...and loose the dogs of default. Well there you go. The Greeks activated the CAC's and sure enough, the ISDA voted unanimously to declare that an event of default had occured making way for pay outs under the CDSs that are outstanding. So much for the oft-stated truism that "no EU member will ever be allowed to default." Sort of reminds me of a well-known economist (unnamed) who used to work at Bear Sterns who back in '95 proclaimed, "Mexico will not devalue, PUNTO!" For weeks thereafter every time he left his office on Park Avenue he would be greeted by cries of, "Hola! Punto!" Great fun...for those who were short the Peso.
I'm sure the Euros will start the talk of an "orderly default" as though this was something different. Seems to me that when a bunch of investors lose 100 billion Euros that they were owed and are forced into a resructuring agreement with no upside or claw-back that has absolutely no chance in succeeding in it's stated purpose, that's about as defaulty as a default can be. But wait for it, it's coming to a theater nearest you on Monday if not sooner. As for the CDSs, what can we expect there?
The concensus seems to be that the institutions involved in the pay-out are well-collateralized so there should be no problem, but 3+ billion Euros is a lot of scratch and late this afternoon there were reports of some 18-letter, totally unpronounceable Austrian Institution was making noises that they had real problems with making payments. I doubt there are going to be problems but we are very much on unfamiliar turf here and until the checks cash we simply don't know. Another interesting twist to this scenario is going to be the discovery of who constitutes the payees; will it be so called strategic investors, i.e. institutions that make a living out of sovereign debt or hot money guys like hedge funds? Heard from an old buddy of mine in the 'Oil bidness" who tells me the boys in the donut shop in Galveston are talkin' about one of their kind who bought up a whole bunch of CDSs and is planning on "makin' a killin' offa them Greeks!" There ARE opportunities for some real good tales coming out of this dog's breakfast and one can just hope they become public right away. GREAT copy!
And for the future? One has to sit back and wonder how the hell we got to this point over an economy that represents less than 2% of that of the Euro Zone and what will be it's effect in the years to come. The answer to how did it happen is easy: numbing stupidity on the part of arrogant and egotistic politicians. What it will bring? Ah, that is a more complex question and one which we will try to explore next week. No point in confusing things. In the fly-over zone it is March Madness and Bracket Sunday this weekend. Nothing is more important.
Have a great weekend.
Showing posts with label CDS. Show all posts
Showing posts with label CDS. Show all posts
Friday, March 9, 2012
Tuesday, February 28, 2012
LOOKING BRIGHTER
Not the international financial situation of course, but for a blogger things are really beginning to look up. In the morning, the International Swaps and Derivatives Association, "ISDA", announced that they were to decide whether to meet to decide as to whether the loss of 70% on Greek bonds by investors who would be forced into the restructuring as a result of the retroactive effect of the Collective Action Clause inserted into all Greek Law bond debentures after the fact amounted to an event of default. Honest to God. Hours later they said they would on Thursday. You can't make this stuff up. Of course it's a default unless they say it isn't. Got it? Now if they say it isn't what does that do for CDSs in general, the market and pricing thereof and the risk assessments by managers who though they had things hedged by way of CDSs and suddenly wake up to find out that they my well be geared well above agreed-to covenants and considerably short of regulatory capital? Please Lord, make them say no. The blogisphere has material for months.
Oh, remember that agreement all the Euro states came up with...the gang of 17...to get and keep their fiscal house in order? Well, this afternoon, the Taoiseach--that's Prime Minister in the Irish--told his parliament that upon the advice of counsel, the decision to ratify what had been agreed would have to be put to a referendum. Now for the other Euros that's no big deal because only 12 states are needed to bring this thing into force...it's sort of like a collective action agreement...but if a member state ops out, the European bail out facility will not be made available if needed and that for Ireland could be a very big deal indeed The early polling as to whether this thing passes is slightly less than 50-50. Depending upon how much time is available to scare the populace, I think the referendum fails, so here's to you Carter, for suggesting that next up in the short the hell out of the sovereign debt game is Ireland. And things were going so well in the sense that Ireland was making slow but steady progress flying under the radar.
On top of all this the Euroland ministers postponed a meeting that was supposed to be held today to discuss the disbursement to 130 billion to Greece until Friday for reason that were unclear to say the least. Dissention in the group? Most probably. Remember, the money is supposed to go into a suspense account and dribbled out as Greece met it's targets. It seems that there has been no agreement as to what those targets might be so we're all working on those so we can get this ball rolling. Sure.
Anyway, things were really looking up until Massimo called around noon.
"You see the numbers from the banks today, Charlie? I tell you so, no?"
"You tell me so, yes, Massimo. The Italian banks borrowed big time from the ECB and bought Italian Bonds."
"And whatta that do, eh? The banks they make a fortune! For free. No capital!. It's what I tell you, no?"
"Yes Massimo, it's exactly what you told me."
"And we do it again for sure. I tell you Charlie, Mario do the right thing and we take care of Italia. Look at the yields. I tell you, no?"
"Massimo, for the last time, YES, YOU TOLD ME!"
"Eh, Charlie. You listen to your friend. You learn. How you say, we take care our own. Ciao, Charlie."
Massimo has been a friend since I got into this business...an insufferable friend sometimes but always a friend. I hate to admit it but he got this one right.
Oh, remember that agreement all the Euro states came up with...the gang of 17...to get and keep their fiscal house in order? Well, this afternoon, the Taoiseach--that's Prime Minister in the Irish--told his parliament that upon the advice of counsel, the decision to ratify what had been agreed would have to be put to a referendum. Now for the other Euros that's no big deal because only 12 states are needed to bring this thing into force...it's sort of like a collective action agreement...but if a member state ops out, the European bail out facility will not be made available if needed and that for Ireland could be a very big deal indeed The early polling as to whether this thing passes is slightly less than 50-50. Depending upon how much time is available to scare the populace, I think the referendum fails, so here's to you Carter, for suggesting that next up in the short the hell out of the sovereign debt game is Ireland. And things were going so well in the sense that Ireland was making slow but steady progress flying under the radar.
On top of all this the Euroland ministers postponed a meeting that was supposed to be held today to discuss the disbursement to 130 billion to Greece until Friday for reason that were unclear to say the least. Dissention in the group? Most probably. Remember, the money is supposed to go into a suspense account and dribbled out as Greece met it's targets. It seems that there has been no agreement as to what those targets might be so we're all working on those so we can get this ball rolling. Sure.
Anyway, things were really looking up until Massimo called around noon.
"You see the numbers from the banks today, Charlie? I tell you so, no?"
"You tell me so, yes, Massimo. The Italian banks borrowed big time from the ECB and bought Italian Bonds."
"And whatta that do, eh? The banks they make a fortune! For free. No capital!. It's what I tell you, no?"
"Yes Massimo, it's exactly what you told me."
"And we do it again for sure. I tell you Charlie, Mario do the right thing and we take care of Italia. Look at the yields. I tell you, no?"
"Massimo, for the last time, YES, YOU TOLD ME!"
"Eh, Charlie. You listen to your friend. You learn. How you say, we take care our own. Ciao, Charlie."
Massimo has been a friend since I got into this business...an insufferable friend sometimes but always a friend. I hate to admit it but he got this one right.
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