Will the Greek Deal Fail After All?

The many actors trying to put together the Greek bailout seem to be having trouble getting on the proverbial “same page.”

In the first clip, CNBC’s Julia Chatterley looks at what appears to be a developing split between Greece’s European creditors and the IMF, referring to the debt sustainability analysis the IMF released last week, which called for a debt writedown of 30%, along with a 30-year grace period.

She added that U.S. Treasury Secretary Jack Lew has been pushing for a deal and warning about the risks of contagion. Chatterley concludes the deal is “a shambles.”

This writer been pointing out that IMF MD Christine Lagarde has repeatedly spoken of the Fund’s interest in avoiding “writedowns and fire sales,” which implies that assets are still being carried at inflated values, and also that the hand of the Treasury is in this deal somewhere.

As global authorities wrestle with another potential crisis episode, the Alfred E. Newman market should roll on apace according to Mike Kelly, of PineBridge Investments. He takes an intermediate-term view and thinks the market has been overly pessimistic for the past six years, “looking at a crisis beyond every corner, we read the worst case into every data point.”

However, he maintains, as this writer has, that global central banks are not only going to remain accommodative, even if the Fed raises interest rates, but will become “increasingly accommodative. So they’re subsidizing you to take a little bit more risk.”

An interviewer challenged the notion that the market has been pessimistic, even as it has continually rallied. Kelly responded that investors are “reluctant bulls,” staying in the market only because they have to.

This writer has said throughout that the bull market is sponsored by the government, so in effect, the financial markets are a GSE, and the Treasury and Fed have been assiduously rebuilding the bubble conditions that gave rise to the 2008 crisis episode. It looks like the plan going into an election year is to respond to signs of trouble by doubling down.

For an example of how an authoritarian, interventionist government props up its stock market, one looks to another trouble spot, China, where Hartmut Issel, of UBS Wealth Management, warns that while Beijing’s intervention is working, it is not sustainable, because he doesn’t think valuations are justified.

Issel is “skeptical” about what will happen whenever positions are allowed to unwind.

This writer expects that if the crash some predict for the U.S. were to occur, the Fed would intervene and buy stocks for its bloated portfolio. A more extreme idea, one that sounds ludicrous, is that if the Chinese unwind is messy, the Fed will buy Chinese stocks.

Finally, as bank earnings, as reported by the banks, have come out, Fast Money traders have reiterated their support for the group. Karen Finerman, who loves JPMorgan (JPM) and its CEO, calls its results “absolutely fine.”

Guy Adami sees Goldman Sachs having “another great quarter,” although he refrains from predicting how the stock will respond. Pete Najarian finds earnings for JPM and Morgan Stanley (MS) “very solid, but nothing that’s going to blow us all away.”

He is impressed with the M&A activity at those banks as well as at Citi (C).

This writer would add that the unstated basis for the constant support of the financial group is the knowledge that in this government-sponsored market, the ultimate favorite of the authorities, as always, is the TBTF banks.

If money managers don’t remember what happened to the S&Ls and the housing GSEs, their memories of the 2008 bank bailouts are fresh, and they are confident that the government would intervene more promptly to prevent a wave of failures in an election year.