Draghi of course, the new head of the ECB. He shocked the world today...well, that may be a bit over the top...but he certainly surprised a few folks by announcing a rate cut of 1/4% to 1 1/4% which was greeted with huzzars in every market in the world. Now one could argue all day as whether this is a move that was needed months ago and stalled by Sig. Draghi's predecessor; my view is with core rates at this level what the hell does a 1/4 point mean? Nevertheless, stock markets rallied and the Dow closed up 203 at the end of the day.
Now we know stock markets love lower rates but the real juice today was the announcement from Mr. Pappendreu that he will not call for a referendum on the bail-out. Battered by both the Angie and Nikki show on one side and the conservatives on the other (who was more effective is a question for debate), this morning he backed down. As just about everyone agreed that the vote had no chance of approving the bail-out terms the removal of the threat was taken as a sign in some quarters that the Union hand been saved. Once again, your humble blogger questions this view. If Greece goes bye, bye it's going to be messy as hell but the destruction of the European Union? I think not, and as I have been consistent in saying, "if it be not now, yet it will come." But the markets breathed a great sigh of relief and thoughts of sugarplums and coalition governments danced in everybody's head. Unfortunately, as I started writing, news emerged that the head of the conservative party walked out of the parliament and tomorrow, the prime minister will have to survive a no confidence vote. My bet is that he will not and if he does, it will be because of a huge number of concessions in regard to Greece's commitments to the EU in regard to the bail-out which will probably spell finis to what has been agreed. Then again, Greece without a government may not be such a bad thing. Anyway, tomorrow will tell the tale.
On this side of the pond, Jefferies had their credit rating reduced in one of the more curious events in a while. Coming on the heels of MF Global, the company's share price was battered until they put out one of the strongest denials I've seen relating to the reason given for the down grade which was exposure to Europe. I have no idea what the true facts may be but in times like this it is unbelievably irresponsible to down grade a company unless you are 110% certain your research is correct. By the same token, I learned a long way back that when folks start talking about a "net" position in their exposure it means nothing. One better make damn well sure what makes up the "net" which means that you had better examine the "Long" exposure as well as the "Short" separately and exhaustively before offering an opinion. I'd be willing to be that the firm that issued the downgrade did not examine the positions in that great a detail. Things are really scary right now guys; be damn sure you are right.
Back tomorrow with Greece
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