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Point on Greece and two links to US macro texts.

|Includes: GRE, iShares 20+ Year Treasury Bond ETF (TLT)
Sorry, but today is complicated enough without me adding to the slew of rumours reverberating on the European scene.
I would just like to reiterate my conviction that Greece will be bailed out for two reasons:
  • Greece's exit from the eurozone in the wake of debt default/restructuring would be a major admission of powerlessness in the construction of a common trade and cultural regional entity, which must count as one of the greatest achievements of human civilisation, replete with a single currency, common rules of living, and all accomplished via peaceful negotiations as opposed to the recourse to arms
  • What signal would such a setback send to potential new candidates to the zone, who are needed to provide balance to the ageing population of "Old Europe, as Donald Rumsfeld once said?
  • The effects of Greece's withdrawal from the eurozone would extend to the weaker, peripheral countries of the zone like a line of gunpowder, which would have a devastating effect on the eurozone, because no one foresees a zone reduced to France, Germany, Austrian and the Benelux countries!
  • Germany has been one of the most to benefit economically from European integration, and a return to currency instability among neighbouring states and trading partners with the ensuring higher costs is not at all in its interest.
  • The stability of the European financial system as a whole would be shaken to its foundations by a Greek default, and no one really knows how much of this debt is in the portfolios of banks, insurance firms, pension funds and classic asset managers. Such an event would spark an anaphylactic shock, much like that provoked by the freezing of certain funds in August 2007.
As we await events by the hour, check out these two, more macro texts relating to the United States:
From Zillow.
Coca, Mc Do and Coors…
As for as our investment biases, some clients have been kind enough to comment that the advised option positions, below, do not really go in the same direction as our bias against risky assets, since they are very delta positive on the EuroStoxx.
As I pointed out last week, due to the steep decline in indices since the beginning of the year (14%), we are now betting on a very short-term stock market rebound amounting to a few percentage points and a narrowing of eurozone peripheral nation debt spreads and thus stagnation on the Bund Bobl and Schatz 
This does not stop one from maintaining in the advised option strategies, below, some big delta positive Bund and Bobl positions, even though almost all our clients have taken their profits on these positions in the past two days.
This is a temporary tactical bias, and any marked upturn will lead us to again recommend bearish structural positions on interest rates in indices.
As I said to a client who asked me about my long-term interest rate targets, so much the better if everyone profits, even if this earns me a few slings from the believers of a resurgence in hyperinflation: 2.5% on 10-year German bonds.

Disclosure: Disclosure : Long 20 years OAT 0% Coupons, EDF Corp 5 Years 4.5%.