Tuesday, January 24, 2012


Of all things, Charlie Dallara showed up in Zurich today straigh from Paris by way of...?  Now Charlie is the chief negotiator for the creditors and what he was doing in Zurich is beyond me unless he was headed to or from that monumental waste of time and money called Davos, where by the by, the guests were surprised and somewhat snocked (according to reports) of the ferocity of the demonstrations against them by what I guess might be called the Occupy Davos crowd.  Memo to the participants:  if you didn't expect this you're dumber than three rocks; truth?  They couldn't care less.  Anyway, there was Charlie on CNBC this morning with the ever-fetching Michelle Caruso-Cabrera (who has been getting most things right these days) letting the cat out of the bag that the impass over the Greek restructuring wasn't so much about the interest rate of new debt but the fact that there was to be no "burden sharing"--as we pros refer to it--with the public sector in regard to write-downs--read, the ECB.  I hate to say I told you that it wasn't about interest rates but I told you.

The interesting thing about this is not that there was another reason for the impass but that Dallara would spell it out so clearly which means he's preety negative as to future events.  Charlie is a pretty shrewd guy and as an ex-U.S. Treasury official he hasn't just arrived in town.  I can't believe that he would have made this statement unless he had given a heads up to his former colleagues on the other side which tells me one of tywo things:

1..Either negotiations have REALLY gone south in looking for a "orderly negotiated default," and/or
2..Nobody cares any more, meaning

the Euros are prepared to risk a disorderly default, and the certain triggering of the CDSs which are estimated to be in the 3 Billion Euro range although no one knows for sure.  The ECB which is the respository of a bundle of Greek paper probably put its foot down and said, "No way Minos" to any write-down and that was that.  Once again I bring up the Yogi-man in that it aint over 'til it's over but right now it appears things are no better than 50-50.  Unless one side blinks, there's no deal, no money in March, probable law suits all over the place and well, I really don't know what.  I can't say I didn't believe that this was going to happen along with a whole bunch of my friends but it is unchartered waters.  But what the Euros appear to be saying is if we lose Greece, so be it but Mario is prepared to play ball and flood the continent with liquidity, we save our precious banks, they buy all the paper out there and make a huge spread for three years and recapitalize themselves and we all live happily every after.  I sound like a broken record but what can an observer do but observe and report.  And as for those holding the bag?  Let's wait another day and talk about that tomorrow.

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