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Friday, September 16

16th Sep Early - Alphabet soup to Europe?

Summary: Interesting market day ahead: Geithner visiting Europe today and has already told Europe what it should do, and Europe has replied “look who’s talking” – statements probable during the weekend. Friday and weekend coming,  ongoing Greek crisis, markets in a slight “risk on”-mood after the USD swap line expansion and quad witching in U.S. (exchange-traded derivatives’ expiration day, usually causes heavy volume, price manipulation, position adjustments, pin risk, blah blah). This week’s major news was the swap lines (money that has to be paid back, but stops liquidity squeezes in short-term). Next news could be the European version of TALF, as proposed by U.S.

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Views: EURUSD below a resistance level. I might tweet with trade ideas.

News roundups:Friday Watch – Between The Hedges
Credit update: After all tomorrow is another day – Macronomics
FX options update: Vols, Risk Reversals & Pin Risk – / Saxo Bank

1. Illiquid or insolvent, treat 2. bank recap 3. change policy from austerity to growth 4. redesign the system to prevent this from happening again.

4 truths: default by Greece, EU has agreed a member can default, Greece should cut deficit immediately, Italy and Germany are not ready for the next stage of the euro crisis.

Peter Tchir: “Notice how they have backed off how bad a Greek default would be and try and narrow it down to the fact that a default without adult supervision would be bad.”
** On Walking The Maginot Line – Zero Hedge

Polish finance minister warns about risk of wars
Poland: the lessons of history – beyondbrics / FT

History lesson: “Greece was ejected from the union in 1908, for decreasing the amount of gold in their coins.”

Swap lines
Article from 2010, based on N.Y. Fed’s primer on swap lines
Solvency can wait, for now deal with liquidity – Free exchange / The Economist

Geithner / EU / TALF

“A Euro TALF will help to ease the strains in the Eurozone banking system, but it will not come close to resolving the root cause of the Eurozone’s problems.  This is just another instance of bankers ensuring that other bankers don’t have to take haircuts.”
Euro TALF Rumors… – Pragmatic Capitalism

Lesson from U.S. TALF: You can give banks money but you cannot make them lend. Call the facility whatever you want but Europe is still putting lipstick on its PIGS.

ECB’s Stark: “Finger-pointing in the direction of Europe shouldn’t prevent others from putting their budgets in order and doing their homework before handing out advice to Europeans.”

Reminds that the U.S. TARP was a moral hazard disaster in retrospect 
** Banking liquidity vs. solvency – Humble Student of The Markets

“The Punch Line” newsletter. After the polished artsy reads from top tiers, this design is refreshing.

The high corr is not there on up-days, so this is just classic bear market corr-to-1.

U.K. was forced out of ERM. Other currency pegs have been broken after that. And should and will be broken in the future.
** 19 Years Ago, It Was Black Wednesday – Also Sprach Analyst

Short ,nasty, insightful and funny comments on all the recent themes. I hope I could write like this.

Has made a bet on HKD peg change

“things in my notebook, interesting, but not providing enough for a full article.”
Market Musings and Lessons – A Dash of  Insight

What Is Pseudoscience? – Scientific American

Boring rant from an ex-banker in the spirit of F.I.A.S.C.O. and Liar’s Poker from 2009