Bulls were hoping for the best Thursday morning after EU president Herman Van Rompuy told reporters: "There is an agreement on the Greek situation."
Details of the agreement are to be determined and the market's reaction to the news was subdued, and titled toward the negative, at least early on.
Some kind of package for Greece was widely expected and "good news has been sold" more often than not in recent weeks, notes Todd Harrison, CEO of Minyanville.com.
The real issue is that "Greece is a symptom - not the problem per se," he says, warning of "unintended consequences" of a bailout.
Comparing European sovereign credits to the U.S. financial system circa 2008, Harrison asks: "What if Greece is Fannie Mae, Portugal is Freddie Mac, Spain is AIG, Argentina is Wachovia Bank and Ireland is Lehman Brothers?"
Bulls are certainly hoping Greece is more akin to Bear Stearns, whose Fed-engineered firesale to JPMorgan in March 2008 sparked a brief but furious "relief" rally that spring.
Harrison was taking a less upbeat view before today's U.S. market open, saying the Greece situation speaks to two of his 10 Themes for 2010:
-- The Tricky Trifecta: "We should remember that global conflicts have been historically triggered by financial hardship," Harrison writes at Minyanville.com. In the accompanying clip, the trader discusses how German taxpayers may bristle at the idea of bailing out countries in Europe where they typically go on vacation. "You could see more populist uprising [which has] implications for social mood and risk appetite," he says. (Ironically, much of the social unrest to date has occurred in Greece, which is getting a bailout.)
European Disunion: The Greek bailout will be the first since the Euro was launched 11 years ago. The EU is "only as strong as its weakest link," Harrison says. If the 16-nation European Union starts to fray "you could see a flight to quality in the U.S. dollar [which] could have implications for the carry trade and all asset classes."
Against that backdrop Harrison is maintaining a short bias with a tight leash on risk, as we'll discuss in more detail in a forthcoming segment.
