Who bankrupted Ireland?

[Fruitcake]

So tell me some tales.

Greece is going to restructure. This is fairly huge but the way the whole situation is being managed it will not seem as bad as it is as people are already pretty much prepared for it to happen. 10 year yields soared again today, it rose to 14.75 percent, after reaching a euro-era record of 14.80 percent. The spread over German Bund rose to a record 11.45 percentage points. 2013 bonds are now exchanging hands for 73.335 cents to the Euro. I bought up my contracts a couple of weeks back at 78 cents so I have missed the peak but then I always believe in leaving something for the next guy and, of course, my sale of Bonds is complete so I have banked my profit and can view what is happening more objectively to see if there is anything I can learn for the next time I am in such a fortuitous position.

The cost of insuring Greek sovereign debt jumped 30 basis points to a record 1,271 basis points. History shows that this gives the debt a 66%+ chance of defaulting.

Portugal’s two-year yield rose to a euro-era record of 10.58 percent, while the nation’s 10-year yield rose 19 basis points to 9.28%. If you cast your eye to my post just this Monday I showed Portugal yields at 9%. The surge in those prices is gathering pace. Portugal's borrowing costs increased at an auction of 320 million euros of six-month bills. The securities due in November were issued at an average yield of 5.529%, compared with 5.117% the last time the securities were sold on April 6. The Portugese Govt cannot pay those kinds of interest rates and should do the same as I recommend for Ireland.

German Bunds have increased in value again, dropping in yield as the dealers bank their profits in safe haven Bonds.

....you see the vicious circle?

[2dimes]

I meant tyche73 because I'm wondering what's going on there from the perspective of a regular guy living through it.

I do apprecieate your side also though.

What currencies are you holding Fruit? I still think I should be on your island Gardening and brewing with izman.

[Fruitcake]

What currencies are you holding Fruit? I still think I should be on your island Gardening and brewing with izman.

I've taken a position on the $, my belief is it will rise so I have bought at a recent price for both 6 and 12 month contracts. I have done the reverse on the Euro to finance the Dollar trades, I think I messed up on my timing by 3 days off the Euro peak but I can live with that.

I mentioned back in Feb that I had taken a position against Chinese building and construction sector. Interestingly the shares that have slipped has just passed the 50% mark in that I now have more fallers on my hands than risers. My feed from Shanghai's stock market shows me as still in a negative position but the gap has narrowed nicely over the last month. I started at 7.1% negative on contracts back in Feb and am now showing just 1.9% negative. Another month or so should see me clear the break even, then it becomes a matter of when to complete and bank the cash.

The Aussie Dollar has been a rich source of quick profits over the last few months when traded against the USD, I think I've been in and out of that currency more times during that period than a Jack Tar with a prostitute on a first night home after 12 months at sea.

[Fruitcake]

The debt crisis in Greece has taken on a dramatic new twist. Word buzzing around the markets late this evening (Friday) is that Athens is considering withdrawing from the euro zone.

I hear that secret meetings are being set for this evening with the Euro area's finance ministers and representatives of the European Commission in Luxembourg.

This was always coming at the situation like an express train. The Euro dropped 2% (a massive hit for a currency of this size) on Thursday with a further slide today. Both the Dollar and Sterling strengthened sharply against it.

[2dimes]

I was reading somone's opinion that the Greek banks couldn't survive a currency change.

[Fruitcake]

I was reading somone's opinion that the Greek banks couldn't survive a currency change.

Not in their present form, they can't, your memory serves you correctly.

However, with an IMF bail out (which would be needed) they can restructure. The problem now would be that it is estimated they would need to effectively devalue by 50%. This would trigger a seismic shock through the system even though Greece is relatively small in GDP terms.

The fly in the ointment is the Germans, they will have to take a massive hit on their bonds, somehow I cannot see them accepting this without some kind of price being paid.

There have been riots almost daily for weeks over the state of things there. The summer is coming and the Med has nice warm nights, so the protesters wont be hurrying home.

[2dimes]

Greece Considers Exit from Euro Zone:

Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency "would consume the entire capital base of the banking system and the country's banks would be abruptly insolvent." Banks outside of Greece would suffer as well. "Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts," the paper reads.
The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "

Code: Select all

Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads. 

In short, a Greek withdrawal from the euro zone and an ensuing national default would be expensive for euro-zone countries and their taxpayers. Together with the International Monetary Fund, the EU member states have already pledged €110 billion ($159.5 billion) in aid to Athens -- half of which has already been paid out.
"Should the country become insolvent," the paper reads, "euro-zone countries would have to renounce a portion of their claims."

http://www.spiegel.de/international/eur ... 01,00.html

[daddy1gringo]

Ireland can't be in financial trouble, their capitol has been Doublin' for years. Sorry, couldn't help myself. Is there a 12 step program for me?

[Fruitcake]

Today's note from my currency dealer.

The turn of the worm against the Euro continued yesterday with debt yields and other risk barometers measuring European peripheral debt continued to increase. Yields across the PIGS rose as it became clear that Greece will have to take further money from authorities in a bid to stave a default. Of course any cash they take now or extension on the time scale of a previous debt facility is technically a default but the politicians will not call it that. It also increases the possibility of further ‘moral hazard’ on the part of other countries. Moral hazard is the difference in how a party behaves when it is not liable for any losses compared to when it is. So why should Ireland hike its corporate tax rate to get a better interest rate when the Greeks can get it by being rubbish? The can of Greek debt is just being booted further down the road. It will have to be dealt with soon or the jig is up.

GBPEUR has hit a 5 week high on this news while EURUSD is at 4 week lows as traders continue to dump the euro. It has bounced back somewhat from the lows we saw yesterday as Asian markets have improved risk sentiment after Chinese trade figures massively beat estimates.

We also wake up to a slight novelty this morning in that overnight data from the UK has been broadly sterling positive. The British Retail Consortium’s survey of April’s retail picture has shown the kind of increase we were hoping for with sales rising by 5.2%. The group puts this down to the glorious weather we had and the bank holidays which got people down the pub and spending some money. The Royal Institute of Chartered Surveyors have also published their monthly price balance survey which showed that more are seeing a price increases than a month ago. This stands in direct contrast to the poor Halifax numbers we saw yesterday and contributes to the volatile nature of the UK housing markets.

The market will not shift is view from Southern Europe today as we are due a Greek debt auction this morning. Following the ratings downgrade by S&P and the outlook shift lower by Moody’s it is a guarantee that we will see the yield on this issuance saw as, to all intents and purposes, bankrupt. Data is quiet elsewhere.

[2dimes]

What are your thoughts on hard assets. I have heard people suggest that land was going to be worthless by now. I'd rather have a decent Garden with a good well, wood stove and dry shelter than a couple billion Zimbabwe Dollars any day. I can't figure out a nice warm place safe for a whitey to set one up though. Maybe there isn't one.

Do you think once one of the main currencies fall there's a chance that all the rest might follow?

I don't know what's happening in Russia but the US&A seems much different now. I feel like the last 5 years has seen drastic change.

I'm no fan of Communisim in the forms it's taken however one difference between China and America is if there's no money the US stops production and can't buy from China. A Chinese guy would still go to work the next day, an American would say, "I'm staying home they can't pay me." Suddenly there's no one at the F-22 Raptor plant making airplanes and there's 75 dudes on his doorstep to "pry it from my cold dead hands."

Good night lady liberty, you had a nice run.

[Fruitcake]

Quote
By Tom Shean
The Virginian-Pilot

The debt crisis that has hobbled Greece's economy during the past year will be resolved because much of its debt is owed to other European countries using the euro as their currency, a Washington economist said Friday.

While many Germans detest bailing out the Greeks, they will be forced to participate in the process because German banks hold so much Greek debt, said Jacob F. Kirkegaard, an economist and research fellow at the Peterson Institute for International Economics.

"At the end of the day, they don't have a choice," Kirkegaard told a luncheon that was part of a two-day program at Old Dominion University on ties between the European Union and U.S. localities.

Some German banks might have to be rescued by their government if forced to write off their Greek loans, he said. However, supporting the Greek economy and restructuring that government's finances won't be easy, he cautioned. "This is not a crisis that is going to be solved by a single summit."

Greece came under added pressure Monday when the credit-rating agency Standard & Poor's cut the country's debt rating to a lower "junk-bond" status.

How quickly its debt crisis is resolved depends partly on the financial strength of banks elsewhere in Europe, Kirkegaard said. "The European banking system is still fragile," he said. "That's the Achilles heel of the eurozone," the 17 European Union countries that use the euro as a common currency.

Still, the robust economic growth in Germany and France could generate more retained earnings for banks holding Greek debt, Kirkegaard said. Regulators and others will have a better idea of European banks' ability to deal with their Greek debt when the results of "stress tests" at 90 European banks become available in June.

...and so Boys and Girls, let this be a lesson to you....this is why finance people never listen to Economists. The only people who listen to Economists when they talk about Banking are other Economists and other deluded followers.

Economists have been getting it wrong for decades and will continue to do so for decades to come. Banking is not Finance in the sense the Economist sees it.

[Phatscotty]

Ireland can't be in financial trouble, their capitol has been Doublin' for years. Sorry, couldn't help myself. Is there a 12 step program for me?

[Phatscotty]

Quote
By Tom Shean
The Virginian-Pilot

The debt crisis that has hobbled Greece's economy during the past year will be resolved because much of its debt is owed to other European countries using the euro as their currency, a Washington economist said Friday.

While many Germans detest bailing out the Greeks, they will be forced to participate in the process because German banks hold so much Greek debt, said Jacob F. Kirkegaard, an economist and research fellow at the Peterson Institute for International Economics.

"At the end of the day, they don't have a choice," Kirkegaard told a luncheon that was part of a two-day program at Old Dominion University on ties between the European Union and U.S. localities.

Some German banks might have to be rescued by their government if forced to write off their Greek loans, he said. However, supporting the Greek economy and restructuring that government's finances won't be easy, he cautioned. "This is not a crisis that is going to be solved by a single summit."

Greece came under added pressure Monday when the credit-rating agency Standard & Poor's cut the country's debt rating to a lower "junk-bond" status.

How quickly its debt crisis is resolved depends partly on the financial strength of banks elsewhere in Europe, Kirkegaard said. "The European banking system is still fragile," he said. "That's the Achilles heel of the eurozone," the 17 European Union countries that use the euro as a common currency.

Still, the robust economic growth in Germany and France could generate more retained earnings for banks holding Greek debt, Kirkegaard said. Regulators and others will have a better idea of European banks' ability to deal with their Greek debt when the results of "stress tests" at 90 European banks become available in June.

...and so Boys and Girls, let this be a lesson to you....this is why finance people never listen to Economists. The only people who listen to Economists when they talk about Banking are other Economists and other deluded followers.

Economists have been getting it wrong for decades and will continue to do so for decades to come. Banking is not Finance in the sense the Economist sees it.

I imagine George Soros has his hands in all these p.i.g.s.?

[Pedronicus]

Currently in Madrid there are huge demonstrations going on. This hasn't been reported in any media in England. It's been widely accepted that Spain is too big an economy to be bailed out.


What is being reported in the English Press is the strong possibility of Greece defaulting on their debts and what sort of a massive impact this would have as the Euro collapses.

It was less than three years ago that the failure of Lehman Brothers sent tremors through the global financial system, threatening the existence of every major bank and triggering the most severe economic crisis since the Great Depression. As Europe's policy elite met for fresh crisis talks today, the dark fear that haunted everyone around the table was this: if the bankruptcy of a middling-sized Wall Street investment bank with no retail customers could have such dire consequences, what would happen if the Greeks decide they have had enough and renege on their debts?

Could Greece, in other words, be the new Lehmans? Given the structure of modern financial markets, with their chains of derivative trades and their pyramids of debt, there is only one answer. Greece could certainly be the next Lehmans. The likelihood that a Greek default would pose a threat to the future of the eurozone as well as to the health of the world economy means it has the potential to be worse than Lehmans. Much worse.

[SirSebstar]

I think you can predict inflation to rise in the euro zone so banking it might not be truely wise. Gold is for idiots only.

I agree with the OP's assesment that Germany stating the ireland is defaulting on their promises is hypocritical. Germany did draw a huge profit out of it all, as described by the OP. Personally I should say it is not germany vs ireland, but individuals using a system like a pointwhore by teaming up with noobs to get the best rendaments, and leaving the noobs in the dirt. However CC ranks mean nothing, while your cash is your livelyhood and risking all that due to actions of others you cannot control is very very bad.

I am afraid none of the individuals can nor will be held accountable, but it is the only way forward...

Obvioulsy they purpetrators could only do this because of the greed of the people.. thats obvious too. Sadly it is illigal to have your livesavings in cash in your house, you run the risk of beling labled with taxevasion...

[Fruitcake]

Spanish Sovereign bond rates are starting to edge higher again. We haven't seen much movement recently. The are heading towards 5.5% for 10 year bonds now. Greece is totally off the radar at nearly 16% (a global highest including Pakistan) and is, unfortunately a complete basket case financially. The IMF is no longer very interested in bailing them out so the ECB will have to do so. This will cause the Germans to get even more edgy and the cracks seen in the system the last few weeks will widen as the Euro starts to stumble quite badly.

Politicians are desperate for nothing to be done until after the elections taking place in many countries this year. The people in the street are being sacrificed for personal gain by these second rate people.

Funny thing about all this....the major southern European economies are only easing their yield returns back to historic values (Spain around 8-12%, Italy much the same)

[Phatscotty]

Spanish Sovereign bond rates are starting to edge higher again. We haven't seen much movement recently. The are heading towards 5.5% for 10 year bonds now. Greece is totally off the radar at nearly 16% (a global highest including Pakistan) and is, unfortunately a complete basket case financially. The IMF is no longer very interested in bailing them out so the ECB will have to do so. This will cause the Germans to get even more edgy and the cracks seen in the system the last few weeks will widen as the Euro starts to stumble quite badly.

Politicians are desperate for nothing to be done until after the elections taking place in many countries this year. The people in the street are being sacrificed for personal gain by these second rate people.

Funny thing about all this....the major southern European economies are only easing their yield returns back to historic values (Spain around 8-12%, Italy much the same)

I really appreciate these posts. Although I have no involvement in Euro anything unless it's inverse to the value of the US dollar, I have always wanted to learn more about bonds.

[Mr_Adams]

Anybody who didn't start their posts with tl;dr is a liar.

[Fruitcake]

Update from my dealer this morning:

There was a typical Friday market sell-off in the FX markets last week with a ratings downgrade for Greece rattling already shredded nerves. Fitch slashed Greece's rating to B+ with some analysts believing that the country has only two months of cash left at its current spending rate.

There we were also bearish comments from the Chair of the Bundesbank who noted that a re-profiling of Greek government bond maturities would make them impossible to accept as collateral by the ECB and that as a result, large parts of the Greek financial system would be cut off from funding. It is clear that any restructuring cannot substitute for implementing a fiscal adjustment program. Both the euro and risky assets tumbled on Friday afternoon as the news was fed through; a decay that has continued in Asia overnight. These nerves have been exacerbated by a fall in Chinese manufacturing PMI to its lowest level in 10 months. This confirms that the growth profile of the world’s 2nd largest economy is starting to dip and that the recent monetary policy tightening is not having the desired effect just yet. The Nikkei finished 1.52% lower while the Hang Seng (1.90%) and the Australian ASX (1.88%) also tumbled.

Sterling has benefited over the weekend after some bullish comments from the Bank of England’s Chief Economist in the Sunday papers. Spencer Dale said that the rest of the MPC should vote for an interest rate rise as soon as possible to control inflation regardless of the state of the recovery in the UK. He has voted for rate rises since February so these words come as no surprise but alongside the euro weakness from the Greek fallout they have helped the fortunes of GBPEUR higher. UK data will be dominated by the second reading of 1st quarter GDP due on Wednesday.

The data calendar is quiet today but the focus will remain on Greece and talks of a possible bailout.

I see the Euro has broken through the €1.15/£1 in the general slide. Dollars are holding up at around $1.62/£1 whilst the Euro has continued to slide against the Dollar from $1.46/€1 just a few weeks ago to near on $1.40/€1 today.

I believe this slide will continue. I exited € for $ a few weeks back (extract from my 20th April post)

What currencies are you holding Fruit?

I've taken a position on the $, my belief is it will rise so I have bought at a recent price for both 6 and 12 month contracts. I have done the reverse on the Euro to finance the Dollar trades, I think I messed up on my timing by 3 days off the Euro peak but I can live with that.

My Chinese building sector shorting seems to be paying off. I posted this on Feb 2nd.

Moving further afield, I have started shorting Chinese building and construction sector, construction accounts for 50-60% of GDP in China. Interestingly, exports have been stagnant as has the consumer segment of the economy. In other words, China's 9% GDP growth has mainly been derived from residential and commercial construction. This cannot continue and a property bubble is appearing. I may take a bath on this if the bubble doesn't burst within my specified timeframe but hey ho, such is the way of these things.

I then posted this on April 20th

I mentioned back in Feb that I had taken a position against Chinese building and construction sector. Interestingly the shares that have slipped has just passed the 50% mark in that I now have more fallers on my hands than risers. My feed from Shanghai's stock market shows me as still in a negative position but the gap has narrowed nicely over the last month. I started at 7.1% negative on contracts back in Feb and am now showing just 1.9% negative. Another month or so should see me clear the break even, then it becomes a matter of when to complete and bank the cash.

I am 2% positive on contracts now with profit adding almost on a daily basis. I am now using my spare margin call to roll into some other contracts.

[thegreekdog]

I thought this was funny, so I'm going to leave it here.

http://www.francescolanza.com/2010/06/1 ... -owns-who/

[Fruitcake]

I thought this was funny, so I'm going to leave it here.

http://www.francescolanza.com/2010/06/1 ... -owns-who/

Very good and does show those who find it hard to understand that they are not alone!

Meanwhile the Euro keeps slipping inexorably towards the edge of disaster. Short in Euros is the way to make money right now...along with a few other nice pick ups....talking of which some of us could not believe our luck when our dear friends at Morgan Stanley and Bank of America's Merrill Lynch offered up the Linkedin share price at IPO of $45. This was a licence to print money. I exited at around midday at over $100 a share, thank you very much! I am sure the Directors at Linkedin must be wondering what hit them when they saw how undervalued the IPO was....lesson learnt guys, don't trust those greedy fuckers in the Banks. I know it has cost you around $350 million but hey, look at it this way, the fuckers down at Morgan Stanley and Merrill Lynch get to buy new chalets in whatever part of the planet they want after coining in the bonuses on seeing the IPO go off smoothly....from their point of view anyway.

Those Chinese building stocks I shorted are still sliding nicely and each day shows a decent return. Yesterday was particularly nice when some of them seemed to fall off the edge of a cliff. Shanghai and Hong Kong shed quite a few percentage points over the last few days due, perversely, to the European crisis and Chinese lending in that market. Which brings me, neatly, back to Europe.

There has to be another bailout on Greece within days. The moolah is fast running out. Their cost of borrowing is now reaching a point where their Sovereign bonds are only bought by the ECB. No one else, in their right mind, would touch them. The market in CDS on Greek Bonds is not for the faint of heart right now with costs rising hourly.

Once the Greeks get another bailout, Ireland and Portugal have no reason to try hard, this will exacerbate the problem. Meanwhile the Euro steadily slides against the Dollar and even UK Sterling. $1.40/€1 floor is being tested hourly with the odd break through but sentiment and profit taking pushing it back up. Soon the Dam will break and the next floor will be tested.

Spain has seen it's Bund (German Bonds) spread rise dramatically over the last few days to 2.56%. In essence this now means the spanish have to pay twice what the Germans do to borrow money to keep the Govt afloat. This is the very same road we have seen trod by Greece, Portugal and Ireland.....

[UCAbears]

I went to Ireland in March of this year and they don't like Russians at all. I'm not Russian, but I some people that also went to the event I went to were from Russia and they got shit. I had food thrown at me while I was walking down the road in Bray. I thought I was going to get jumped by a bunch of faggot looking kids. But I absolutely loved Ireland. I could go to the clubs and drink all I wanted to. Which is something I can't do over here in America. I <3 Ireland.

[2dimes]

Are you worried at all that every currency you hold could crash hard and you're stuck with only paper? I would be trying to buy hard assets even if that's only a false sense of security also because if things hit hard enough you're not set up with sufficient military might to keep it probably.

[Fruitcake]

Are you worried at all that every currency you hold could crash hard and you're stuck with only paper? I would be trying to buy hard assets even if that's only a false sense of security also because if things hit hard enough you're not set up with sufficient military might to keep it probably.

I don't actually hold currencies. I always contract from the get go so I know I can exit the position at any point during the time frame, the key is timing that completion correctly and not losing your nerve when it may seem that sentiment has swung against you. The risk, if there was one, would be that the Institutions I contract with go bust, however I hedge against this by various financial instruments such as CDS to ensure I cover the downside in such an instance. The cost of these, for the time-scales and size of Institution I tend to deal with, generally means the cost is not prohibitive or impacts my expected margin too much. I always strip some of the profit out and tend to buy fixed assets with the facility before dealing within another market or opportunity that presents itself. I use margin calls to increase the size of potential profit should I feel the situation warrants but generally I use the liquidity I have amassed to trade as I have an aversion to allowing my position to be influenced by what some numbskull thinks or decides.

[2dimes]

What I'm getting at is money is just paper. I might have a paper that states the bank owes me millions of papers that say $1 on them. But if that $ becomes worthless bummer. I base this partially on Zimbabwe a few years ago and still regret not buying billions of their dollars when I could get a multi billion dollar bill for under $2 canadian. Just to be able to carry billions of dollars in my wallet.

Let's say me and another person both have $200 us. I buy a bucket, spade shovel, rope, seeds, hammer, nails and lumber. I build a nice shanty and dig a garden that I water with my bucket.

The american economy crashes like Zimbabwe to the point where a box of crackers costs 7 billion us dollars. Suddenly a millionare needs to get a job or they will not be eating once the pantry is empty. Later I eat carrots and the other guy eats some peices of paper and sleeps outside. I wont sell any of my carrots but I might trade one for some crackers.

Have you considered buying some farms or other food production type of assets, like a cannery or something? A nice tropical plantation sounds good to me regardless of the economy. Millions of currency units only sounds good to me if I can buy objects I like or think I need.

Is it getting to a point where you could resonably buy farms in Spain and let the family stay on to run it like they were only with you as the land lord. Even better several of them in a region with a fairly nice house near by. Where you might like to go if your current location is no longer desireable. Or is spain too populated and you'll just get murdered for having a nice home with food when it gets to that point?

I just like to think about pulling a smaller scale "Elizabeth Sinclair" move.