Cyprus: {Six Thoughts}

A few quick notes/thoughts on the Cyprus situation.  I'll not recount the events over there from last Friday until now because the financial "webverse" is dominated by this news but here's a few quick thoughts.

1.  Cypriot banks are scheduled to remain closed until Thursday.  Right now there's all sorts of talk about what kind of haircut {if any} depositors under 100,000 Euro might be forced to accept.  My question is what happens now to the little guy.  Irrespective if he's going to take a haircut or not, why isn't he going to take all his money out of the banks at the first opportunity he can do so?   I know that's what I'd do.   Even if he's spared a haircut, what confidence can he have that the government won't come after him again.  Now I suppose Cyprus could put in place capital outflow checks.  That might keep businesses and individuals from doing precisely what I just suggested.  But why then would I ever put money into a bank that won't let me get it out.  It seems this solution might lead to the very process of bank insolvency that it was designed to prevent.

2.  Then again if the banks are insolvent, the country's government broke and the EU unwilling to completely foot the bill, what choice do they have.

3.  If I was a Russian Oligarch, I'd be calling/bribing/threatening every member of the Cypriot Parliament that I could get my hands on or I could get to answer a phone.

4.   So far, particularly here in the US, markets have shaken this off.  Stocks fell yesterday morning abut came back as the day progressed.  Futures are up here today and Europe is positive so for now markets are looking through this event.  I think the verdict is out till we get through the end of the week, see what happens over there and see what happens when their banks reopen.

5.  What have I done so far?  Nothing.  A one day event is not necessarily the reason to take action.  We're guided by our indicators, the playbook and the game plan.  When they tell us to do something we do.  To quote Jim Cramer, "Nobody's ever made a dime by panicking".

6.  As to the point above, it may be that Cyprus marks a high of some point in the market although the jury is out on that.  What should be noted is that Cyprus won't be the cause of a market decline.  It may be the straw that breaks the camel's back in terms of an event that finally changes market sentiment.  If the market is going to begin a new phase here, it will be most likely because the weight of the overall evidence finally turns the table.  So far we've seen no evidence of this.