The Cyprus Fireworks might be put off til next Tuesday, as the Eurocrats and US Treasury Dept give Cyprus’ government til then to come up with a new plan to steal from their citizenry in the name of “saving their economy”.
The easiest plan for Cyprus is to follow the rule of law which calls for wiping out anybody who risked their money as shareholders or bondholders of the banks that are insolvent and making sure everybody who has saved their money in the banks get every dime (up to 100,000 Euros) back. That’s only rational, fair and it is the law and it would work.
Certainly wiping out the investors, both institutional and retail, who RISKED their money as the shareholders and bondholders of those banks would have huge rippling effects and would likely end up wiping out the investors, both institutional and retail, who RISKED their money as the shareholders and bondholders of Goldman Sachs, Bank of America, Citigroup, and the usual cohorts which keep sucking trillions of dollars out of the system and using taxpayer funds to bail their endless bad gambles out.
So what? Do you realize I was yelling on TV and writing the EXACT same thing back when we started the explicit bailing out of all these same firms back in 2008? As I told Jay Leno on the Tonight Show, there’s plenty of people and firms who haven’t stupidly gambled 1000x their assets in derivatives and worthless mortgage securities, and they would happily buy these bankrupt firms’ assets and actually start producing real profits from those low cost levels.
Instead, we get this anarchy.
Anyway, the markets are holding firm again today. There’s a lot of pressure built up by both the bulls and bears regarding whatever outcome Cyprus’ government comes up with in the next five days. So thinking that scenario out trading-wise, I still come up rather bearish about the near-term. That is, I could see a sell-the-news reaction if the supposed best-case-scenario plays out as Cyprus agrees to steal their customers’ deposits to get more bank welfare for their banks’ shareholders and lenders from other EU citizens. Or I could see the markets really tanking if the Cyprus government does right by their people and leaves the EU and goes back to their own currency and wipes out most of their sovereign debt as they do so. It’s not painless either of course. But it’s the only thing that will enable Cyprus to get out of this endless-EU-debt-crisis cycle that they (and the US too of course) will remain in, if they keep kicking this can down the road.
I’m going to short a small batch of the SPY ETF, which essentially opens up more short exposure to the S&P 500 which further hedges my portfolio. I’m also selling the last of my Google call options as I’d noted I probably was going to yesterday. Nice profit on that trade. Time to let the common stock work for us now.