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Monday, March 5, 2012

Storm clouds over the horizon

Most Americans do not have the slightest clue about Europe.

Don't feel upset.. it is the truth.

Of course, don't feel proud of it either.

Now to give a benefit of the doubt, most don't really feel they need to.   We, as Americans live in one of the world's largest economies with a great diversity of natural resources and food production, both organic and chemically preserved.   We export far more than we import, and basically as world superpower, our influence on the world economically, politically, military, socially and culturally is far greater than any other nation's influence upon us.

Most of all, we feel economically insulated from their problems..

So most Americans figure, 'why should we care about Europe?'

And everyday people can normally get away with that mindset because they aren't in the stock market and don't see any connection between problems abroad and how it may (if at all) affect them.
Today, the market only dropped about 14pts.  It really should have dropped much, much further.   There should be panic and fear in Wall St over exactly what will happen once Greece is forced into default.

There should be a lot of antacid chewing.

For traders and investors, this is their livelihood.. They're supposed to know..

Instead, there's complacency.

Its not too hard to understand we suppose when rat traders & investors are subjected to utter-bullshit news articles like the following this morning from Financial Times:

"A large grouping of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a significant step forward for Athens as the country struggles to avert a sovereign default. Twelve banks, insurers, asset managers and hedge funds in the steering committee of bank lobby group the Institute of International Finance (IIF) said in a statement that they would take part in the bond exchange...  A spokesman for the IIF said this represented a “substantial” amount of the €206bn in Greek bonds held by the private sector that banks managing the swap are trying to involve. Analysts estimate that institutions represented by the IIF make up about 50 per cent of the private sector bonds."
In other words, the IIF is trying to convey that these twelve banks, insurers, etc are happily accepting 70% losses on Greece bond value via swapping and because they represent holders of half private sector bonds, meaning everything is moving along smoothly before a Thursday deadline for 95% of all bondholders to agree.

No problems... no sweat.

Oh wait, what's this that Bloomberg reported this afternoon?

"Private Investors (are) holding About 20% of Greek Debt to Join Swap...The 12 members of the creditors’ steering committee that said today they would join in the exchange have debt with a face value of about 40b euros ($53b), compared with the 206b euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports."

In simple-speak, the IIF lied by 30%.  This means that a whopping 80% of the bonds subject to exchange are unaccounted for, and more importantly, it means that the likelihood of a major blocking stake organized against accepting 70% reduction is far greater than realized.  It also means those 20% hold 1/5th the amount of bonds the Financial Times was proclaiming.

Remember:  Greece needs 95% participation by bondholders by Thursday to have bailout funds released to them.. funds that Germany really doesn't want to give and all of which go to pay banks as backdoor bailouts using Greece as merely the vehicle.

The media with few exceptions is pushing confidence to the very bitter end.

Confidence...  Con...   Con job...
They refuse to admit openly Greece will default.    They refuse to openly state that Greece owes its creditors $1.1 Trillion dollars and really couldn't even pay everyone back at 30 cents on the euro.  They refuse to admit openly that potentially the affects of this and impending trigger of credit default swaps, could make 2008 look like a picnic-- bank runs, bank closures, bank "holidays"...

And to the very bitter end, political and financial leaders utterly refuse to give honest assessments as to the precariousness of the Eurozone and global economy on the whole.

It may be par for the course, but still Deeply frustrating...

Some may feel we at A&G write too much on Greece and interpret one of our postings on a particular day is basically 'same ol', same' ol' to a post on Greece from a different day.

You would be mistaken, and respectfully... you'd be ignorant.

Until March 20th, Greece IS the story...  Not higher gas prices, not possible dust-up with Iran, and certainly not the Republican primaries or anything Election 2012 related.
Unless some incredible financial manipulation occurs within the next 15 days, Greece will be defaulting, and unless Europe and the US are truly more buffered than they've let on, it will have affect within the banking and finance sector, which affect markets and which ultimately affect Mr & Ms Everyday person.

We will go into scenarios of how people will be affected by the default in a future post.  The main reason we will not do so at this moment, is we're not fear mongerers.  Our goal is not to scare people.  We have no products or services to sell here.  In addition, we need to see over the next few days if there's going to be last-second behind-closed-doors arm twisting to force capitulation by the remaining 80% of bondholders to the will of Greece and the major banks.

We don't expect it but then again, Nothing surprises us anymore.

For now, stay tuned.. and don't be complacent.