With all of the recent hoopla over the debt ceiling issue in the US, you may have forgotten an equally important (actually, more important) issue in Europe: Greek, Portuguese, Irish, and soon Spanish bailouts.
Karl Denninger does a nice job on the subject here:
Karl Denninger does a nice job on the subject here:
Portugal eh?
In another sign of the rising pressure on European governments to broaden the burden of their bailouts from taxpayers to the banks that have lent to so-called peripheral euro zone countries, the ministers backed a 78 billion euro bailout of Portugal but insisted Lisbon seek agreement from private bondholders to maintain their exposure to its debt.
But but but.... Portugal was going to be ok on its own? Now it's not? Hmmm... when things get dicey, you have to lie, right?
Then there's Greece:
Jean-Claude Juncker of Luxembourg, who chairs euro zone finance minister meetings, left the door open however to a "reprofiling" of Greece's debt under which investors would be encouraged to agree to an extension of the maturities of the debt they hold.
"I have to repeat that a large restructuring is no option. Nobody was mentioning tonight the need of having a large restructuring," Juncker said.
"Reprofiling"? You mean lying about a restructuring, right? That's what you're talking about, when you get down to it.
Greece has basically no hope of being able to pay down their 330 billion Euros in debt. With the market effectively locked on new issue as maturing notes come due Greece is going to have to either pay them or default. Since they can't borrow more rolling over the debt is going to be essentially impossible, making the decision rather interesting.
Bloomberg has a somewhat different slant on the story:
Introducing that prospect marks a break in Europe’s crisis- fighting strategy, with governments potentially shifting some costs to bondholders instead of relying on taxpayer-funded bailouts to stamp out the debt crisis.
The government should have never bailed out anyone in the first place.
The fact of the matter is that the banks in question here knew Greece was cooking the books, as in many cases they were helping them do it through their issue and trading of the swaps that made the deception possible.
It is an outrage that these firms that were directly and intentionally engaged in deceptive deals to make Greece's debt load look less-damaging than it was transferred the load to the taxpayers. It's one thing to get caught flat-footed with no knowledge that you were screwed. It's quite another when you were the one doing the screwing.
“We suggest that Greece is insolvent and that at some point the can cannot be kicked down the road any further,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an “InBusiness with Margaret Brennan” interview on Bloomberg Television. “Ultimately debt holders will have to bear some of the burden as well.”
Bill is correct.
Note well America - we're headed right down that road. If you include the forward obligations of Social Security and Medicare, we have a current exposure of more than six times GDP, which is 400% worse than Greece's debt burden.
Of course we, like Greece, are playing games with the numbers so that they don't "look so bad." I direct you to Greece for instruction on how this inevitably ends when the markets suss out that you don't have the money, won't be able to acquire it, and ultimately won't pay.
Trade Date: 5/17/11
E-Mini S&P Trades*
(before fees and commissions):
E-Mini S&P Trades*
(before fees and commissions):
- No "Secrets" trades filled today.
- Algorithm positions (4)
- "Reading the Tape" positions (10) ...combined Secret"s, Algo, & "Reading the Tape" total... +9.00
Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!
No comments:
Post a Comment