Risk Shifting

Hands across the water
Heads across the sky
--Paul McCartney and Wings

Toddo considers the rising angst stemming from the Greece/EU situation.

One of the feathers in the bull's cap has been narrowing credit spreads, more specifically corporate credit spreads. But in a world where governments are socializing risk, isn't a reduction in the odds of business failure (which is what corporate credit spreads reflect) intuitive--at least in the near term?

The credit spreads that are rising are sovereign credit spreads. This should also be intuitive as governments assume more default risk.

Over the past couple of years, levels of debt and leverage haven't gone away. The risk has simply changed hands.

As the EU situation demonstrates, we're running out of hands.