I am not at all a financial or Wall Street guy, but I had a few thoughts
- I am amazed at the equity rally over this. Writing down one country's debt, without fixing its underlying financial problem or dealing with all the other countries who have problems, seems a small win. Particularly when this one country stretched European resources to the breaking point, and there are a lot of other lined up just behind Greece.
- Its interesting to see how much everyone bent over backwards not to trigger payouts from credit default swaps (CDS). If this is the wave of the future, I would be shorting sovereign debt at the same time I was writing CDS contracts on sovereign debt. Maybe this is exactly why I am not a trader, but it strikes me that if you had an arsonist around burning down houses, while at the same time the government worked hard to let fire insurance companies avoid paying off on the fire damage, wouldn't you be shorting houses and long on fire insurance companies?
- How smart does the UK feel right now for staying out of the common currency? The anti-EU folks in the UK should be calling for that referendum on EU participation right now. It would likely fail by a landslide.
- The question that keeps nagging at me -- is it really worth as much as a trillion euros to keep Greece in the Euro? Why?
Update: Oh, and I left out the obvious take: moral hazard
When sharing our kneejerk reaction to yesterday's latest European resolution, we pointed out the obvious: "Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." Sure enough, 6 hours later Bloomberg is out with the appropriately titled: "Irish Spy Reward Opportunity in Greece’s Debt Hole." Bloomberg notes that Ireland has not even waited for the ink to be dry before sending out feelers on just what the possible "rewards" may be: "Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken."