Bailout Halflife

$ES_F at 50% retracement…

I’m half back from vacation, half interested in speculating on the weakening Eurozone, half sure the G20 headlines are going to move the markets but I’m a bit more than half interested in my November put spreads…

I impatiently exited some $ES_F shorts today, my stops were too tight, and I knew it. Live and learn, that’s another thing I have to more than half work on improving.

Speaking of Europe while at the same time speaking of each country that makes up Europe is essentially, the problem. We talk about Greece and it’s $400 Billion in debt, while at the same time wondering whether Germany will come to the rescue. This makes absolutely no sense. When you look at trading/hedging the dollar do you wonder whether California is going to cover it’s federal debt? (Maybe we should…) In any case, do you hedge California?

Greece creditors will take a voluntary 50% haircut (which in reality is closer to 16% – see below) so that French banks don’t go bust. Ireland, Portugal, Italy and Spain are lining up… What’s good for Greece, should be good for Spain, shouldn’t it? What’s good for California, is good for New York, legally.

And from my favorite newsletter: Things That Make You Go Hmmm…

“The mathematics behind the much vaunted 50% reduction in Greece’s debt is far more curious than the headlines would have us believe and, the ultimate writedown on the total amount actually turns out to be a far less conclusive 16%. How so, I hear you ask? Well, let’s take a look at the numbers: Greece’s debt is roughly €350 billion. Of that, approximately €150 billion is held by the ‘Troika’ (including the €75 billion held by the European Central Bank) and this €150 billion is NOT subject to the haircut imposed on private holders of the debt. So that leaves us with roughly €200 billion. Greek banks and pension funds account for (give or take a billion or two) another €85 billion and, though many number-crunchers apply the haircut to this slice of the debt pie, my own feeling is that it is untouchable as, if they are NOT ring-fenced these holders will be bust should they be forced to take the proposed haircut. By my calculations, that leaves €115 billion needing to be ‘forgiven’. Apply the haircut to that number and you are left with a reduction in Greek debt of €57.5 billion – or 16%.”