The Credit Crisis Financial Stocks Short Journal

Quote from Martinghoul:

There are rumors circulating of SNB and ECB re-instating x-ccy swap lines with the Fed.
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The authorities might be able to engineer some kind of relief rally. There is the swap lines, ECB liquidity programs, ECB rate cut pricing in the markets/rumors, delivery of bailout to Greece,etc
Its a matter of how long till things turn again
 
Seems to me that the crisis there will only be solved when the government solution involves things like 'bank holiday' 'bank recapitalization'. The PIIG debt is already on the banks books, there will be losses, bailouts can only delay that for a while. Greece needs to default, cut down its debt and the EU banks be recapitalized by the states, if runs start(both in Greece or elsewhere), a bank holiday is announced. At that point even if Greece is still uncompetitive, that would be irrelavant to other countries. The same procedure would have to be done to the other PIIGs. The way they are doing things, the EU is starting to look like Japan big time, the banks will be zombies, holding gov junk debt, reluctant to lend, trying to recap so they can write down the junk. Maybe I should be betting on the 'low for longer' in the EU too
 
Quote from Daal:

Greek 2y yielding almost 19%, it might be hard to blame this one on a glitch
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How long til they have to announce a default I wonder? At this point the bailouts have no credibility, it would just be better to work out a plan to handle bank runs & failures, then announce a 50-75% haircut on the debt. No need to leave the Euro or any of that nonsense, just let the bond investors eat their losses and get it over with.

If the current government doesn't do it, eventually they will be forced out of power like in Argentina, and another politician will go for the populist vote by raising a middle finger to the IMF etc by defaulting.
 
Quote from Daal:

You are not going to bailout of GE?Libor is blowing up huge, whether the media like it or not, EU is melting down
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Can't do it. The bid/ask on June 11 and beyond (where I have most of my exposure) is super wide. I'm not giving these back to the clown who sold 'em to me in the first place for the prices being bid right now.

The libor blowout hasn't and probably won't affect these contract months. The underlying and the options were up strongly all week. In fact, I expect they will fall in price along with the LIBOR/OIS spread. That's the paradox of this trade. I now realize that 75 points as an upside was a pipe dream. There was no way that if financial condtions remained at the point where the LIBOR/OIS spread was so slim, that the Fed would not have eventually tightened. The only way to get the Fed off the tightening track was for this to happen, which has blown out the spread. 50-60 points is a much more realistic upside.
 
Well, there was a rumor yest that the Greek govt hired Lazard to explore restructuring options... Obv, it was denied and the Greek MoF said that Lazard's involvement has nothing whatsoever to do with restructuring. Lazard, of course, is the bank that advised Argentina, Ecuador, etc. during their sovereign defaults.

BTW, USD 3M LIBOR fixed at 42.813bps, which is arnd 5.5bps higher than the previous day's fixing.
 
Quote from Ghost of Cutten:

How long til they have to announce a default I wonder? At this point the bailouts have no credibility, it would just be better to work out a plan to handle bank runs & failures, then announce a 50-75% haircut on the debt. No need to leave the Euro or any of that nonsense, just let the bond investors eat their losses and get it over with.

If the current government doesn't do it, eventually they will be forced out of power like in Argentina, and another politician will go for the populist vote by raising a middle finger to the IMF etc by defaulting.
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Well, Lula was elected here on that kind of platform so perhaps the next Parliament there might run saying they should default, specially after the economy tanks huge, this year and next. In any event it doesnt appear that such thing will happen anytime soon
 
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