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« Weighing the Week Ahead: What about Jobs? | Main | Weighing the Week Ahead: What will we learn from Q3 earnings? »

October 04, 2011


David McDonald

For you and the ideas you educate us with, brevity is a mistake!!

Mike N

No problem with the length of your posts Jeff. I enjoy the education and your perspectives thoroughly.

Chris Tinker

The issue for Europe now is that the market has increasingly decided to position itself for the "big payoff" trade of a Euro breakup. Long "German group" debt, short "non-German" debt on the basis that even without default, a currency split would allow a major FX gain. Should that occur, then the devalued country equity markets become a buy (close out the short futures contracts)and the "German group" exporters drop further until those shorts are also closed. What policy makers will do, therefore, if they convince the markets that the Euro is NOT going to break up, is cause these position trades to be unwound - either in an orderly fashion - or a disorderly one if the likes of Pimco get behind it. Bottom line, though, is that the trade is already at an extreme so absent a Euro collapse, most of the money has been made already and the risk has to be that a relatively orderly unwind is already beginning to occur.

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