Updated Nov 28
This Weekend, The Sunday Headlines Begin on Saturday
NYT: Banks Build Contingency for Breakup of Euro
Bloomberg: Europe's Single Currency May Unravel Before Action, UBS Says
Bloomberg: Euro in Longest Losing Stretch in 18 Months
The Telegraph: Prepare for riots in euro collapse, Foreign Office warns
Reuters: Greece may miss 2012 selloff target due to Euro crisis
The problem with the extreme pessimism is that it presumes that everyone is completely stupid. That in itself is a wrongly placed assumption. If someone takes Merkozy for total idiots, I am pretty sure that is wrong. I am quite confident they are not, and they are not stone deaf either. They will respond, the question is speed, force, and whether the market is convinced or not. The lack of details given so far has been stunning. That the market has bought any of the "fixes" without the details is amazing, but the crowd is getting more pessimistic with each passing announcement.
Nevertheless, here are the "solutions":
Yahoo! Finance: Germany, France plan quick, new Stability Pact: report
Reuters: Euro zone integration may pave way for ECB bond action-officials
Economic Times (India): IMF readies 600-billion-euro rescue plan for Italy: Report
Within the next 24 hours, I suspect both lists are gonna get even longer.
The naysayers are out in force; you know what that usually means....
A bounce is probably in order.
Post-Mortem Monday (Update 1, Nov 28)
Rumors of IMF rescue plan were roundly denied, and the Franco-German stability pact remained sketchy at best. A euroland-within-euroland debt issue was also denied. Last, and not least, the notion of further leveraging of the EFSF was also denied. Whew, that is a heckaofalot of denials. So while the rally seemed tenuous and on low volume, the fact is that it didn't disintegrate when all of the denials arrived.
The market tell is, and will be, $DB, $CS, $ING; these three are Euro financial ADRs and yet are not within a PIIGS bloc. So, they represent the exposure to the Eurozone debt problem, and the liquidity problems all in one fell swoop. Add in some Euro exposure (due to their original denomination), and voila, you can tell whether the market move intraday is going to hold up. Today, $ING was up 12% out of the blocks, and didn't give much back. KISS, and that is as simple as it gets.
Market sent us everyone a message: the market is leaning short and punished those that stayed short. After the close today, Fitch kept the U.S. ratings but moved the outlook to Negative. Market reaction? Nada. We could be moving into a mode where bad-news fatigue is setting in again, and all bad news is good. 'Tis the season, after all.
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