Macro Man

Wowza. That was interesting. China CDS apart, the response to our calling for a turn in risk in the markets was most informative. TMM's "comments rule" played out again where bullish posts are either met with no response or a stream of disagreement to the point that we think we proved one of yesterday's observations - "On balance the blogosphere wants a recession so they can say 'told you so'". TMM received similar ribald jibing in their work environments too. Now such biased response certainly does not mean that TMM will be right, and with a 2 horse race of bottom or no bottom. A 50/50 outcome is all we should expect. But if price reflects information and expectations, and expectations as detected by our mockery meters are pretty extreme, then where do we go from here? Who is the seller who is more stupid than you who hasn't been exposed to stories that are so tabloid they are on the back of cornflakes packets?

Many comparisons are drawn between today and 2008. Back then, the discovery of a new land of economic doom had all the financial cartographers mapping the landscape, but such mapping appears to have given today's financial navigators a false confidence that their 2008 GPSs of financial crises are to be followed blindly today. But TMM, just like any good navigator, suggest that the 2008 GPS is an assistance to traditional navigation methods, never to be trusted fully and to be used together with a wily local knowledge and a healthy respect for the uncertainty of what lies ahead. Things are only ever obvious with hindsight. Especially new things.

Our point is that the observation itself has feedback into the price and so the outcome will never be exactly the same again. Most of the price moves of 2008 were on a shock of the new, if you think you have an accurate map then there should be no shock and so price moves will not behave as many expect. Not only does this feedback occur from the punters side but also the policy makers, who, having seen the disaster of 2008 have learned their own lessons. This last point is hard for many to believe and indeed the intransigence and lack of discernable action from Europe would support that disbelief, but TMM really do trust that the lessons of 2008 HAVE been learned and will not be allowed to happen again.

Let's dig a little deeper. As mentioned above, TMM find it particularly interesting that the "default" view as to the natural path of events is "this is 2008". We remember vividly back in the summer of 2007 that many were of the view that "this is 1998" and that rate cuts would fix the problem. TMM would argue that traders minds are usually framed, as far as crises go, on the last crisis they experienced. So "This time is NOT different" is more the norm than not, from an expectations standpoint.

The trouble with this view is that ALL crises ARE different. But they DO share one common element: the inability of markets point in time to distinguish between a liquidity problem and a solvency problem. To wit, once upon a time, shortly following a financial crisis in one part of the world, credit markets began to seize up as a basket case economy with a large amount of debt started to have problems. It entered an IMF programme, but kept missing its targets. Meanwhile, financial conditions globally tightened, PMIs began to fall sharply and ISM printed below 50. Equity markets fell sharply, and speculation grew about US Investment Bank exposures to this country and a certain systemically important financial entity. Then that country defaulted. Markets panicked, and the equity prices of several investment banks fell as much as 70% from their peaks a month before.

How did it end? Ring-fencing of that certain stressed systemically important entity, liquidity provision by the Federal Reserve and a 30% Q4 rally in the S&P500. For those that haven't guessed already, this was 1998. And it turned out to be a liquidity crisis rather than a solvency crisis.

And this is the point TMM are trying to get across. In a crisis, you just DO NOT KNOW whether it is solvency or liquidity. Now, TMM believe that European banks are insolvent *conditional upon* the PIIGS collectively being insolvent. Clearly this is the case for Greece, but for the others, this is unclear - and, particularly in the case of Spain and Italy, a function of the rates at which they can borrow. So while the ECB provides a liquidity backstop, they have the room to adjust. Of course, the missing ingredient is growth, Europe already looks as though it has slid into recession. But nothing is certain.

While we're on the subject of differences with 2008, TMM would note that by July 2008 - a full two months prior to the Lehman default - the World had entered recession. This is clearly not the case now, though growth has indeed slowed, there are signs the US and UK are picking up, just as they began at a similar time in 1998.

So is the *real* Black Swan (a 30% rally in SPX) the outcome in which things start to look like 1998? Greece defaults, the UK & US embark on further QE, the EFSF leverages up alongside the IMF to provide liquidity to the rest of the PIGS, or the ECB continues to cap yields on Spain and Italy on a conditional basis, growth expectations gradually rebound and the next bubble is born...

...Beware Bears bearing maps.

We left on Friday with the plan to sell and not buy back until today. So far so good, but do we buy back now? Glancing through the OED, as one does over morning coffee, the page flopped open at the perfect description of this morning's markets.

"A functional disturbance of the nervous system, characterized by such disorders as anaesthesia, hyperaesthesia, convulsions, etc. and usually attended with emotional disturbances and enfeeblement or perversion of the moral and intellectual faculties".  Also called colloquially - Hysterics.

Let's start with the fastest riser up this week's Top Ten chart of hysteria. China. Today we bring you our nomination for the 2011 CDS Darwin Awards. Last year saw those proud owners of BP CDS win in spectacular style, but TMM would like to nominate the recent purchasers of China CDS for this year's CDS Darwin award.

Now, TMM have for some time felt that CDS on debt for countries that can print their own money is a lot like Magic Cards: an obscure game that can be expensively played by 30 year old man-children, who should be doing something else. On that basis we could make fun of most of the sovereign CDS market - US, Australia, Japan, you name it. But TMM feel that those who have pushed China CDS out over the last few months are a special bunch indeed. China has reserves of approximately $3 trillion and a grand total of $1.2bn in external borrowings at the sovereign level. Now, TMM know that China has a lot of NPLs - don't get us wrong - but those are in local currency. Ooooh, but what about SOE borrowings in USD? TMM would like to point you towards creditors to Vinashin, a hopeless Vietnamese shipping company, who appear to be 1) taking a big fat haircut 2) not getting control of the company and 3) now hold busted, useless paper that is not deliverable into sovereign CDS. The bottom line is, if they don't feel like paying you, they won't and your CDS won't pay out. This is EM credit 101: willingness to pay is often far more important than ability to pay. So anyone buying CDS on China is buying something that is collateralized about 2500x with cash and rising. Remember - China doesn't sell its reserves to print money to recap banks, it just expands the monetary base. Just like the Ber-nank.

TMM don't doubt for a moment that China CDS could widen further, much as Pets.com had its day in the sun and BP briefly went deep into the high yield zone. However, as a whole we are calling this trade what it is - deeply, profoundly, ridiculously stupid, poorly conceived and no doubt primarily owned by equity and corporate credit guys who've thought about it for around 2 seconds before putting this trade on, like thick pants, in the vain hope it will stem a haemorrhaging from their posteriors that makes Ebola look like Deep Vein Thrombosis. TMM would like to say to these people's investors that if you want to stop the bleeding caused by a portfolio disease known as tight monetary policy and poor corporate governance, then stop giving your money to credit analysts that can't analyze credit and equities analysts that can't analyze equities - Please! Don't buy China CDS.

Next Dexia -

FRENCH, BELGIAN GOVTS, WITH CEN BANKS WILL TAKE ALL NECESSARY MEASURES TO SAFEGUARD DEXIA SA ACCOUNT HOLDERS, CREDITORS -FRENCH MIN

Note the word CREDITOR in there. The return of bank liability guarantees would be a significant policy response, given that credit markets have been under significant stress in the face of worries about bondholder bail-ins. Markets need an explicit confirmation that governments do not intend to inflict losses on senior bondholders, so this is a positive development. Having said that, this is only one bank, so can't get too excited, but it is a step in the right direction. Of course, this has to increase the probability of France getting downgraded even though, in TMM's eyes, the upside to preventing a bank collapse is significantly better than the downside of a ratings downgrade from less-than-credible agencies.

Back to the mood. The technical picture has yielded cries of  "Bring me a new support, this one is broken" across the city, especially in SPX, with many now ready for the next leg lower. We have even had Battledeathcrosstar Galacticas sighted in various guises. But notable was the way that yesterday's varied positive economic data were pretty much studiously ignored or explained away to such an extent that TMM are beginning to wonder if Alessio Rastani is actually representative of many more than we thought, with all secretly hoping for a recession to serve their own nefarious purposes.

The UK Government wouldn't mind a recession as a justification to its spending cuts (Osborne highlighting the severity of the economic downturn yesterday). Meanwhile the Labour party wouldn't mind a recession to prove how wrong Tory policy is. Every socialist-leaning government in the western world would like a recession as further reason to neuter the banks. On balance most of the blogosphere would like a recession so that they can cheer "told you so". Every holder of Gold ETFs and physical outside of central banks wants a recession to justify their holdings. Sell-side sales folks, rather short-sightedly, seem to want a recession as it means they can scream "not since the last time" a lot and charge wide spreads. Buy side analysts want a recession as they have learnt in 2008 that being contrarian gets you noticed, they just haven't noticed yet that being bearish is now consensus. Is there anyone apart from normal folks with normal jobs, who can't control whether there is a recession or not, who don't want a recession?

Whilst TMM may have been a bit over the top there, the point we are making is that this has to be one of the best flagged and prepared for recessions we have known, accompanied by localised and, in TMM's mind, overhyped short term hysteria. So TMM are indeed going to buy back today, as there is a chance that this may be a beautifully crafted bottom. What one might call a "Pippa Bottom".

We are heading out early today after suggesting a new market adage...

"Sell on Friday and go away
Don't buy again til next Tuesday"

Wishing you all a none too terrible month/quarter end and hoping that your Octobers not be red.

We leave you with the commisioner for EU policy -

Europe and all things European have been holding the world's attention to an extent that it’s all too easy to forget that life goes on elsewhere. One of the corollaries of the European shock has been a general global deleveraging rolling right through to the emerging markets.

TMM had some pretty dark things to say at the start of the year about emerging markets and particularly China. As trades go, this has worked – The Hang Seng and Hang Seng China Enterprises index has dropped gradually throughout the year and has really been hammered since August in particular. As noted by the esteemed commodities analysts at the US ex-investment bank, copper is very closely correlated to China fixed asset investment, which appears to have become public enemy number 1 of the People’s Bank of China’s latest tightening campaign. It dropped off heavily and has taken copper with it. See below the bonds of Evergrande, a property developer, and copper and China fixed asset investment. All jokes aside, the China real estate bond market really is copper with a coupon.


Much of what seems to have kicked off this panic is not anything particularly new to TMM: China has an unbalanced economy, is too dependent upon fixed asset investment and its banks end up short puts on a lot of bad investments. So far so good – China property, banks and basic materials have been a great short.

But here is where TMM find themselves out of line with the market thinking. First, you haven’t thought anything through until you consider the government and likely policy responses, given the command economy context. In TMM’s opinion watching the banking sector explode into a flaming wreck is not something the government will sit by and watch idly and the last time we heard of Wenzhou SME’s blowing up, credit loosening was not far behind. Similarly, some will point to high levels of inflation, but breaking China inflation down into food, non food and housing (see chart below; white line - food, orange line - non food, yellow line - rents), a big part of non-food makes it pretty clear that food is beginning to turn for its own reasons, while house prices and rents really are falling out of bed. Given what global financial conditions have been doing (and reading some chemical company transcripts), we are inclined to think that the global situation has gotten bad enough for the PBOC hawks to stay hooded when the local banks scream for looser credit.


In summary: the worst may be yet to come, but probably not in the next 6 months.

On valuation, China’s banks are about as beat up as they ever have been historically as you can see below:


On a back-to-basics corporate finance level they are looking cheap, assuming that most of the book value isn’t a complete write off. Now, bears may scream “BUT IT IS, INNIT?”, to which TMM would agree, - but then again we would also note that the government has demonstrated prior ability to take on pools of toxic loans, throw them in an AMC and forget about it for quite some time (lessons for the Europeans?). Being super short on the assumption that the banks will have to issue equity that will allow you to cover may not work. Given these numbers, if we see a combination of loans bought by Huarong and Cinda and a stimulus, we could see a squeeze that could rip this stuff 30-40% higher.


Which gets us to positioning data and, suffice it to say, the market has got itself very net short in copper per the COT data and the short sale turnover / total turnover picture in HK below is looking pretty extreme too.


And on that point, TMM are covering and running. When shorting Chalco and Anhui Conch looks more like a T8 Typhoon day in Hong Kong (see below), we’ll be back.


In the meantime, we’d rather sit out the next move down and not risk the squeeze and instead start thinking about what the next white elephant nation building/wealth expropriating capex binge China will come up with next. Rail? Soooo 2008! TMM are looking at stuff like this instead.

As Tom Jones would sing ..
"Tape Bomb, Tape Bomb , you're my Tape Bomb.
You can give it to me when I have just gone long"

Today it's pretty quiet in the minefield of the market, which is somewhat deflated by a turn in the RORO (risk on risk off) mood spoiling the bears' party. The cries of "well, it went up on nothing changing, so it is not valid" is just as easily countered with "well, it went down on nothing changing last week too, so plus ca change". However, the market is now attuned to "no news is bad news". We are running into quarter-end now and have the new "month-end flows" excuse to throw into the blame game of short term losses. Especially handy if it goes against whatever trade you have on (it's not my fault! it's all a conspiracy!).

We have out-analysed ourselves yesterday, so are sitting back today staring at the potential tape bombs as they weave by through the minefields of the news screens.

ECB ALLOTS 500 MLN DOLLARS IN 7-DAY OPERATION - one bank only again. Not much different to last week and not indicative of any USD funding crisis - Fuse nearly fully retracted soon to be labelled "safe"

*EU PROPOSES FINANCIAL TRANSACTION TAX TO START IN 2014
*EU PROPOSES 0.1% TAX RATE FOR STOCK, BOND TRANSACTIONS
*EU PROPOSES 0.01% TAX RATE FOR DERIVATIVES CONTRACTS
*EU SAYS TAX WOULD BE PAID BY INSTITUTIONS, NOT HOUSEHOLDS
*EU INTENDS TO PRESENT TRANSACTIONS-TAX PLAN TO G-20 IN NOVEMBER
*EU ESTIMATES NEGATIVE IMPACT OF TAX PLAN WOULD BE 0.5% OF GDP

FX .. Land of the (tax) Free. Well, the numbers don't stack up to start with. With nominal GDP of €12trn: 0.5% GDP = €60bn COST of tax plan vs €57bn revenue. Nice one, boys! This is just making us feel like buying cheap Libyan property and setting up a Singapore equivalent in European timezone, as there are more reasons for financial markets and multi national corporate treasuries to leave. "We don't need 'em anyway", - cry the baying mob whipped up by Alessio Imatwati's interview. We will see.

*EU SAYS TROIKA TO RETURN TO ATHENS - Must be modelled on a UK schools exam, where you are allowed to redo the modules until you get a pass. "D minus, please redo". Which has TMM going one stage further and recommending that the TROIKA fully adopt the hallowed Oxford and Cambridge exam regulations, whereby if you die during the exams you are deemed to have passed. Interesting. They would also be allowed to demand "cakes and ale" during the examinations, but must remember to be wearing their swords at the time or else will be liable for fines. These sorts of rules must be right up Germany's Strasse.

THE EURECA PLAN - Now this is interesting.

1. Bundling the assets into a holding company and selling it to the EU for €125bn would represent a fiscal transfer of around €100bn, given that Greece is struggling to raise €25bn through privatizations, and will probably only get around €15bn, given it is a distressed seller.
2. The paper is optimistic about the potential for these assets to recover value, but we would guess this would be the main sticking point for France/Germany. That said, it is a very similar model to the one that was applied for East Germany. Some opposition to the sales is bound to occur in Greece, but it seems like the EU would be massively overpaying in our view. Papandreou/Venizelos should be able to sell this to PASOK relatively easily ("Guys, this is a lay up... Let's sell them this stuff and then when we can just build a new welfare state afterwards", etc...). Moreover, in light of the EU being a buyer (rather than Alessio Imatwati-type evil capitalist speculators), it should be significantly easier for the Greeks to swallow.
3. It contains an 8% GDP stimulus over 3yrs, which will make this a lot easier to sell in Greece and will also support the economy. This growth strategy is important in breaking the debt-deflation trap.
4. CDS spreads would collapse and burn speculators, reducing the probability of further contagion to Spain/Italy and creating a model for what a sustainable package might look like.
5. It will be difficult to sell this to the Germans, but it is promising that Roland Berger have credibility on their side, given their involvement, if we recall correctly, in the East German transformation.
6. Risks would involve the Greeks selling their national assets to their new German overlords only to re-nationalise them once they are over the stress (would have to be governed by strong international law, not Greek)
7. And, last but not least, would the British Museum have to arrange transport of items to Luxembourg?

Of course Europe is on the F-Plan Diet. A new F'in plan every day designed to reduce debt corpulence; works really well for a month but you've put it all back on by Xmas.

Back to sleep.

Team Macro Man chuckled to themselves upon reading the A-Team's latest trial balloon, as the irony of an idea grown out of financial innovation and structured credit coupled with leverage is presented as the solution to a crisis caused by precisely the same things. But in seriousness, TMM are unconvinced that this particular implementation is going to work and give them a B- for effort and finally realising that the time has come to whip out the bazookas, but "must try harder".

The Eurocrats have certainly succeeded in making this plan to leverage the EFSF via the European Investment Bank (EIB) appear complex and thus fulfil the requirement of "pulling the wool over the eyes of electorates and the media", but there are a few problems with this particular implementation that in TMM's view make it a non-starter. As TMM have noted before, bailout complexity can be useful in addressing problems without political or electoral opposition, and they recommend readers take a look at Phillip Swagel's excellent account of the US Treasury under Hank Paulson. The key paragraph from that Brookings piece is:

"At Treasury, two additional lessons were learned: (1) we had better get to work on plans in case things got worse, and (2) many people in Washington, DC did not understand the implications of non-recourse lending from the Fed. This latter lesson was somewhat fortuitous, in that it took some time before the political class realized that the Fed had not just lent JP Morgan money to buy Bear Stearns, but in effect now owned the downside of a portfolio of $29 billion of possibly dodgy assets. This discovery of the lack of transparency of non-recourse lending by the Fed was to figure prominently in later financial rescue plans."

And this is where this plan falls down: it does not involve non-recourse lending. To see this, the plan diagrammatically looks like this (please excuse TMM's Noddy paint skills!):

So the leverage in this case would come from the SPV issuing bonds to the Eurozone banks which they could then repo with the ECB. As a result, the SPV, as a wholly owned subsidiary of the EIB, would have to be recapitalised by the EIB should its capital become depleted. And there are three serious problems here from what TMM can see. Either (i) the SPV is not guaranteed by the EIB, in which case its credit rating would be something like single-A, and therefore there would be few investors willing to buy its bonds, (ii) it would be guaranteed by EIB, and therefore in the case of it requiring more capital, EU members would be compelled to inject more and (iii), the UK is joint equal largest shareholder in the EIB (see chart below). The latter two possibilities are clearly very problematic as the leverage effectively comes in the form of more explicit exposures to EU governments - i.e. France and Germany lose their AAA ratings. But that is not all... The UK will also lose its AAA-rating. This just isn't going to fly in this form and TMM suspect the Dambusters will ruin the A-Team's attempt to build a Dam in front of the rest of Europe.

In TMM's view, the leverage HAS to come from the ECB, just as it did in the Fed lending programs like the Bear Stearns bailouts and TALF etc. And the lending *has* to be non-recourse, in order for losses beyond the initially capitalised 20% to accrue to an entity in such a manner that the EFSF bond and the SPV itself get a AAA rating (and therefore attract demand from SWFs). TMM think, therefore, that the structure needs to look more like this:

The trouble is, that the Bundeathstar really don't want to do this, and the Panzer tanks are firmly blocking the ECB lending to such an SPV. But, as mentioned yesterday, TMM get the impression that the Germans have overplayed their hand (for example, they don't have any friends at the G20), and unless they really are about to leave Europe, they are going to be forced to accept some such plan. The key thing with the above is that it maintains the cloak of complexity for the public, while showing markets where the money comes from, thus avoiding the need to put the plan to electorates. Because action is needed *now*, and there just isn't time there just isn't time to vote on this. Europe is unlikely to change its history of doing what it likes, regardless of voters' wishes.

There was an interview on the BBC on Monday that has shocked not only those it intended to, but those it probably didn't too.A young man purporting to be a "trader" appeared on BBC news being asked his opinion of the current crisis. The interview can be seen here:

Now whilst TMM are fully supportive of anyone explaining to the BBC how the real world works outside UK politics and social issues, the content and style of this young man's outburst were so stunningly dreadful that TMM have been forced to consider things are not as they seem. Having dug a little deeper we found this trader to be fairly opinionated on his abilities judging by the content and title of his web site.

But TMM are completely baffled as to how he ended up on the BBC, and after much head scratching and worry are considering the following:

1) Said trader had escaped from a lunatic asylum and was holding the producers family for ransom his demands being that he lets the world know how mad he is.

2) He is Sacha Baron Cohen's next character to be launched.

3) The BBC really is so completely clueless about any subject that has numbers involved in it, that they actually thought he was an "expert".

4) And this is the one TMM are most convinced of...

This man must have been a stooge, set up by Ed Balls to appear just when he was trying to launch a new round of "really it wasn't our fault last time but if it was we've seen the light, spend our way to more votes" policy to highlight just how satanic and parasitic anyone involved in finance is.

Whilst the BBC presenters were of course shocked that someone could be so heinously evil as to wish depression on people, their highlighting of the fact rubbed in it nicely. The clincher was the line that governments didn't rule the world, Goldman Sachs did. Now whilst a few may suspect as much, you certainly don't go blurting it out on TV unless you are about to go on about the Illuminati, UFOs, crop circles and astrology. But then that would just confuse the BBC too much as they struggle with where to separate truth from fiction or more importantly, emotion.

Whether this man is for real or not, whether or not the interview was a spoof (nope, its not April 1st) just let it be shouted from the roof tops - TMM and everyone they know in the field of finance think him a disgrace and only wish he was "trader" enough to own a Bloomberg Account (which he doesn't) where we and our like could message him to tell him such.

Of course, as TMM know all too well... Great traders trade. Bad ones run courses.

Looking at the price action overnight it looked similar to Friday with Asia and EM getting in a panic over Europe and selling off and yet Europe calmly correcting most of it. Which leads TMM to suggest that the stories out there are not just solely Europe but are multiple and overlapping, yet the general euro wrapper is being used to encompass all.

We have had dumps in western equities over the past week, but if you were to listen to the press and hadn't seen prices you'd think we were 20% lower than we are by now. TMM's DPI indicator and newly launched WMMT indicator are certainly reflecting that with weekend conversations pointing to a disconnect between where prices are assumed to be and where they actually are with "well, we are only back to where prices were in early August" being greeted with disbelief. (WMMT = "What My Mother Thinks").

Gold meanwhile has had all the spam chuckers scrabbling in their coffers to buy the dip, though "with what?" we would like to ask, as we thought they'd spent every scrap of fiat currency on it months ago. Maybe it will be just a little longer before they can afford to return to society from the log cabins. Having said that though, the bounce does look solid. -100 and + 80 bucks of gold within 7 hours is a pretty good sign of a blow off and would have TMM normally looking to buy. But if this is a long term play we can afford to wait.

Meanwhile Asian and EM moves continue to show signs of greater self-fulfilling worries than the rest. This just adds to TMM's belief that all of this is just that deleveraging trade we have all been talking about for so long. Europe may be the story, but the effects are global deleveraging. Europe is already so deleveraged on the long side that it's now short, the UK and US appear pretty neutral, so we are left with the leverage residing in EM and particularly EM fixed income.

Now then, looking at this proposed IMF super package that has been the result of the Euro offsite in the States (lots of coffee, lots of networking breaks, lots of playing blackberry games under the table and plenty of trying to stay awake after too big a "get to know you" evening the night before). Well, on the face of it we have nothing concrete, but instead see the first phase of EU policy launch. Having obviously learnt this trick from the Labour Party in the UK, it involves leaking a potential idea and watching how the market reacts. If it's a disaster, then deny it ever existed, and if positive, then work in that direction. If there is one thing that TMM are learning from this crisis, it's that tape bomb shock has induced an inherent mistrust of anything being done until it is. But as we also know with this style of leakage policy, by the time it is announced it will be fully priced in, so we are therefore forced to consider the ramifications of this latest idea leak.

The €2trn has not been agreed yet but it could come either from the ECB or from just allowing the EFSF to borrow more itself. In the first case, the EFSF would issue bills that it would present to the ECB in exchange for Euro just like a bank-like financing, or it would sell those bills/bonds directly to the market. The Germans (cf Schauble) appear to be leaning in favour of that latter though at the expense of credit rating (it would act in a CDO-like manner). Which is fine as long as the German public don't notice.

On the German point, TMM frequently come across the view that the Germans, finally realising that they will have to pay, will just give up and re-adopt the DEM. The problem with this view is that both the economic and geo-political consequences of such a move - which, judging by how spookily similar the past few years' events have been to the post-1929 Wall Street Crash timeline, may well end in War - seem too much of a hurdle for them to be worth considering. Indeed, TMM reckon the Germans have overplayed their hand, and the leaks coming from the G20 suggest they have no friends. It's a case of "JUST SORT IT OUT, OK?!"

But back to the IMF idea, TMM reckon that with a fund that big, coupled with a broad based bank recapitalisation, the ECB and EFSF buying of bonds would be enough to convince markets that Italy/Spain will not suffer the Greek fate and that should be enough to give real money the nerve to reallocate.

So overall, TMM are encouraged that even if it did take the Americans to ram it down their throats, the Europeans are perhaps at last "getting it" and are actually discussing the policy responses we would want to be in place. Even the hardened Eurobears would have to take note.

But, back at home in Euroland the random word generators of the Eurocrats continue to spew out non-committal statements about what they haven't decided and what is possible with a frightening lack of what IS going to be done.

*GERMAN FINANCE MINISTRY SAYS NOT MULLING THIRD EFSF EXPANSION
*ECB'S MERSCH - WILD EXPECTATIONS ABOUT ECB RATE CUT SHOW SOME PEOPLE HAVE LOST DIRECTION, ECB HAS ONE NEEDLE IN COMPASS
*ECB'S NOWOTNY - ECB INTEREST RATE CUTS CANNOT BE EXCLUDED
*ALMUNIA SAYS MERKEL, SARKOZY KNOW WHAT IS AT STAKE
*DUTCH PM RUTTE SAYS NO PLANS TO RAISE AMOUNT OF MONEY IN EFSF

So maybe all the great ideas hatched in the Euro "offsite" in NY will evaporate, like most offsite action plans, on the plane journey home. We look forward to the follow up call from the offsite coordinator in 3 months time .. "Hi, we wanted to know how your progress plan we discussed at the offsite in September is going .. You haven't had a chance to look at it? .. Your line manager isn't supportive? I see.."