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Wednesday, September 14, 2011

Market Thought... EU chatter

There was a ton of EU chatter this morning, and for the most part, was positive. Here is the chatter:

1. Moody's downgrade SocGen. No surprise there. The market was pricing this in the other day.  But a positive effect was the action BNP took.

2. BNP will be unloading about 70b Euro in risky assets. (This is basically a $95B capitalization. The sooner they do it the better, but this is really positive news.)

3. Euro bond proposal by the ECB. This proposal is much sooner then projected by Merkel. This is just a proposal, and there will be a ton of debate around it, but the fact that a proposal is coming so soon is very positive for the credit and equity markets.

4. Ireland and Portugal got far better favorable terms for the bailout funds. Their maturates are extended to 30yrs, and yield brought to zero. This is positive, but to me, more importantly it signals flexibility by the EU. The flexibility should lead to an orderly restructuring of Greece. (With Greece eventually getting an orderly default or re-structuring, I have a feeling Ireland and Portugal will be getting more 'gifts' from the EU.

All this chatter is really good news for markets, especially the capitalization.  Still waiting on the 'Greek default', but looks like the EU is taking the multiple steps needed to get a far better handle of there situation.

(I will add to my Euro short, via the FXE puts, despite any rally, as I believe a declining Euro is a part of the economic equation to fix the EU zone.)

ps... Geithner maybe doing the EU's job saying definitively 'the EU will not let a Lehman like event take place, they will not'. Referencing private meetings between Merkel and Obama. (nice)

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