Will No One Think Of The Tourists In Mykonos?!

This is a story about the real victims of Greece's financial crisis.

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Athens is getting its ass ripped open on a daily basis, sure, but what's a little rioting/bank closures/mass layoffs/Hades on earth compared to agony of ordering a bottle of Château Rayas and being informed only [whispers] Spyros Hatziyiannis Santorini is available?

At Nammos, the hottest daytime restaurant/club in Mykonos, the champagne was flowing, house beats were thumping and 20-somethings danced on table tops in bikinis and swim shorts. Prices were steep – about 15-20 euros ($16-21) for a cocktail. But that didn't stop tourists from trying their luck at getting a reservation. The average waiting time for lunch was 2 hours last Friday. "Mykonos is in its own bubble. Tourists continue to vacation here…despite concerns over Greece's financial state," said Jacopo Janniello Ravagna, owner of Caravana Montacristo, a boutique that specializes in bohemian chic clothes and leather tasselled handbags...but that doesn't mean business hasn't been affected....[a] beachside restaurant in Mykonos said they haven't been able to serve French and Italians wines to guests for the last three weeks. "We've been trying to aggressively market Greek wine and liquor…but that doesn't always go down well with customers who have a refined palette."

Are you listening Angela Merkel? Show some mercy for Christ's sake!

What Greek crisis? In Mykonos, the party doesn’t stop [CNBC]

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Next time you're about to kill a bug, stop and examine your motives, says the bond fund manager.

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Several weeks back, Michael Douglas appeared in public service announcement shot by the FBI, in which he tells people that while they may have been taken by his character in Wall Street, that it's important to remember that that was just a movie and in real life, insider trading is wrong. Next up among actors who think roles they portrayed on the big screen contributed to the financial crisis is Richard Gere. Glamorizing being a corporate raider who made enough money to buy a hooker is his personal cross to bear. It was the modern-day fairytale that captivated hundreds of millions of film fans the world over. But it seems Pretty Woman holds nothing but regrets for its leading man, Richard Gere. While promoting his new financial thriller Arbitrage recently, the 62-year-old shared his scorn for the feelgood 1990 chick flick, telling Woman’s Day, “It’s my least favourite thing.” Richard adds, “People ask me about that movie, but I’ve forgotten it. That was a silly romantic comedy. This is a much more serious movie that has some real cause and effect.” Incredibly, the grumpy star also claims his Pretty Womancharacter Edward Lewis helped contribute to the global financial crisis, as he glorified greedy and selfish Wall Street types. “It made those guys seem dashing, which was so wrong,” Richard explains. Related, what's it gonna take to smoke Vin Diesel out of his hole? It's pretty obvious it was around the time his turn as senior broker in Boiler Room premiered that Dick Fuld ramped up the shit on Lehman Brothers balance sheet that ultimately took the firm down. Richard Gere: Pretty Woman Was Rubbish [WD via Dealbook]

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Bloomberg's story about the Greece-Goldman swap-debt-whatever kaboodle, so let's talk about the philosophy of derivatives for a minute. First the story: Greece’s secret loan from Goldman Sachs Group Inc. (GS) was a costly mistake from the start. On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said. There are at least three reasons to use derivatives. First you could be into some actual informed shifting of risks from those who want to pay to get rid of them to those willing to be paid to bear them, or from those who have Risk X and want Risk Y to those who etc. Boy are there a lot of textbooks that talk about this. And I suppose it even happens sometimes. You could imagine that a vanilla interest rate swap entered into by a corporation on its bonds or credit facility could qualify as this. I guess people who trade listed options to do covered-write strategies or speculate on takeovers or whatever fall in this category, maybe modulo the "informed." (Sometimes!) Then there's tax and regulatory arbitrage. This is time-honored and much of it, particularly the stuff with the best names, is focused on tax dodging, but there are also various other regimes - securities laws, accounting, whatever - that you might want to get around with derivatives. Paying $10 for CDS with a maximum payout of $10 purely to lower your capital requirements is a recent amusing/egregious example. The thing that wasn't mentioned in the CFA Level I derivatives primer is principal-agent arbitrage. This is ... first of all, let's say this isn't a derivatives issue, or a financial-industry issue, it's like a life issue. (Some would say it's why there's an M&A business, for instance.*) But it's also a derivatives issue! And you can see why if you're as baffled as I am by the Bloomberg story. So this:

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Gaaaaaaaaaaaaaaaah Greece. Okay so all systems appear to be go on the Greek debt exchange, which means its time to decide What This Means, and, I just. Really. Greece. Come on. All I want is to talk about 13D reporting requirements, and now I have to pay attention to Portugal? No. Just no.* Still here is arguably a fun factoid: On Wednesday, Swiss bank UBS AG started quoting a "gray market" in new Greek sovereign bonds ... using as a guide details of the debt swap Greece has put on the table for private investors to accept until Thursday evening. The "bid" price for a batch of future Greek bonds due in 2042, or the highest price the dealer was willing to pay, was around 15 cents on the dollar; the "offer" price, or the most the dealer was willing to sell at, was 17 cents on the dollar, the first person said. ... The prices quoted by UBS imply that losses private creditors to Greece will take are more like 79% of face value, not the original haircut of 70-75% many had expected. Yeah but. If you believe this horrible CDS mechanics stuff that various people including me have been yammering about for weeks - here is the best explanation - that means that if for some reason you had the foresight to be long Greek bonds and hold CDS against them you'd end up with a package worth (1) 21 on the bonds and (2) 83 on the CDS (assuming that the 17 offer for the 2042 bonds represents a real price for the cheapest-to-deliver new bond in the Greek auction) for (3) 104 total which is (4) more than par, so you win this particular game, yay. Which you were at risk of losing - a week ago one of our fearless commenters spotted the longest new bonds at 25ish vs. 24ish for the old-bond-y package, for a total of 99 for the hedged holder - losing 1 point versus par.**

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Officials are *not* happy with the work Greece has turned in re: its plan.

Will No One Think Of The Tourists In Mykonos?!

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Greece Jotted Down Some Notes On The Back Of A Cocktail Napkin And Submitted It To Us: EU