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| Nice warm bath or shark-fin soup? |
Summary: Sarkozy and Merkel to make an announcement on Greece – no they won’t. China is going to buy Italian bonds – no they won’t. BNP executive complains funding is dead – no it isn’t – or yes it is. Russia and Brazil will help Europeans – no they won’t. The only thing missing now is Warren Buffett sitting in a bath tub.
Next up: Prime ministers of Greece, France and Germany will hold a video conference later today. On Friday, European finance ministers meet on Friday with U.S. Geithner showing up as well for the rave party. The dj will probably play nostalgic shock & awe tunes from 1992.
News Roundups
Wednesday Watch – Between The Hedges
EURO CRISIS
Martin Wolf’s article is the week’s best article by far: he points out that at this point euro is not helping any countries at all, nobody wants to join it anymore and those who are already in are seriously thinking about leaving. It is Germany’s choice to decide what it wants.
George Friedman: “When I visited Europe in 2008 and before, the idea that Europe was not going to emerge as one united political entity was regarded as heresy by many leaders.”
** The Crisis of Europe and European Nationalism – Stratfor
“The structure created was a financial union that lacked a political mechanism to oust members who didn’t meet the accord’s rules… Subsequently, almost all member nations broke the rules of agreement, but the periphery did it in grand style with debt-to-GDP exploding as growth rates fell.”
** Where Politics and Money Intersect – The Big Picture
“The restructuring of Greek debt does not necessarily mean an end of European unity; rather, a truly integrated Europe is not possible without restructurings and reforms in Greece and other crisis economies in the euro zone.”
**Europe Must Stand on its Own – Or it Will Fall – EconoMonitor
Full text from Moody’s
Argentina’s ex-central bank head Blejer comments on Greece
Tim Geithner Tells Germany It Has To Sacrifice More Taxpayer Money To Protect The Status Quo – Zero Hedge
“The prospect of Greece exiting the euro area is seldom viewed with the proper degree of fear and trepidation”
Citi's Willem Buiter Warns What Happens If Greece Quits The Euro – Business Insider
“Forget the idea of kicking Greece or Portugal out of the eurozone. For many in the market, the euro must be defended at all costs.”
Why The Euro Must Be Defended – Forbes
“..we must move to a hard restructuring of Greek debt, an orderly default that will also involve recapitalisation of banks in Greece, and some in Germany and elsewhere..The top priority is to avoid an uncontrolled insolvency..”
Eurozone default is not synonymous with breakup – Credit Writedowns
“The ensuing melee will force the ECB to buy a massive amount of bonds to stabilize the market, tying the fate of the peripheral countries with that of the richer core members.”
What happens after a Greek default – Fortune
“maybe, just maybe, they can build a TARP on the fly - wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs - one for each country. That is going to require a US style socialization of each banking system”
Jefferies Describes The Endgame: Europe Is Finished – Zero Hedge
Slovak refusenik: 'EU bailout fund is greatest threat to euro' – euobserver.com
Finance minister says they are studying in secret and in cooperation with the central bank all kinds of scenarios – another source confirms Greek default is one of them.
Non-US banks keeping money with the FED because of liquidity hoarding, counterparty risk
The World's Safest Bank – The Street Light
Bundesbank president still against ECB bond buys
Yesterday’s stories that BRICS would save the Euro.
That Brics rescue plan in full, sort of – beyondbrics / FT
STOCKS
** Stock Correlations Soar To 97.2%: Here's Why – Zero Hedge
Valuing Equities: Defending Shiller (again) – Buttonwood / The Economist
Capitulation has Started-UBS Technical Research – The Trader
OTHER
Risk reversals on EURUSD are low.
Morgan Stanley Slashes EURUSD Target To 1.30, Says EUR Attraction As An Alternative Reserve Currency Ending – Zero Hedge
Old vs. young, small vs. large, experience vs. exposure
The handicap of experienced investors – Pragmatic Capitalism
Video interview + text summary: Buy NOK, SGD, Google, Apple. Sell European periphery.
Robertson: Greece will default, macro is bad everywhere – Pragmatic Capitalism
EU Commission tables on Friday the option to close rule-breaking countries’ borders
EU countries say 'No' to commission powers on border control – euobserver.com
EU border agency gets extra powers – euobserver.com
DIVERSION
15 Years of Cutting-Edge Thinking on Understanding the Mind – brain pickings