In my last Credit blog post (Article: Credit: The Pressure Is Building...) I stated that we had imminent signs of default in the EU zone and that contagion will be the name of the game. Glance at some of the important credit market charts below:
Greek 1 Yr at over 150%...
...2 Yr at over 75%...
... and 10 Yr at over 25%. But you, I and the market already know all this!
Back in the day Eurozone politicians called hedge fund managers who speculated against the Greek debt through CDS crazy. Looks like the gentlemen who went long Greek CDS at 100 beeps do not look that crazy anymore? 5000 beeps and counting!
Gordon Brown was on Bloomberg earlier. This is what he had to say:
“In 2008, governments could intervene to sort out the problems of banks. In 2011, banks have problems, but so too do governments. The euro area problem is now moving to the centre, the euro cannot survive in its present form, it’s going to have to be reformed dramatically. We are, I think, at an hour to midnight in the way that we look at this issue.””
The Dollar is in demand now as we should already know by my recent article on currencies (Article: Currencies: Is The Dollar Rally Real?). I think Gordon Brown is also advising his best friends to buy the Dollar against the Euro and the Pound.
On the other hand, I am bullish on risk assets, however I am not buying anything yet. We have signs of capitulation in certain places and as every day passes by more signs are shown to all of us. Some commodity companies on my watch list look great. Having said that, I think that no matter what earnings state, no matter how well company revenues are, no matter what sentiment is saying, no matter what technical analysis or breadth readings are showing, no matter what the long term trend is... in my opinion, until the credit markets settle down, we just aren't there yet.
Greece needs to default. Hopefully the politicians do not kick the can down the road again for a few months. If they do, than the risk asset rally will be false. Do not get suckered into it! Having said everything above, please don't think the world is about to end like these investment banks:
Hahahaha! I cannot help but laugh at some of the garbage these guys send to clients on daily basis. It gives Hollywood a run for its money.