Monday, September 12, 2011

They Said What?

With the ever accelerating disaster scenario that is the Euro zone, trying to keep up with rumor/crisis/solution du jure is enough to leave a strong mind with a serious case of confusion (what I call the “they said what?” syndrome) and a weaker one in a state of psychotic dislocation.

Just last Friday the rumor of the day was that Greece could default or withdraw from the Euro over the weekend and that German banks were scrambling to put actions in place to cover the losses the German banks would incur. Oh what I would have given to be a fly on the wall hearing the behind the scene conversations at the G7 meeting in Marseille this weekend. Not so remarkably the public statements were long on hyperbole and short on substance.

By late Sunday the futures on all the major markets were in the red. By the end of trading in Europe all the markets closed down with the French CAC getting hammered down by over 4%, based on concerns of their exposure to Italian Bonds.

It looks like the decision coming out of the G7 meeting was to tell the Greeks with “great firmness” to shut the hell up about possibly defaulting as the bankers had a bigger problem on their hands with the disastrous, nearly bidless Italian Bond auction. With the DJIA continuing to decline the Italians then released a story that they had had discussions with the Chinese requesting they intervene and buy the undesired and undesirable bonds.

Whether the almost immediate reversal in the DJIA, with surprise, surprise financials like BofA and Citi leading the way, was actual investor interest or intervention by the FED is yet to be determined, if at all. If I had to bet on that one I know where I would be putting my money.

Never mind that the Chinese have not even said if they were going to buy any Italian Bonds, the rumor that they might was just the excuse needed for another manipulative intervention. Never mind that they are presently looking at getting burned on the Portuguese and Greek bonds they have already purchased. More MOPE (management of perception economics) was needed and that’s what we got.

With each new rumor/crisis/solution having a half-life shorter than the one before, the Chinese intervention story will probably be shown up as bogus by the time markets open Wednesday if not before. At this point only a fool would speculate what the next round of rumor/crisis/solution/MOPE will be, never mind how absurd it will sound. I can however be pretty sure my first reaction will be “they said what?”

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