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.
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 – tradingfloor.com / Saxo Bank
EURO CRISIS
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.
** Europe's currency crisis: How to save the euro – The Economist
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.”
Greece Was Ejected From The Latin Monetary Union – Also Sprach Analyst
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.
** How American Taxpayers Could End Up Paying for ECB Liquidity Flood – MarketBeat / WSJ
Geithner’s bright idea for Europe – alphaville / FT
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
FINANCIAL CRISIS
“The Punch Line” newsletter. After the polished artsy reads from top tiers, this design is refreshing.
The Complete And Uncut Chart Porn Collection – Zero Hedge
The high corr is not there on up-days, so this is just classic bear market corr-to-1.
High Correlations? And what? – ETFreplay.com
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
** Every Day the New World Emerges, Yet We See it Not. Like today, as Europe Begs China for Loans – Fabius Maximus
OTHER
Short ,nasty, insightful and funny comments on all the recent themes. I hope I could write like this.
** Please call me “market economy” and I’ll hand out the petty cash – The Big Picture
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
DIVERSION
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
American excess: A Wall Street trader tells all – The Independent