Been watching this video of Larry McDonald and Matt Davio, and there are a couple of take-aways:
- Greek debt has blown out, and won’t come back in.
- The thirst for yield continues as the Fed/central banks show no signs of pulling back on liquidity. Junk yields are way low, given the credit risk inherent in holding them (in my view).
- The risk transferrence from corporate/personal balance sheets to sovereign balance sheets is an unintended consequence of the excessive liquidity in place (the definition of “falling on the grenade”)
- Back to Greece: the sovereign debt issue is at the precipice of a currency issue. Brussels, Berlin, and Frankfurt will go toe-to-toe with Athens about this before it’s all said and done.
At any rate, take a few minutes to watch this.