A Positive Development

 | Nov 07, 2011 | 11:35 AM EST
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So Jefferies (JEF) blows out of sovereign debt on a dime. It is unwilling to let its balance sheet be in question even for a nanosecond. But what I want to know is, other than MF Global, who the heck is buying this stuff, and why?

One of the reasons I like the "kick the can down the road" strategy here is that if banks have time, they can get rid of this stuff. There are still bids, unlike with the collateralized debt obligations (CDOs), where there were often no bids at all because the paper wasn't even real.

We are all paralyzed by the exposure that some may or may not have to European bonds. While Jefferies did not have a huge amount of paper, it was pretty clear that you can get rid of it with a couple of phone calls.

I am not trying to find positives where there aren't many, but if things are so dire, why is the euro so strong, why are the European markets so strong, why are there so many bids for this stuff? Maybe, just maybe, we have to start thinking that as time goes on, the last banks standing with this junk might be able to be bailed out and that those getting rid of it now are stronger than we think.

I mean, after all, not everyone is in such terrible shape that they can't afford to take a little risk, which is what I would say is the case with taking on this paper.

I am encouraged by Jefferies' action. No, I don't want to buy Jefferies. I just want to point out that if the world were coming to an end, there would be no bids whatsoever.

It's a piece of the puzzle, and a positive one.

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