Europe

We have learned that the Defense Minister is calling for a wholesale change of military leadership. I see this as an extremely alarming development. And in conjunction with Papandreou’s move to call a referendum, it would make sense to…

I wrote an article for Room for Debate at the New York Times on the potential for a Greek collapse to end the euro. Here are the parts I would highlight.

I was going through my archives to figure out when I first started saying Greece would default and it made for interesting reading as a chronology of the sovereign debt crisis. For me, the pivotal post that signalled default was inevitable…

There is much truth to the generalization that European banks took on direct exposure to European sovereigns through the bond market, while top banks took exposure through selling insurance, primarily CDS, on the sovereigns. The latest BIS…

This chart from Credit Market Analysis shows the sovereign bonds which had the greatest percentage increase in their default probability over a 5-year horizon.

Bonds in Italy are marching higher amid rumours of ECB intervention. Yesterday they breached 6.15%. Now they are above 6.30% and going higher still. Belgium and Spain have also been infected with Greek referendum contagion.

Greece’s decision to hold a referendum weighing on sentiment; global PMIs most softer thus far. EUR/USD has retracted half of its Oct. move in two days; Greek referendum increases disorderly default risk. US ISM manufacturing key report of…

Given Greek sentiment, in all likelihood, a referendum vote for the bailout agreement will fail. The question is “what then?” I would anticipate that, at a minimum, an an actual default which triggers credit default swaps with higher…

Lots of debate out there what took the market down today. We’re not certain you can tag the first 15 S&P points on a single factor — MF Global, euro, Italy, yen intervention and strong dollar, or simple profit taking — but willing to up…

Austerity cuts demand too much to have the positive effects on deficits in the short-term that Europe wants it to have. All of these countries are likely to miss their targets. And then the Troika ‘occupations’ will commence. This is a…