Collapse of the euro is 'inevitable' says French Banking Chief

[ASusilovic]

Quote from Martinghoul:

As someone pointed out, Albert Edwards and Dylan Grice have been beating this "end of the world" drum for a while now. Neither can be described as "French Banking Chiefs". They are global macro strategists and it's worth knowing that often, in their biz, the more outrageous you sound, the more clients you get.

I think lots of people outside of Europe misunderstand just how much support there is in Greece and other Club Med countries for the Euro.

Also, while the Eurozone govts are not self-funding, as someone mentioned, the fact that the ECB is extremely generous means that the banking systems across Europe are stable for now.

Albert Edwards is a carnival barker. It's about time that he simply STFU.

 

[ASusilovic]

Quote from christianhgross:

Let's take it from the perspective of anybody that is not in Sterling. If Sterling falls by 30% with respect to my currency then that indeed is a 30% bond face value cut.

In our fund we trade in USD, but have EUR, and GBP clients. We hedge the currency and then regardless of how the currency evolves the client gets the same monies.

Thus for the client to avoid getting the haircut they would have to hedge the bonds with currency contracts. You can't do it with cash since cash would have a cost associated with it.

For example, let's say I have a 100 USD and I want to buy GBP bonds. Since I am required to exchange my currency for the GBP bonds I can't hang onto my USD's since then I would borrow GBP's and have a carrying cost.

Thus you need to convert the currency and buy the appropriate futures contracts that need to be rolled. That way regardless of what happens you will get an equal amount of USD's as a return. Of course if the face value of the bond does drop then you are hit...

Do you write off the roll over as "hedging costs" in your fund ?

 

[christianhgross]

Quote from ASusilovic:

Do you write off the roll over as "hedging costs" in your fund ?

Yupe... But interestingly the spread in FX is quite small. Usually about 2 pips, which is peanuts. I was expecting quite a bit more.

 

[tetramorium]

Quote from Ghost of Cutten:

If you take out gun crime murders (due to widespread US handgun ownership), the UK is more violent than even the USA...

Conversely if you take out non-gun crime murders (due to widespread UK fist ownership), the US is more violent than even the UK.

 

[C6H12O6]

Quote from Ghost of Cutten:

If sterling falls 30%, isn't that the same for a bond investor as if Greece restructure their debt to knock 30% off the face value?

It's completely different:
By printing, you destroy the value of the money, impoverish those who hold the paper money (I.E. everyone), and destroy the confidence in the Central Bank.
By defaulting, you INCREASE the value of the money, impoverish mostly those who hold the bonds, and destroy the confidence in the Government.

The UK is a remarkable case: they managed to destroy the confidence in both the pound/Central Bank AND the Government.