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Punish the Bad Old Greeks <sarcasm>, But California?

22 December 2009 1,887 views 3 Comments

Yes, now the next rating agency has decided to downgrade Greece. Not to say that one should not downgrade Greece.

"The government remains committed to the implementation of the reforms announced…and will intensify its efforts to restore the viability of fiscal and economic trends in Greece," the statement said.

We shall see…

But what gets me, is the ratings agency credit worthiness of California. California is rated A+, and so is Louisiana. Yet, is California worthy of this rating?

But the fact that California still has been able to borrow tens of billions of dollars via short- and long-term muni bond debt in recent months shows that many investors don’t believe that default is a real possibility.

Watkins thinks muni investors are too sanguine. The state, he notes, resorted to a host of gimmicks to come up with a (temporarily) balanced budget last summer. Now Sacramento faces a $21-billion budget gap over the next two years.

Tricks, hmm, where did I see this? Oh yeah GREECE! But hey this is California in the US, and all is ok! And hey these “investors” sure know their stuff. OOps you mean like AIG? Look I am not debating the reason for downgrading Greece. What I am debating is why a bunch of agencies would downgrade one, but not the other.

But there is an interesting thing going on and that I am watching very very closely. It appears in the Asian sessions the Euro finds support and rises, and that has me wondering. Are the Asians taking the moment to switch from Dollars to Euros?

I wonder…

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3 Comments »

  • Patrick said:

    Well we both know markets aren’t efficient, otherwise we wouldn’t be able to consistently take asymmetric odds, and therefore its quite possible for investors to happily pile into munis whose default risk is going to spike.

    Regarding Asian session patterns, I’ve been observing inter-session patterns on FX rates and also spot metals for about a year now, Asia generally counters the NYC session just as a function of profit-taking and risk liquidation, when gold has a strong day for instance Asia tends to sell off a bit to take in some profits before finding support as people see an opportunity to get positioned for a bullish continuation. When things are selling off, we tend to see the inverse. I wouldn’t ascribe any fundamental reasons to it, its just how the market breaths.

    # 22 December 2009 at 4:01 pm
  • Christian (author) said:

    Thank-you. I was hoping somebody would say something because there had to be more to it [re Asian session].

    I will keep an eye out for this pattern more often to see the behavior. Normally I ignore Asia, but I suppose not possible with FX…

    # 22 December 2009 at 6:23 pm
  • Patrick said:

    I’ve found Asia to be useful for generating signals regarding a continuation or reversal, and in the latter case, a good pivot opportunity. Everyone stumbles over themselves to hedge gap-risk, I like trading FX because stop orders are sufficient and you get a clearer data picture. May also have something to do with the clearer wave counts or what-ever macro pattern theory you apply. Having seen the utility for PMs and currencies, I’d be interested to get a database loaded with commodity futures data across both CME and whatever the Asian equivalent is. 24-hr automated trading of extremely liquid instruments is the future, and the present as well it seems.

    # 22 December 2009 at 9:37 pm