(BN) *MERKEL SAYS ECB TO HELP ADVISE EFSF AFTER LEVERAGING DIFFICULTY

Maybe they could hire an advisor who has actually done structured credit?  This single line does explain a lot including the fact that the termsheets they sent out looked like the scribblings of a failed MBA student.  They really were just making it up as they went along.

It also helps explain the confusion coming out of Greek “PSI”, they had no clue what they really wanted, or how to get it there either.

The whole “muddle through” theory seems to be an absolute best case outcome and is largely priced in.

They are going to use the “much cash” that is still in EU structural funds for growth.  Will be interesting to see how much is “much” and what is “cash” or guarantees.

Talk about funding ESM early as a “signal” to the market.  I guess it is a signal, but honestly, it doesn’t look that much different from EFSF with the current “funding schedule”, but maybe they will fully fund it, but where are they going to get the money for that?  Maybe the ESM or EFSF can issue notes to itself, and then since they are guaranteed by the governments, they can pledge it at the ECB?

The tone is decent this morning, though we have drifted off of yesterday’s early highs.  The fact that part of the rally is based on the Chinese economy doing poorly enough that it will need stimulus strikes me as dubious.  But a larger concern is that once again, lots of people are talking about how the positive price action is indicative of future positive price action.  It isn’t just the “technicians” and “momentum” types that are saying this, but many “fundamental” investors too.  The “fundamental” investors who buy in based on the technicals have been weak longs before, and are a potential source of weakness again.

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*MERKEL SAYS ECB TO HELP ADVISE EFSF AFTER LEVERAGING DIFFICULTY

2012-01-11 12:53:53.710 GMT

–ALAN CRAWFORD

-0- Jan/11/2012 12:53 GMT