Via Mark J. Grant, Author of Out of the Box,
“An Affair to Remember”
In the remake of this classic film starring Deborah Kerr and Cary Grant we find most of Europe in one role and Greece playing the female lead. I suspect, when we look back some months from now, that this is what we will see; a love affair gone badly due to conditions beyond anyone’s control and a separation that, while bound in great sadness, is what the Fates have determined for the actors in this grand drama. It will have been an “Affair to Remember” but the pain of remembrance will be felt for quite some as the body blows from $1.3 trillion in Greek debt slams the European banks, the ECB and the IMF. While the world focuses on the sovereign debt, I remind you of the $90 billion in outstanding derivatives contracts, the municipal loans/obligations that have been placed in a large number of securitizations, the bank debt that has been guaranteed by the sovereign and the billions of dollars in unpaid sovereign obligations to health care companies and other suppliers of goods and services to Greece. The shooting of the movie has been difficult but the ending will be a blockbuster and long remembered by audiences everywhere.
Interviewer: I'm sure you had some wonderful experiences in Europe.
Nickie Ferrante: Yes.
Interviewer: Would you care to expand on that statement?
Nickie Ferrante: No.
-Cary Grant, An Affair to Remember
Today you may get some respite as the markets open. Treasuries off, the stock markets up both buoyed by the German economy doing better than expected while the rest of Europe continues to flail in the sinkhole. My advice is to take what advantage you can because we are nowhere close to the end in the decline of the equity markets or to the widening of credit/risk spreads in the bond markets and these fleeting moments of pause will be the only advantage you are likely to get for the next several months as politics and economics batter all of the markets while the Euro continues its broad decline. Even if you are of the opinion that another LTRO is coming or another easing by the Fed; these will only come as moves of desperation as recession grips first Europe and then America as many of the contingent liabilities and guarantees show up at the orphan’s table demanding their porridge. At least we can all give thanks to Europe for the Greek PSI and the kindness they provided for investors in the recent swap of Greek debt. As I recall all of the generous words and the reassurances of the European politicians and all of the soothing proclamations that informed us what a great deal it was not only for Greece but for us I note this morning that the new Greek bonds are now worth 14.98% of their face value and so long and thanks for all of the memories.
“A memory is what is left when something happens and does not completely unhappen.”
-Edward de Bono
Mr. Hollande’s Opus
Today the new French President and the German Chancellor will meet for the first time. They will issue a statement promising cooperation, a brighter Europe, some vision of a grand alliance and an eternal pledge for the spirit of unity between the French and the German people. Believe none of it. The Germans are already targeting Vichy as the new place of government in France and there is an active search underway to find the decedents of Marshal Petain. There was an armistice between Germany and France in 1940 and there may be a new one announced today but the new one, like the old one, will be a short lived affair as the goals of France and the goals of Germany could not be further apart.
“I have heard your views. They do not harmonize with mine. The decision is taken unanimously.”
-Charles de Gaulle