Thoughts on Cyprus

The shenanigans with Cyprus have a passing similarity to Lehman in its last days, though many differences remain.  Lehman was shopped.  South Korea comes to mind.  Cyprus is being shopped.  Somehow I doubt that the West will let it "fall" to Russia.  Cyprus is too near to Syria, where the West and its Arab allies appear to slowly be squeezing the Assad regime, and with it Russia's naval base in the Mediterranean.  If so, though, will Russian interests still help to force a disorderly event in Cyprus?

Two articles in the Greek e-paper Kathemerini discuss the latest, with insights into dissension in Europe.  LINK, LINK.

The second of these is interesting.  It shows substantial criticism within the European Parliament of how this situation was handled.

It strikes an American who knows nothing special about Cyprus as quite odd that an insured depositor or a safe and sound bank in Cyprus would have to be assessed a "tax" on deposit to bail out a shareholder or bondholder of an unsound bank.  Why not force the uninsured, and if necessary, insured depositors of the insolvent banks, plus their senior or co-equal stakeholders, to take the losses?

Or else, why not place the burden on society at large, including citizens/residents would own other assets, such as real estate, stocks and bonds?

There may be unintended consequences of this situation.

In a stock market that per Value Line is "frothy" and per Jeremy Grantham is poised to underperform even moderate inflation on a 7-year basis, there's a lot to preserve by increasing cash and decreasing exposure to the continued Goldilocks scenario.