By: Daryl Montgomery
Once again Greece has avoided a messy default and once again its creditors have had to take a greater loss on their loans and once again standards had to be abandoned to make the deal go through. And once again, we’re not done yet.
Realistically, Greece is actually undergoing a messy default; it’s just doing it in slow motion. When creditors are not fully paid, there is a default. The original default terms ...
Read On →
By: Daryl Montgomery
The Greek bailout deal is once again falling apart. Whether or not it is patched together another time, the end will inevitably be an ugly default.
On Thursday, news sources around the world were trumpeting that the EU and Greece had come to terms that would allow Greece to receive a 130 billion euro bailout payment that would prevent the country from defaulting by March. But late in the day, EU finance ministers ...
Read On →
By: Daryl Montgomery
•Greek bailout timeline supposed solutions:
May 2010 – €110 billion
July 2011- €109 billion, plus 21% bondholder loss
October 2011 – €130 billion, plus 50% bond loss for creditor other than EU/IMF
•Referendum crisis arises only 4 days later
•One-year interest rates in Greece before Oct plan as high as 193%, fell to 154%, then rose to 206%
•Hard default would be around 75% or more
•Would be bigger than Russian default in 1998
By: Daryl Montgomery
EU leaders have agreed to seek a 50% reduction in Greek debt from bondholders. This supersedes the 21% reduction decided on in July that was supposed to resolve Greece’s financial problems. Apparently $30 billion will be given to the banks as an inducement for them going along with the plan. The EU and IMF will also give Greece an additional 100 billion euros in bailout aid.
While the announcement was delivered with a ...
Read On →
By: Daryl Montgomery
In a replay of the 2008 Credit Crisis, global stock markets are now rallying strongly after a huge selloff last week. This pattern was common in late September and all during October three years ago. It seems to be replaying itself again in 2011. Huge moves down and up are common in severe bear markets.
As has happened many times so far, stocks are rallying on “hopes” of a resolution to the Greek debt ...
Read On →By: Daryl Montgomery
Stocks in Asia, Europe and North America are falling as contagion from the Greek debt crisis continues to impact markets worldwide. Until there is some resolution, investors should expect this to continue along with intermittent sharp moves up due to central bank liquidity injections.
Trouble began in Asia last night with the Hang Seng in Hong Kong falling 537 points or 2.8%. It closed at 18,918, well below the critical 20,000 support level. The Indian Sensex was down 188 points or 1.1% ...
Read On →By: Daryl Montgomery
Yields on two-year Greek governments reach 46.84% last Friday. This is roughly comparable to yields on Argentine bonds in early December 2001 — only a month before the country defaulted on its debt.
Similar interest rates occurred this spring in Greece before the second bailout package was put together. The bailout saved Greece from defaulting back then, but the bailout is now falling apart while the fiscal situation in Greece continues to deteriorate. The risk ...
Read On →
