THE AUCTION IS ANNOUNCED

The game's afoot...until Friday at least.

The Greeks have announced plans to spend 10 billion Euros in a debt buy-back which, if successful, would reduce their outstanding debt by 60% (their figures).  The style is clever; it is a Dutch auction which puts maximum pressure on those who really want to get out of town.  With a limited amount to be spent and obvious pressure being placed on local entities such as Greek Banks who would expect to recoup their losses from the taxpayers of Europe, some folks might just bid early and bid often to be relieved of their holdings closer to the minimum band of 30% rather than waiting to chance the upper limit of 40-odd%. Depending on how much of this stuff has been bought recently by hedge funds and at what level, this could turn out pretty well for Hellas.

Now you have to forgive me but I'm a suspicious old guy and I've seen a lot of these things in my time.  The "book runner" so to speak in this operation is Deutschebank with Morgan Stanley in the background providing--well--I don't know what they provide.  Keep in mind that anything that gets this phase of the game in the history books is good for the Greeks, for Euroland but especially for Angie and anything that is good for Angie is good for Deutschebank.  Now I have no knowledge of the goings-on but if I were a betting man I would wager that Deutschebank has a damn good idea at what levels the hedge funds are owners and what their profit goals might be.  Rigged?  How dare you Sir!  But I bet they're in at less than 30 for the most part which means some serious money is about to be made.  Memo to bond holders: if you're looking for 37-38 there is a big disappointment in your future.  Never going to get there. Only four days to see if I am right.

Oh, the Spanish banks asked or a bail-out of 38 billion Euros.  Some commentator remarked, "Surely this is a good thing."  This is where we are.  A National government announces that five of its larger lending institutions are flat-on-their-butts broke and we can't cover them without help from out side and this is a good thing?  As I have said before, I should have retired to Bedlam.  Madness, pure insanity and now we all wait in joyful hope for the coming of the request from the government itself.  Once that happens we'll all be in great shape that is as long as the U.S. doesn't go down the gurgle tube at the end of the year or over the fiscal cliff depending on what image strikes your fancy.

And then there's the French.  Today they announced that hereto come, Euro financial transactions should be centered in Euroland with London being allowed to participate but not playing an important role.  They of course mean Paris, a city of incomparable beauty, lacking only the necessary infrastructure for such a role and a language not spoken anywhere else but in West Africa and Haiti.  Can't we all just get along?

SNIPPITS

--There is a famous film of the great American football coach, Vince Lombardi, looking out across the field and asking, "What the hell is going on out there?"  At 9:00 am this morning the Greeks let leak that they had received a two year extension by the Troika for the meeting of their financial targets and their-agreed fiscal plan.  About 11:00 am Reuters, the original publisher of the leak, began to question its veracity.  By 5:00 pm the Greeks were denying that any extension had been granted and the Troika indicated that Plan Greece had not been accepted.  I can just hear Vince yelling, "What the hell is going on out there?"  Beats the hell out of me, Coach.

--Continuing to be in the role of the uninvited guest, David Cameron today announced that the UK would veto the proposed increase in the EU budget.  What! A mere 11% increase in the amount of money that a bunch of professional politicians in Brussels could spend on themselves?  Surely you jest!...Apparently not as the ol' boy was joined by the Dutch.  And one wonders why things don't get done.

--Mario Draghi spent a number of hours trying to convince the Bundestag that spending all the money in the world to bail out everyone and everything in Euroland will not be inflationary in the long run.  Little Paulie Krugman could be heard cheering in New York but apparently a number of German politicians wandered out of the get-together in a move interpreted as they not being convinced.

--As more and more people begin to look at the true state of the Spanish banking system, there appears to be a growing concensus that what the government has said is need to fix it...i.e. in recapitalization...may be a number whose basis is firmly planted in thin air.  And where have you heard that before I humbly ask?  Slowly yields rise once again and I suspect will continue to do so.

--But there is a saving grace.  I have it on good authority that someone high in the German Finance ministry let it slip that there are times when the fiscal detectives must be aware that their efforts at finding a solution may be subject to political realities and timing.  When are those elections? Next October?  You mean we have another year of this nonsense?   What the hell is going on out there?

NO DETAILS YET

...which is probably a good thing.   The Euros coughed up 100 billion Euros for the "recapiltaization" of Spanish banks.  Boys and girls, we are about to see a replay of that old accounting rule, "last in, first out,"  assuming this is real money and not play cash--which is probably what they should have done.

Now, nobody knows the real state of the banks' balance sheets so 100 billion is nothing more than S.W.A.G....which for those of you outside of the business is a Sophisticated Wild-Ass Guess...but it's a nice big number which even led some moron to suggest that it's more than is needed.  For capital, perhaps but not for cash which will probably continue to flow outwards until these guys do something to stop it...like, as suggested...cut off recipient institutions.  And it may not even be enough capital because, as stated, the true condition of the Spanish institutions.  News flash to the pundits: it's getting worse as we speak.  So is it worthless?  No, because the real purpose is to send a message to the Greek voter next weekend that we got your back and don't do anything that will immediately cause the bad guys to get their way.  It doesn't really solve anything but we are now at the stage of "short term solutions" which, unfortunately, are not defined in terms of months or even weeks, but in terms of the next news cycle.

Forgive me for reverting to form, but I find it hard to believe that after rioting in the streets, firebombing, fist-fights in parliment and a 25% unemployment rate, any Greek government will be prepared to say, "Right, great thing this austerity, good for the Germans and the Austrians, we'll stick to the terms and stay buggered for the next 5 years or so.  The Euro forever!"  But hope springs eternal I guess and maybe The Leader, in one of his many conversations can point out the road to success to his Euro counterparts.

So, what to expect in the coming week?  Nothing except a concerted effort to pay even more attention to the European Cup at least until the Greek Elections next Sunday.  And is there cause for hope:  the Greeks drew with the Poles in the opener much to the distress of the bookmakers along the Caladonian Road.  An Omen?  Homer was big on those sorts of things.  Sing oh Muse!

WHAT A DIFFERENCE A DAY MAKES

Markets woke up this morning and looked to Euroland and didn't like what the saw one bit.  It started in Greece where, as reported, the two "centrist" parties--if there is such a thing in Greece--gave up trying to form a government, donating the task to the avowded Communist in the grooup who immediately announced that upon his success--not guaranteed mind you--the first thing he would do is reject the debt agreement with the Troika and nevermind if that meant the stoppage of finance.  Shock and horror all around.  Would this mean that Greece was gone from the Euro?  Yes, of course it would so why not figure out what to do in that case as quite frankly, anybody who forms a government is going to have to promise to deep six the debt agreement.  Anyway, the Greeks have about until the end of June before they run out of money so there's PLENTY of time.

The final numbers for the French election were closer than the original reports and whilst none of the powers in Euroland were terribly happy about the result what they fear most is the unsettled future that the results may indicate.  If Hollande were to have won, most everyone was hoping that the margin would be great enough to indicate that his mob would carry the legislative elections in a few weeks insuring a governable France; now, all bets are off.  If Hollande loses the assembly (I'm not an expert on this) the appointing of a Prime Minister goes to the opposition at which point you have grid lock like nothing we have seen in this country.  France as a leader of Euroland?  Fuggetaboutit.  The U.K., despite it's own wretched economic situation, is howling with laughter as anything bad for France is a cause of great merriment.  Of course, that isn't particularly helpful to the cause but imagine poor old Hollande, whose first stop has to be a get down and dirty meeting with Merkel, and  trying to do that not knowing whether he is going to be a mere spectator in his country'y immediate future and realizing that as unsettled as his own future is he has no chance of getting any substantial concessions from the Germans, which will result in additional political weakness, which will...well, I have my suspicions but let them play out.

And now Spain or more precisely the Spanish Financial system.  This morning everyone seemed to figure out that there might be a problem there.  As we having been trying to point out the problem EVERY WHERE is the financial system but let us not gloat and try to approach this in a calm, rational manner.  It stinks.  Like a country not too far from home the Spanish economy ran for a couple of years on the anticipation that private residences being constructed at a level about 2x the population would be sold over and over and always increase in value.  That's called a housing bubble and like a country not too far from home the financing of this miraculous  event was accomplished by savings banks who had a remarkably close association, both financially and politically with the independent Spanish states in which they were located.  Gee, never saw that before.

Anyway, not too long ago, it was deemed wise to consolidate a number of these institutions in order, as the argument went, to bring together individual financial strengths into a larger, more focused and financially powerful entity.  It was called Bankia, SA.  What it did was to consolidate an enormous pile of crap into an entity that was...you guessed it...Too Big To Fail...whether by deliberate design or just plain stupidity.  Management was assigned to the highly acclaimed former finance minister and IMF head, Rodrigo Rato who, if he had a clue, hadn't a chance, and who resigned yesterday.  Concurrent with that event, the Spanish government announced that it might be necessary to recapitalize Bankia and perhaps the entire system if deemed necessary to promote economic growth for the Spanish state.  That show had opened in a number of other capitals and did not attract full houses.  Indeed, a few of the less constrained began asking if this plan didn't sound like The Great Irish Idea to bail out banks that shouldn't have been bailed out and didn't that lead to the last two years of economic stagnation?  Rum, very Rum old boy.  Shouldn't be saying things like that.  Very Rum, indeed. Then again there's always tomorrow.  What a difference a day makes.