Fra Saxobanks Steen Jakobsen
There is EXACTLY the same feeling into the air as before the Lehman default. I remember being almost alone in thinking Lehman would fail to secure their life, but market and Fed kept seeing solutions last minute.
The decision is similar. Lehman was perceived too ‘difficult’ to save, actually very few people wanted to help them and don’t forget Lehman paid significant overprice for funding +100/200 bps in one week deposits way before 2008…
Lehman was leveraged 30/35 x on BALANCE shee -Greece was in debt similarly exposed.
The ‘morale’ risk also similar and it comes from the MACRO Prudential Framework of always trying to buy more time….. which never works…. Fed’s (re Lehman) plan was to buy more time… as Plan A, Plan B was “carrot and stick”…..which blew up and Plan C was panic… and no plan. Lehman didn’t have a plan, neither does Greece. Having no plan is not a plan…. as we are wittenessing…
We have difficulty dealing with non linear movements in markets… Hence the hope and believe… But again.. Let me stress the biggest risk is bloated VaR… (Value at Risk and correlations going to !) The unintended consequences like Bulgaria and Romanian bond routes yday, Puerto Rico likely default, and higher euro.
Market is chasing ‘good hedges… Which doesn’t exist.. Trust me as someone who ran risk and trading through 1992/1997-1998/2000,2008 and 2010/14….there isn’t any good hedges only not having the bad positions in the first place… when everything is goes to correlation of one
Failure to secure last minute deal should see Dax down another 3-5%, explode credit risk to NEW European members like Hungary, Croatia, Bulgaria, and Romania even Poland should feel headwind.
My advice of taking six month holiday from markets unfortunately looks like good advice…
Also being in Shanghai market here is nervous ahead of opening… We are down 22% from peak…!!
Meanwhile as seen below Syriza keeps playing games……in a situation where are on the brink of civil unrest, shortage of petrol, EURO’s, and food….. Beginning to understand why I disapprove of macro and politicians?
Safe travels
Steen Jakobsen
Sent from Bloomberg Professional for Android
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Tsipras Says European Leaders Won’t Dare Kick Greece Out of Euro
2015-06-29 20:24:35.131 GMT
By Marcus Bensasson and Christos Ziotis
(Bloomberg) — Greek Prime Minister Alexis Tsipras said European leaders don’t have the nerve to throw his country out of the euro, striking a defiant tone just hours after imposing capital controls on a country in economic freefall.
As Greeks come to terms with a new reality that’s trapped their money inside the country’s banks, 12,000 people gathered in the central Syntagma Square with banners that read “Our lives do not belong to the creditors.” Tsipras, who passed by them en route to a televised interview, said the cost to the 19-nation bloc of Greece leaving would be “enormous.”
After blindsiding negotiators with the announcement of a July 5 referendum on the European Union’s aid proposal, Tsipras has plunged Greece into political uncertainty and economic turmoil with a series of emergency steps to prevent Greece’s financial system from unraveling.
“The referendum will give us a stronger negotiating position when the talks resume,” he said on Twitter. “The higher the participation & numbers of people voting ‘‘NO’’ the stronger our position will be.”
With Greece in lockdown mode and banks closed, Tsipras blamed everyone but his government for bringing the country to the brink of financial paralysis.
On Monday, European equities sank, with the Stoxx Europe
600 Index down 4.2 percent while bond yields jumped in Italy, Spain and Portugal.
“The institutions were not interested in finding common ground, but rather to impose extreme measures,” Tsipras said on this Twitter account, citing passages from his television interview with ERT TV.
Neither German Chancellor Angela Merkel nor French President Francois Hollande, the heads of the two biggest economies in the euro, have given any inkling of concessions.
European Commission head Jean-Claude Juncker said the “whole planet” would view a “no” vote as Greece turning its back on Europe.
“The Greek government’s behavior has been beyond belief,”
German Finance Minister Wolfgang Schaeuble said in ARD television interview. “It won’t be able to destroy Europe.
Europe is stable and Europe is standing together.”
