Tonight's NPR Marketplace broadcast repeated a Margaret Thatcher quote relevant to Greece's negotiating position: "The lady's not for turning." It is a very pithy assessment of the Greek approach to the eurogroup. The two sides met today and all public reports indicate that they have not agreed to resolve Greece's pending debt crisis. Body language can tell the story.
I have not located any real-time photos or videos of Jeroen Dijsselbloem, the Dutch finance minister who chaired the talks, after he held the post-meeting press conference. The talks achieved little of substance. I am certain that hedge funds on both sides of the Atlantic are frantically analyzing the facial expressions and body language of the eurogroup participants as they emerged from the meeting. Confident posture would indicate a strong negotiating position, while slouching and slinking away from the cameras indicates the euro folks fear Greek demands. Greek finance minister Yanis Varoufakis appears remarkably confident in his most recent public appearances, perhaps even flippant.
The NPR broadcast I referenced above offered comments from economist James Galbraith, a former colleague of Mr. Varoufakis and the son of famed economist John Kenneth Galbraith. His comments emphasized Mr. Varoufakis' rationality and knowledge of game theory. I described the two parties' likely game theory boundaries in a previous article. The Greeks are playing a weak hand the only way they can . . . with an immovable negotiating position that will force Europe's hand.
Europe thus has two choices if Greece will not tolerate any form of debt restructuring that requires another political upheaval in Athens. I now consider an ECB-driven quantitative easing bailout to be slightly more likely than a Greek exit from the eurozone. The reason for my shift is the changing atmosphere among the developed world's finance leaders. A consensus emerged at the latest G-20 finance ministerial meeting favoring concurrent monetary stimulus and tolerating multiple currency devaluations. Group photos of that meeting speak volumes. The expressions on the faces of Christine Lagarde and Janet Yellen were priceless. Mme. Lagarde of the IMF looked she was having the time of her life, entertaining several finance ministers as if she were fending off romantic suitors. Ms. Yellen, on the other hand, looked like someone had just handed her a multi-trillion dollar bill for a party she knows the Federal Reserve cannot afford.
Portfolio managers should study financial statements, but when data is unavailable they must seek anecdotal indicators of human intentions. They need financial analysts who can detect anomalies in human psychology. Anomalies manifest in speech, facial expression, posture, and gait. The US intelligence community produces trained human intelligence (HUMINT) analysts who notice these details. These highly motivated people need something to do when they leave the military. They might as well move to Wall Street and work in business intelligence. Figuring out how hard the Greeks are riding Europe is right up their alley.
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Additional disclosure: The author is long a put position against FXE.