DISCLOSURE: I Will Lose A Bunch Of Money If Cyprus Leaves The Eurozone
If Cyprus leaves the Eurozone, I'm going to lose $1000. For most folks in my industry (typing words on a keyboard) that counts as a lot of money.
Actually, if anyone leaves the Eurozone in the next 2.5 years or so, I'll lose $1000.
That's cause about 2.5 years ago, I made a late-night bet in a bar that no current Eurozone country would leave the common currency in the coming 5 years.
Things were particularly dark at that time. At that specific point, the focus was on Ireland, and the possibility that it might not be able to come to a deal. Greece was of course omnipresent in the news at that point.
But mostly it seemed to me that inertia would win out... That elites who control the purse strings didn't want to open the Pandora's Box of anyone going back to their own currency. Furthermore, even in the countries bearing the worst of it, staying in the Euro has always been extremely popular. So although lots of folks were talking about it, it just didn't sem very plausible.
There have been a few scares along the way, but mostly things have been fine. Greece got its deals. Ireland is rebounding. And the ECB last summer finally started serving as something of a backstop (although a backstop that comes with austerity handcuffs that's making the economy miserable). Since last summer, it seemed like the main threat was a country like Italy or Greece rebelling like austerity due to the horrible economy.
Cyprus has always been an issue lingering out there for the bet, but the cost of saving it was so cheap that it didn't really seem like it could be a problem. But actually that is the problem. It's just too small to worry anyone outside of Cyprus. Markets don't seem to care at all (yet). The actual amount required to save it is nothing, but politically it's too explosive to be seen as giving money to Russian depositors.
And it's not clear that anyone outside of Cyprus can walk things back. Merkel seems locked into her position, in part because opposition and coalition parties in Germany are getting traction by turning this into an issue in an election year.
It still doesn't seem likely that Cyprus will leave. They'll probably hack together a deal. But given that the subject of #CypriOut has been breached multiple times, I figure it's best to let people know that I have a financial stake in the outcome. Betting is good for people in this business. It's a BS-tax. I'll try to remember to link to this post on issues of sensitivity on this matter.