Via Peter Tchir of TF Market Advisors [4],
I have been struggling with two issues that I just can't make sense of. At the risk of coming across as a bigger geek than usual, I feel like the darn computer in war games trying to win at tic tac toe (was tic tac toe ever fun again after that movie?) two things make even less sense to me, and the more I think about them, the more convinced I am that someone somewhere is missing something and the level of disorganization in Europe is higher than I thought.
Why is the March 20th date still in play? Why talk about needing the bailout by then for bond payments when there should be no payments due. In theory PSI will have been successful and pushed off all private holding into the distant future. If PSI isn't successful then they will do a retroactive CAC clause to ensure it gets pushed off (has anyone checked if a retroactive CAC clause would really be upheld by the Greek courts without even a temporary injunction?) Is it concern that if they do that, UK law bonds will be able to accelerate and the payout of all holdouts in those bonds is accelerated? The March bonds trade meaningfully higher than other bonds. I can't help but feel I am missing something, or they are missing something. Have they properly accounted for PSI in their calculations of timing and size of bailout money? I am very confused. I wrote some thoughts down on the march bond trading price earlier today, but I feel I am running around in circles trying to figure out the angles. If it is as simple as the ECB owning a lot of these bonds, then why not let them extend the maturity by a year for all "public sector" holders? The ECB could probably book it as a par payment and book a big juicy profit on the Greek portion of their SMP.
Then last Monday the Greeks flew excitedly to Brussels with news that they were close, only to be told to go to hades. Well, technically they were told to go back and "prove" their commitment. Now they are returning to their masters with a "successful" vote. Barely 2/3 rds of the politicians agreed - and that is without a moment having been spent on an actual alternative. They had not planned for anything other than getting the bailout so they agreed with a weak majority. Leaders gave party members who disagreed, the boot - can they actually do that? Some members avoided the voiding. The puppet has no clothes now - he had a job to do - scare the Greek people into submission, and he did it. His chances in the April election seem low (maybe he will declare himself empower for life before then and avoid those pesky elections). Samaras is openly questioning the deal post the April elections and quite frankly the rioting and scenes from Athens were shocking. But yes, the EU will thank Greece for a string demonstration of their commitment because they too have not done anything to prepare for Greece saying no (Draghi, to his credit, has done a lot to prepare for potential fallout from a Greece not getting the bailout money). Do the EU politicians really think what happened over the weekend was an endorsement of the measures adopted? They can't, yet they don't seem prepared to say it wasn't enough, so why bother? Why play the tough guy if it's a role you won't follow through on? Why the midnight vote which only made the deal seem more backhanded? What are any of them trying to accomplish other than "win" the negotiating stance they took?
I think that is it, they took a stance and are trying to "win" based on that stance with no assessment of what it means to "win". I can't remember the message out of Wargames, but I think it was saying that if you play the game, there is no way to win, yet here we have so many politicians and lobbyists eager to play. The deeper I have gotten into the process, the more clear there is very little thought and the people trying to do develop these plans don't have the background, dont have the resources, are overworked and stressed, and even the finance ministers are politicians first and foremost. Truly scary and just like tic tac toe, the only way to win his to have the other side make a mistake. Or for your kid brother to get angry, rip up the paper, and whip the pencils across the room. Picture Athens last night.