All the roads lead to Goldman: Libya & the Euro.

Haven´t had much focus on sitting and writing, lately. I guess, I´ll work it out and let develop the blog in its own form. There´s is so much interesting information around, that I figured I would end up the day writing, which is not the idea, at least for now.

One of the most interesting things I see during the day, is how the market “reacts” to certain news or events. Another issue that always gets my attention -at least in the short-term- is how “disconnected” the market is from what is generally taught in a basic Macroeconomics course.

For example, last week, the Euro/USD fell from 15-month-high @ 1.4695 to 1.4300 in 2 days, only to recover and touch the 1.4430 mark, today. The “curious” thing about it, is that the event that “triggered” the sellof last week, was the reaction to the JC Trichet hawkish stance on a posible hike of interest rates … As far as I know, money chase yields is one of the basic concepts in econommic theory. Point to be made, this seemed like a typical type of “buy the rumor, sell the news” situation, in which the move has already been made, and the event in fact only works to “trigger” the opposite response of what the rationale would suggest.

But the story doesn´t ends there. Today, S&P downgraded Greece´s credit rating on the basis that any attempt to rollover its debt would be considered a default…Making it, according to a Reuters report, the lowest rated country in S&P’s universe … Although I´m sure this is not an easy situation, I guess there are many more countries around the world who are in worst circumnstances than Greece.

The answer to that: The Euro rallied back towards the 1.4430 mark… The rationale? There is nothing “rational” about buying the currency of an country, area that is going to the tube, even might be the “Next Lehman Brothers”, according to an article published by the NYT this weekend. This also brings the issue of moral hazard into the equation and the possible consenquences of another global meltdown, which will bring me to more hours of writing, which I currently don´t have. Thus, I have to conclude that I have no idea on why the Euro made that move, and have no intentions to get into intrincate discussions… It is just “is”

This brings me to Euro-PIIGS-default-whateveryou-wanna-name-it situation that has been going on for almost 1.5 years (the Euro crises reached its “peak” back in early June of 2010. Personally, I don´t think there were too many individuals (included myself) that -back then- would have a gavored stance towards the euro appreciation in the year to come… The answer is that you never know.. no futurology, just probabilities.

I have to say that -at least back in early 2010, when the crisis unfolded- the comparison to Argentina´s economic crisis back in 2001-2002 seemed like an interesting analogy to lean into, although I´m not so sure there´s is such, with the exception of the common ground: when you spend more that what you make, your probabilities of going broke tend to increase, specially in the long term.

The other story that I´ve been closely following, is Goldman Sach´s management of a Libya´s Sovereign Wealth Fund investment that netted $1.3B loss back in early 2008, which unfolded into a spy-like novel, including the possibility of Lybia to become a Goldman´s shareholder.Hard to imagine that in the current state of affairs.

Furthermore, according to the following article, Back in  Nov. 2009, Greece -with the “assitance” of Goldman, in this particular case- was presented with the possibility of rolling over the debt of Greece´s health care system into the future, similar to what many homeowners have done from 2002-2008 in the US. 

As a clever piece, depicitng the (in)famous financial behemoth by Matt Taibbi in Rolling Stone magazine, back in April 2010: The first thing you need to know about Goldman Sachs is that it is everywhere

It never ceases to amaze me, how interconnected the players and the events are.

Have good night.

Update; Bloomberg has a published a report that the Libyan Investment authority has decided to trim off its investments in lossing Hedge Funds. The article also points out that the US, UK and Europe have frozen Libya´s assests, although it fails to explain how come Millenium, a London-based HF continues to manage some of Lybia´s assets.

 

 

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