The point by point summary (see post for explanation):
1. Not enough money for bond guarantees. 2. Covers financing needs through mid 2013. 3. A 20%-25% guarantee is insufficient. 4. The guarantee is not credible. 5. Germany doesn’t want to assume risk as guarantor. 6. Outside investors will not participate meaningfully.7. Bank recapitalizations not credible.8. Core credit risk. 9. Insane cost.10. EFSF as preferred creditor. 11. Fake Brady Bonds.12. No restructuring. 13. Reference interest rates too high. 14. Without ECB money creation, any plan will fail.
From the conclusion.
Thus, I believe that the correct posture at the moment is for investors to be entirely in cash, or at least equity neutral via paired trades and/or hedges... The question is this: Do you have the courage to stand aside and possibly leave 10%-20% or even 30% on the table? Or would you rather not take the “risk” of missing out on that gain -- even if it means assuming the possibility losing 30%-50% when and if the European plan unravels?
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