• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

It was not until it was too late that most people realized Dick Fuld was out of touch with reality.  As late as September 10, 2008, days before Lehman’s bankruptcy on September 15, Dick Fuld proclaimed Lehman was solvent and fully capitalized. 

Fact is, Mr. Fuld was not accountable, and had a laundry list of excuses, from naked short sellers, to credit rating agencies, to credit default swaps and the rumor mill.  The sad reality is, he probably thought that the then Treasury Secretary Henry Paulson would bail him out since he was bailing out AIG.

As we’ve been focused on over the last weeks, Greece CDS swaps are blowing out to the up side, while just today Prime Minister George Papandreou said Greece is being victimized by “rumors” in financial markets.  Further, he’s on the tape denied that Greece is seeking to borrow from the European Union to finance the country’s budget deficit.  While suggestions of international assistance are, according to the Prime Minister, “unfair”, I’m sure Dick thought the same thing....

Greece, which has a culture of levering debt upon debt that dates back centuries, is dealing with a credibility issue in a period of weak GDP (see chart below), which only further exacerbates its leverage issues as the government is hampered with cutting spending while attempting to stoke growth. Greece’s budget deficit is at 12.7% of GDP (four times the EU’s limit), as European Central Bank president Trichet says he’s “confident” that Greece will fix the problem.

We’re less confident in Greece’s leadership to fix the problem and are calling this spade for what it is, a sovereign debt crisis in the making.

Howard Penney

Managing Director

Matthew Hedrick