I took yesterday off of work and the markets because I needed a day free from the commotion. I didn’t check up on the state of the world until after the close, that night. And it was wonderful.
It gave me some room to mull things over. And I’ve reached the conclusion that most of you are not, in fact, crazed idiots. Only some of you are crazed idiots.
The problem right now is that most of the sane people are taking their chips off the board, and casually going over to the bar; leaving psychopaths, daredevils, and programs CS majors forgot to shut off to do what they will.
So the Greek bailout deal is falling apart and Portugal is next up, but the euro holds above 1.3. Will the euro be worth half that when all the bad countries are either forced from the union or bailed out by the ECB? No, but no one seems to desire to challenge that now.
Or how about gasoline? Gasoline consumption is plummeting, but that’s not stopping the market from keeping the price punitively high. For now, that gets a pass, but eventually the people going long gas are going to have to be cut down at the knees.
The current price action is very aggravating, because it is decoupled from fundamentals. There’s a lot of betting on “future fundamentals” plus a whole lot of goodwill being handed to the European continent. Will that be trust well invested? Maybe. I guess we’ll see soon enough.
Because in case you haven’t noticed, for two weeks or so now, Germany has been steadily pushing Greece towards the edge…
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Have the Athenians started burning merkel in effigy yet?
When a coalition politician lights the first match the game will finally be over.
Right on Cain.
It is clear that the Germans want them out, they keep pushing demands. LTRO was simply a delya mechanism and time was given for positioning. I would like to see DBs CDS books right about now.
Not to mention Bernanke’s testimony last week he said he would save the US from any European contagion.
The ground work has been laid.
Just waiting for default weekend.
Nice writing there… Mr. Thaler.
Then there are some that say if Greece and other retards leave the EU the euro could shoot up to 1.70. Wouldn’t that be a bitch?
That’s like saying Germany’s currency, by itself, is worth as much as the USD. Especially with the latest US data and the German contraction, that makes no sense.
So it will probably hit 2…
Actually, I was thinking this very thing.
I’m assuming the rationale behind a weaker post-Greece Euro keys in on the fact that a lot of European creditors are getting screwed in the short term. But fast forward a few years and it’s hard not to expect the currency to be stronger, and perhaps stronger than it’s ever been, given the expulsion of Greece. The rub comes when Europe gets PIS’d on again… Portugal, Italy, Spain. This should be the real concern. Not coincidentally, I suspect that all those creditors in Europe (read: Germany) are being as harsh as they possibly can be, so as to avoid the moral hazard associated with bailing Greece out. I know you’ve brought it up before, Cain, but if Greece gets a piece of the pie, you can be damn sure the rest of the PIGS will want some dessert too.
To me, the most reasonable outcome is to let Greece default while reassuring the market that Italy, Portugal, and Spain will be handled. From there, I see a mean Euro rally.
Well given that England’s currency is worth 58% more than the dollar at this very moment, that might not be such a crazy idea…
This was in reply to your comment, Cain.
I should add that I, too, expect the Euro to collapse eventually. The social pressures alone will become too great. That said, even if they do “okay,” I expect a great strengthening of the USD over the next 3-10 years as we become more energy independent and get our spending in check.