The Merkozy Contagion Diet: Before and After Photos
BEFORE However many summits later and after so many efforts to erect “firewalls” and reduce contagion risk, here is what a steady diet of Merkozy financial planning has done. AFTER Special thanks to Vitaly Fiks for this. Our ability to use graphics is limited, but I think this gets the […]
The Weekly T Report: The Fed and Falling Knives and EUROPE
Why should the Fed catch a falling knife? Every trader is told not to catch a falling knife. The image is clear, reaching out your hand and being cut by a blade, and then the blade clattering to the floor, with nothing to show for your effort but a bloody hand. Without a doubt, traders […]
The T Report: Banco de Ponzi
Ok, I’m bored of basically saying the same thing and you are probably bored of hearing and reading the same thing, so let’s do something different. Let’s prove that solvency = liquidity. Yes, I am that bored today. I’m nervous about being long, but my thesis that Germany finally did the work on what a […]
EFSF and ESM Funding Explained in Detail – Why Italy is Ok with it
There is so much confusion about the ESM or EFSF funding costs. How it works, how it affects countries, etc. Here is how it works. €1 Billion of EFSF Borrowing The EFSF sells bonds to the market. They have already issued €109 billion of bonds, so they are a meaningful issuer and buyers at this […]
The T Report: A Risk-Meh Morning
Credit Markets Mixed: Spitaly vs Corporates The first thing most people are noticing today is the weakness in Spanish and Italian bond yields. Spanish and Italian CDS are both wider as well. There is a lot of talk about what it means to hit 7% on 10 year bond yields. For Portugal, Ireland, and Greece […]
The T Report: The Greek Election is Irrelevant but FROB Isn’t
Does the Greek Election Still Matter? The market still wants to believe that the Greek elections are an important catalyst for the market. That if one side wins, the Greeks stick to the original plan and continue to destroy their country, but make the markets happy. If the other side wins, conventional wisdom, is that […]
The T Report: What a FROBbing Headache
You’ve Been FROBbed We still await details of what the Spanish bailout is. So far the market has decided to take a negative view on how effective it will be. That may turn out to be the correct view, but many of the headlines seemed to ignore what few details we do have. This is […]
One Sided Balance Sheet and Solvenquidity
One Sided Balance Sheets I’m seeing a lot of negative headlines about how much more debt Spain is adding. How much subordination there is going to be for existing creditors. That is in spite of a lack of detail. I’m not here to cheerlead this deal, but at the same time, falling prey to the […]
The T Report: Skeptics Galore and the Big Picture
It seems like it would be easier to find an adult who believes in Santa Claus than one who believe the events in Spain over the weekend accomplish anything. It is actually very hard to find a positive article, yet most seem to take worst case scenarios and take that as the likely outcome. Some […]
Spanish Bond Subordination: Some Possibilities Analyzed
This is a rough approximation of the Kingdom of Spain’s €730 billion of sovereign debt as it currently stands. The ECB’s SMP holdings have no legal standing to be senior, yet as we saw in Greece were treated as senior. I assume the number is around €50 billion and is all in government bonds. T-Bills, […]