Lots of what they are saying its what they have to say. They can't say 'If Greece exits it will trigger the mother of all bank runs' so they say 'We can handle it' just like they said 'Greece won't default' to stop people from panicking
From recent talk by James Montier ... Anchoring â give someone a number â any number â and s/he thinks it means something (even when it doesnât). Notes: http://rpseawright.wordpress.com/2012/05/06/cfa-conference-james-montier/ Full talk: http://annual.cfaconference.org/2012/05/06/live-stream-session-the-flaws-of-finance/ Starting at 18 minute mark.
Love it (circa 27:00): The Value at Risk model is kind of like buying a car with an airbag, where the airbag is guaranteed to fail when you need it. Or alternatively putting on Kevlar body armor that will stop 95% of bullets. It's really not any good. It's cutting off that part of the distribution that we need to worry about -- the tails.
Hi all - simple question. Everyone keeps talking about Greece defaulting and exiting the Eurozone. I'm curious about the "AND". Greece might get booted from the Eurozone in the sense of being part of a community with certain rights and obligations. However, they could continue to use the Euro as their main currency (not saying they would do so, only that they could). Or introduce a Drachma that is pegged to the Euro. What are the politics of a Greek currency post default. Do people think they will: a) introduce a floating Drachma b) introduce a pegged Drachma (and pegged to what) c) continue to use the Euro for main accounts and trade within the country
Yeah if they backstop it then they can do it by printing money, but this will tank the Euro and represent a defeat for the Germans. The Germans may however prefer one-off QE rather than having to pay the bulk of a taxed transfer payment to Greece (and then Portugal, Spain etc). As you say, it's a Soros reflexive situation and the thickos at the 'Bundesbank' must figure this out eventually, if they haven't already. Much cheaper to rescue Greece than to let it fall and trigger a Minsky moment, then have to rescue the entire periphery. So, either Greece exits the Euro and the EU banking system has a 2008/2009 moment, or EQE comes in on huge size and the Euro collapses. Both scenarios are pretty dollar bullish, so I think the time for Euro shorts is now. If the Euro doesn't tank on the current macro news flow , then it won't go down on anything.
Why you expect money printing in large scale?Under a default but no EUR exit, the fiscal transfers would be done automatically by haircuts on the debt held by the public EU sector. Further Greek bailouts(And it seems that they will need because they don't have the money to recap banks) might have to be done EFSF way
I don't believe the Drachma peg would hold. In order to keep it 1-1 to the EUR they will need EUR reserves(lots of it) to contain market speculation. The government is broke and can't print EURs
What is 'knife-catching', exactly? Does it mean Bill Miller buying a financial stock in 2007 just because the price went down on bad news, or does it mean doing a Buffett-style deep value investment in a strong business franchise with a fortress-like balance sheet at 1/4 of book value, because it's now a great bargain? I think the phrase is practically meaningless. When trying to convey facts, using analogies generally confuses the meaning that one wants to convey. Analogies are for artists and elementary school teachers, not financial market participants. And while we're at it, can we also avoid using ugly contractions like "Grexit". Is it really so hard to say or type "Greek exit", which sounds better and is a whole 3 letters longer? The financial media really need a refresher course in writing style. It reminds me of that other ridiculous, lazy, and totally misleading phrase, "The Fed is out of bullets".
Just to be pedantic, no body armor will stop 95% of bullets (as any maker will tell you), no airbag works 100% of the time (in fact they can injure and kill you sometimes). Seems like today is lazy & misleading analogy day.
Hmm, do you think that Greece could just default on all its debt, stay in the Eurozone, and the banks and ECB would be recapitalised by tax increases? I'm sceptical.