Good evening. You find me tonight enjoying a small dinner of mostaccioli with a side of bread for taking up a delicious red sauce prepared with a mild citrus flavor and a nice red wine pairing.

I spent the day in retreat, as the market was closed and I had very little to preoccupy myself with.

I did want to address the November 1 effect of all “speculative” naked credit default swap positions being banned in Europe. How, precisely, one can ban all speculative positions in a counterparty relationship is beyond me. Logic dictates that there always has to be at least one “speculative” position set to make money without a covered stake (we all know the European banks don’t have the money to cover their liabilities because that’s not how fractional reserve banking works).

I suppose I understand that what the EU really means is “no buying CDS coverage unless you’re one of our ‘preferred citizen’ lenders”. That’s fine.

It won’t work.

The EU is only delaying the inevitable. Besides, the CDS market had largely collapsed before now anyway; not from the potential restriction, but from fear that any bond bet could be destroyed in seconds by ECB intervention or EU government bail outs. Or from a Greece like event where the core government ends up strong arming the CDS committee from declaring a technical default while still subjecting unwilling bondholders to a haircut.

For the moment, distressed debt of EU nations is subdued. That’s a large part of the reason I am long.

In a few months though, I could see myself getting very bearish on Europe and global growth again.