or risk not getting full support. A 100 billion of Chinese money dumped into the bond market is not going to turn the boat around. That money invested into banks would make a big difference. EFSF may not yet be ready to TARP the banks but individual countries could. Germany and France can handle that themselves and the bric's could help with the rest.
Faros was one of the first firms to suggest the ECB sell CDS to supplement their bond purchases. I see no reason why the ECB couldn't do that, but honestly think they would get far more bang for the buck (sovereign CDS does trade in $'s) using that in the aftermath of a Greek default. Heck they might even make some money if they get started when the market is in a panic rather than just reasonably pricing in the problems of each country. I don't the the effect would be long lasting but the impact would be much greater in controlling the situation after a Greek default, than before.
So what to do with Portugal and Ireland? Buy as many bonds on the open market as possible and then offer the banks a harsh and timely restructuring option. Make the banks give real concessions. The threat of default will be much more real once Greece has defaults.
I am not sure what announcements I'm missing but I am confident that it would be easy to demonstrate that they fit in with default preparations. I did not a lot of votes seem to have been delayed - that too would be consistent with a near term end game making them irrelevant.
Who gets hurt the most by this? Banks and bank shareholders. Frankly, Scarlet, I don't give a damn. There is not a single politician who any longer cares about the feelings or wealth of bankers. They can't believe that the banks and too big to fail have brought them back to the abyss. They are going to let Greece default, try and contain the aftermath, and then get focused on some other serious issues. This has taken far too much time and effort over the last 18 months and they think they can deal with a default and that risk is worth potentially putting the mess behind them.
»
- 8181 reads
- Printer-friendly version
- Send to friend
- advertisements -
I believe the writer meant Metaxas line! At least they went around the Maginot line.
That is a really nice read for me, Must admit that you are one out of the top bloggers I ever saw.Thanks for posting that informative article. Luton airport parking and if you are looking for some best deals on meet and greet parking services you can get easily but im sure you need to eat some delicious things for that you need to learn sushi recipes
true they let greece default the last 2 years I am sure they will keep on for another 2 at least ... playing the greek default is a bit overdone dont u think?
Good job with lay out Peter! On the same line as dax with last 2 years and possible two more - I suspect natives (voters) are getting really restless and many politicians will not be returned in their current capacities through their next elections. Thus, will future leaders adhere to agreements made by current crew? If can continues to be kicked down the road then it will lead to worse outcomes than truly dealing with this now. Not bandaids but need surgery with drugs. Restructurings and many banks going down, but financial system survives.
Painful but let's get on with it!
Getting the uncertainty of Greece's inevitable default out of the way is the right thing to do ... always was.
Right and now that theyre certain Greece will default, time to ramp everything up.
Get the ouzo and popcorn ready. This will be entertaining.
Yes watch for "contagion" ...Greece is going to be a gonna, which was never supposed to happen.. next watch for more of what was not supposed to happen.. happen!
Bank stress tests looking good at this point, real good
And Gold is below $1800, so a Greek default might let the Banksters still be in the position to defend $2000. ;- )
Bought some bullion today. Nice correction.
Good call.
this weekend greece will default like the previous 2 ...
So if the short term liquidity mechanism is in place, then is it too much to suggest that Greece could default at any time. Like, maybe, as soon as this weekend? Timing, timing, timing.
Yes the most bankrupt entity by far, the US, can tell the others how to manage their default. Freakin experts.
For the love of Zeus, just default already. This is painful.
This all tells me the calm above the surface on Greece does not show the furious paddling underneath the surface...if its so painless for Greece to default then just do it!
But they cant really have economic unions on one hand, and then chop off arms and legs without the body feeling the pain. The price you pay for central control.
Zeus would thunderbolt you for that...A greek never defaults. At least not one who believes in Zeus.
Interesting. If short term liquidity is in place then the next step would be: actual default.
Also, if US banks were under-writers of Greek CDS, don't they have to pony up?
Whatever THEY plan, it will benefit THEM ONLY! We cannot expect to be part of ANY short spiral down followed by a super ramp Higher! That would be pure luck on our side! yet still many keep trying! Just look at the ramp today!! Not to mention the "volume"! It's THEIR "market" and we are the "lifeline"! Using options only! I lose a little every now and then but may just get lucky to be IN when THEY decide it's time to SELL!
So this time Greece is really going to default as in days/weeks not months? Or do we need to wait for some other Bullshit to be done first/
you need to wait new EFSF to be ready to recapitalize EU banks
~sigh~ which will be when?
believe the liquidity fund won't be fully operational until mid-October. Therefore, I'm calling the default date: Weekend of October 15th.
Let's just see what happen Friday n week end
As we've been doing every week since 2008.
Maginot line? Just go via the Ardennes, the Germans did......twice
No...actually, it was only once.
The Maginot line was built in the 20's - after WWI
Now, it is true that the Germans did go thru the Ardennes region twice...but the Maginot line was only there for the second one...and failed miserably at its intended purpose.
(Similar to the upcoming failure of the modern-day economic Maginot line that has been created in the hopes of protecting the banks in France and Germany from the attack of the PIIGS)
OT: Tyler have you seen Google Trends? Noisy, broad, but interesting trends nonetheless--nothing you wouldn't expect...maybe a slight pickup in consumer retail (not sure how they afford them)
http://www.google.com/finance?q=GOOGLEINDEX_US:LUXURY
http://www.google.com/finance?q=GOOGLEINDEX_US:RLEST
http://www.google.com/finance?q=GOOGLEINDEX_US:UNEMPL
http://www.google.com/finance?q=GOOGLEINDEX_US:CONSTR
http://www.google.com/finance?q=GOOGLEINDEX_US:CREDIT
http://www.google.com/finance?q=GOOGLEINDEX_US:JOBS
Greece defaults, then onto any of the other tempests in a teapot all over Europe, still not paying any mind to the giant black hole default candidate USA.
Everyone is totaly bankrupt, but 'they got a plan', yea whatever.
Off topic...
It at least accounts for $40 trillion. Regardless of validity... there is nothing, NOTHING, that could shock me anymore.
http://www.eutimes.net/2011/09/obama-ordered-to-denver-bunker-by-us-military/
http://www.whatdoesitmean.com/index1514.htm - Virginia and Colorado earthquakes were nukes... apparently/maybe/who the fuck knows or would truly be surprised.
Tickhound, Interesting article from eutimes.........saw this bit in usatoday yesterday about china cancelling an LPGA event the same week with absolutlety no explanation..........
http://www.usatoday.com/sports/golf/lpga/story/2011-09-14/Imperial-Springs-canceled/50399980/1
I hate to say I've been "following" this theme, but I have. Saw that story... just waiting for the CIA to come forth and admit we all have alien pen pals.
anyone know what he is refering to here, "I did not a lot of votes seem to have been delayed - that too would be consistent with a near term end game making them irrelevant."
Austria delayed their vote. Was it only yesterday that the headline that they rejected EFSF took s&p to 1160? And iif seems to have pushed off commients again. Though Spain who is about to be a big beneficiary did vote in favor of letting EFSF bail them out.
The banks were given a reprieve and squandered it - the shareholders deserve to lose all their equity.
this guy is from another planet janet
Correction:
Exactly. Im supposed to believe politicians dont FIRST and ONLY care about the wishes and the wealth of the banksters? Give me a damn break! Every politician has a central banksters hand rammed up their ass making their mouths move.
Bankers - during fund raising and after elections to pay them back. Plebs right ahead of elections. And politicians are arrogant enough they might believe they don't need bankers
No this weekend is to soon. They need the votes on the new EFSF in place first. Did Slovinia move up their vote?
It seems all of the big European banks have come out recently saying they only have limited exposure to Greek soverign debt. So who is lying? And who is the AIG this time around? Anybody have any ideas?
According to SEC filings, Bank of America, is the US bank with the largest direct exposure to Greek debt, at $$477 million.
I disagree that bank shareholders will be hurt. It will be the US taxpayer. Geithner is over there selling us out. It was telling, that during the debt ceiling negotiations last month, TOTUS let slip that he had been busy handling other problems such as Greece. If Greece is a TOTUS priority, than you can be sure American taxpayers are going to be shafted. This is getting no play in the media. Even the financial and alternative media seem to have missed the significance of Greecs as a TOTUS priority. With daily speeches and press conferences, how come the TOTUS has not said anything or been asked about Greece?
It's interesting to watch the CB's tinker with the lives of billions of people. They decide who defaults, who goes to war, get bailed out or get bankrupted. Power is way too centralized and if the Europeans have any sense they will disolve the EU and if we have any sense we will restucture our banking system in the US.
Europe is now "doctoring" the GREEK patient in terminal illness. It will be a matter of time before he will be like Ariel Sharon...somewhere on a greek island in a black hole officially still part of euro family. We will then forget about Greece and concentrate on the real issue : the euro banks and how to control CONTAGION. That's how the Oligarchs think and, alas, ACT...
Actually all this about Greece is total BS, its TINY compared to everything else going on! Its a diversion for something else way bigger. Hell we've got STATES with bigger debt problems!
When American's learn that The Fed is going to bail out the European banking system with US assets, why they'll flip. In fact, they'll probably demand another 99 week extension to their unemployment benefits. And a tax rebate. And I don't know what else.
It's gonna cost a lot.
Who is going to tell them? What percentage of the people know that QE2 went to European banks? What percentage of the American people even know what QE is?
The American people arent going to do anything.
Zh should change Its address to amerikanidol.com. Then some people might find out by mistake what is really happening in their country :)
It is not a mistake in my opinion and I am sure that many will have the same opinion.
yachts sweden
Same shit different smell-- didn't work before and it certainly only amplifies the problem-- before it was Lehman, now Greece, next?
The value of an unbacked paper currency to you and I is what it will buy us right now and what we think it will buy in the future. But to its issuers, the value of an unbacked paper currency is the capacity of the paper to be diluted to shift wealth to and fro as the elites desire.
Ask yourself honestly how much you have left over at the end of each month. How much could your consumption fall or your taxes rise before you were unable to meet basic needs?
I think with central bankers coordinating on a world wide scale as never before, the answer to the questions above (taken across the people of the world as a whole) tells us how much time we have until this incredible ongoing theft can no longer continue.
I want it to be fast and awful, but I expect its going to be slow and grinding. There will be so much time for Krugman and Palin to spew nonsense at us while the ship sinks.
huge $ swaps into EZ banks? greek default is eminent. buying into panic meltup rallies will prove lethal
Something tells me that Greece aint defaulting any time soon Dow will not plummet and risk on play in on the way. if something is wrong I ll kill it.
The politics is just a sideshow now, Eu is preparing to let all the bad banks fail, they just have to get the cross border legal stuff sorted out!
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+COMP...
http://www.europarl.europa.eu/oeil/FindByProcnum.do?lang=2&procnum=INI/2...
There is one thing that is not addressed it seems.
Who wrote the CDSs on Greece.
Is that why Timmy is going to Europe?
How do they unwind that?
lord has a point here. Good one.
Why thank you dax.
I thought I was being ignored because of the leprosy.
B.A.C.
now that would be effin hilarious.
they think they can deal with a default and that risk is worth potentially putting the mess behind them.
Do they think they can deal with expectations of more and bigger defaults?
Faros was one of the first firms to suggest the ECB sell CDS to supplement their bond purchases. I see no reason why the ECB couldn't do that
Effectively doubling down on risk, why not, whatever, that suggestion fits right in with the rest of this default circus.
I've been sitting on SDS and SKF shares waiting for the EU debacle to blow, but watched my bet erode day after day on the stupid rumors and desperate prop-up-the-mess measures. I still feel like a bunch of US banks will get lambasted when the default occurs. Just frustrating that they keep finding ways to maintain the facade. And it's damned odd given the parade of really sucky economic data of late that S&P keeps climbing on even more sucky EU rumors.
Yeah, I know, wah-wah!
It seems the concept that France and Germany can handle socialization is far from certain. The absence of The Netherlands, Austria, Luxemburg et al from this is also noteworthy. Then there are the issues of "core periphery" nations Belgium, Spain & Italy... The combination looks more than remotely beyond the combined capability of the BRIC's, with liquidity support from the fed to support.
If Europe and those of us that support a medium term bullish stance on the region are to be sustained in our view then the ring fencing that needs to be addressed are deposits within the banking sector generally and the money centers specifically. These will provide much of the necessary support to stabilization if executed with any skill. A serious question given the apparent skill with which other combined efforts at stabilization and ring fencing have been to date.
Well written and good points. I think a part of the equation missing is the implications of Greece default on Cyprus and Balkan states, since Greece banks are very strong in the area. If that Countries get in trouble, than Austria, again France and Italy start to tilt...