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Random Thoughts: Crisis Averted!


World peace breaks out.


I walked into work this morning and began my daily process. I powered up the four screens in front of me, flipped the switch on my desk fan, eased the lid off my morning Joe, checked my phone messages and logged into my Bloomberg terminal, which occupies the other four screens on my right, to scan the TOP stories.

And there it was; #1, top of the heap, above all others. The proclamation.

Greek Crisis Is Over, Rest of Region Safe.

I stopped mid-sip and clicked through the headline.

"March 10 (Bloomberg) -- The worst of Greece's financial crisis is over and other European nations won't follow in its path, said former European Commission President Romano Prodi.

For Greece, the problem is completely over," said Prodi, who was also Italian prime minister, in an interview in Shanghai today. "I don't see any other case now in Europe. I don't think there is any reason to think the euro system will collapse or will suffer greatly because of Greece."

Now, I hope he's right; while we've dutifully walked through the regional progression -- in January with my Ten Themes, once it hit the mainstream radar, through our Five-Step Guide to Contagion, in front of the positive shift in sovereign sentiment, and sharing the "other side" of regulatory reform -- let's be honest; nobody, and I mean nobody, would benefit from yet another global contagion. There are only a handful of possible outcomes; none of them are good and some of them are very bad.

Yet, I can't help think of three items. The first is an image championing accomplishment long before there was reason to celebrate.

Click to enlarge

The second is a column from September 2009, when we Questioned Conventional Wisdom. The list is chock full of misguided excitement; should debt tempers flare anew across the pond, Mr. Prodi will find himself in esteemed company.

The third is familiar to Old School Minyans as it's seared into the psych of capitalism. It was a prescient piece written by Kevin Depew in April, 2007, when Janet Yellen, Ben Bernanke, Dick Fisher, Hank Paulson and Freddy Mishkin assured America that the housing slump was well contained.

Denial, Anger, Bargaining, Sadness, Acceptance

I will again draw your attention to the two-sided risk given the specter of sweeping CDS reform. Should this legislation fast-track, there should be more gains to come, although it will do little to "cure" the underlying disease (and some of it is surely discounted). If it's delayed -- or worse, turns out to be an empty initiative -- trap door risk exists as there are far fewer shorts to absorb the supply that will materialize.

See both sides, Minyans, and tread carefully. We live in interesting times.

Random Thoughts

  • Wouldn't it be ironic if CDS reform hurt Greece more than it helped Greece?

  • What does it mean that the chairman of Britain's Financial Services Authority asked banks to perform stricter stress tests to ensure they have enough capital to withstand a peak-to-trough fall in GDP of minus 8.1% over the next four years?

  • This is an interesting article regarding the VIX-S&P relationship. Minyans might remember that this "off-the-radar" measure presciently predicted past turns for the tape.

  • Keep an eye on those piggies that poke; a move through BKX 50 would be a feather in Hoofy's headdress.

  • The Dot.Com Crash: Ten Years Later.

  • I've anointed MV Editor Terry Woo as the TV Czar and he has full autonomy on all things television. Congrats Woo-Bear, and please remember that Syracuse plays at high noon tomorrow.

  • American International Group (AIG) is up 30% in two days; interested that there are no long sale curbs in place, eh?

  • Jack a horse full of steroids and cripple his competition and he can shuffle a deck of cards while smoking a cigarette running on its hind legs-and win by a mile. Just make sure he doesn't have a heart attack, cause that would suck for the horse-and anyone who bet on him.


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