European Bazooka

by Larry Levin

Do you remember when Treasury Secretary Hank Paulson asked for, and received, a HUGE amount of money from Congress to stop the equity market's slide? When asked why he needed such a massive sum of money his response was something like "...if the market knows you have a bazooka, you probably won't need to use it..."

Hank Paulson was wrong. His bazooka was packed with confetti. It failed.

From Bloomberg...European Union finance ministers moved toward agreement on an unprecedented loan package worth at least $645 billion to prevent Greece’s fiscal woes from triggering a broader sovereign-debt crisis and shattering confidence in the euro.

Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro governments sketched out plans to make 440 billion euros ($570 billion) available, with 60 billion euros more from the EU’s budget, according to three officials at the talks in Brussels. An additional, unspecified sum may come from the International Monetary Fund, the officials said.

“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair the meeting yesterday. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”

“Europe is getting its act together,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Time will tell if this statement is enough to satisfy the European bond market vigilantes.”

“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”

Government officials said they won’t push the independent ECB to, for example, buy government bonds. President Jean-Claude Trichet accelerated the market selloff on May 6 by rejecting that measure. Trichet is in Basel, Switzerland, for a scheduled meeting of central bankers from the Group of 10 nations. Vice President Lucas Papademos is attending the Brussels talks.

Although it didn't work here, European bankers are trying for themselves now. Good luck fellas.

Expect an initial knee-jerk reaction higher, which is showing a 30-point gap open if the current quote holds at the open. What will be even more interesting is how the day and week closes.

By the way, isn't it interesting that the Europeans are going to "support the Euro" by printing 440 BILLION more of them? Ummm, what does that do to the value of the current value of Euros in circulation? Yeah, it DEVALUES them. Don't you just love how politicians think?



Previous Day's Trading Room Results:

Trade Date: 5/7/10

E-Mini S&P Trades*
(before fees and commissions):

1) No "Secrets" trades filled today.

2) Algorithm positions (32)

3) “Reading the Tape” positions (62) …combined Secret’s, Algo, & “Reading the Tape” total…+149.75



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