Monday, June 13, 2011

Into the nose-dive – who is next?

S&P downgrades Greece, says default likely

"Standard & Poor's on Monday cut Greece's credit ratings by three notches, saying the country is increasingly likely to restructure its debt in a way the ratings agency would consider a default".

Posted by alan @ 06:18 PM (2043 views)
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20 thoughts on “Into the nose-dive – who is next?

  • general congreve says:

    Come on next major economic calamity that will bring the next major phase of the financial crisis upon us, come on, you know you want to…

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  • this is getting scary now, I am still in the USA working and OMG things are bad, Nevada has an unofficial unemployment rate of 25%, there are homeless people everywhere, nearly every junction or crossing there is someone begging for money or food.

    There are numerous shops empty, many bars and restaurants have filed for chapter 11, the larger high street stores are very very quiet.

    THINGS ARE TURNING NASTY

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  • general congreve says:

    Thanks for the report on the ground Mark, this masquerade can’t have much further to play out.

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  • Good job the UK is well place and all that.

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  • “Several banks have come out publicly in favour of rolling over their holdings of Greek debt, including France’s Credit Agricole, which owns Greek bank Emporiki.”. I wonder if these banks have the most to lose!
    I suspect Sterling will benefit quite a bit over the coming 2 or 3 months because of this chaos.

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  • Goody, goody gum drops.

    Their greedy ambious plan is finally unraveling to reveal the sham or power grab that it really is.

    ~ Let them eat fish cake.

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  • Yo-ho-ho…

    First Trichet starts covering his back (in a rather stage-managed pseudo-spat with the German finance minister) – and now we get a three notch downgrade in one hit..

    What are the odds on Greece leaving the euro in the next fortnight?

    – If someone doesn’t come riding to the rescue soon, that’s the way its looking..

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  • 2. mark

    Have I mentioned, “hyperinflation, food shoortages” in the past.

    You know, the nutters stuff.

    Sharpened up on the gun range lately, you anti Barry (still no legitimate birth certificate) Obama terrorist you.

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  • @ 2

    Mark,
    I’ve heard horror stories from friends in Miami and Maine, Ma ‘n’ Pa corner shops closing down and cardboard box cities etc.
    I’m amazed how it seems to be business as usual for most of the people I meet … I know one amateur landlord that wants to buy a business unit and another BTL flat to add to his ‘portfolio of 2 BTL’s. He asked me and others if we wanted to invest in the commercial property…. I didnt !

    Also as a contrarian indicator, I’ve sold a business in the last fortnight (catering) and had the first interest in a second business (IT), in the 15 months it was been on the market ……

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  • @ 2

    Mark,
    I’ve heard horror stories from friends in Miami and Maine, Ma ‘n’ Pa corner shops closing down and cardboard box cities etc.
    I’m amazed how it seems to be business as usual for most of the people I meet … I know one amateur landlord that wants to buy a business unit and another BTL flat to add to his ‘portfolio of 2 BTL’s. He asked me and others if we wanted to invest in the commercial property…. I didnt !

    Also as a contrarian indicator, I’ve sold a business in the last fortnight (catering) and had the first interest in a second business (IT), in the 15 months it was been on the market ……

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  • little professor says:

    Greece now has the lowest credit rating of any country in the world.
    This is getting ridiculous now.

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  • Analysts are predicting Greece has a 90 per cent chance of rescheduling its debts… Interestingly or worringly, perhaps, Ireland and Portugal are now up at 60 per cent, ie more likely than not. The house of cards is wobbling.

    http://www.reuters.com/article/2011/06/13/markets-greece-idUSLDE75919U20110613

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  • Greece isn’t the biggest problem it’s who they owe money to which is the bigger problem!

    The ECB, German and French banks have the largest stakes followed up by various other countries banks, including the UK, to say nothing of all the derivatives loaded on top of this! This is why the ECB and others are so keen to keep Greece from defaulting, because the losses could easily be an order of magnitude greater than the props so far and could send shock waves around the world! It’ll happen anyway, it’s just a matter of time!

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  • Greece now has the lowest credit rating of any country in the world.
    This is getting ridiculous now.

    Then it will be minus, minus ‘the worst country in the world’

    The breaking point must be coming soon.

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  • I don’t understand why Greece can’t sell its Gold or do a long lease on a couple of Islands.

    How would the bank take it if you couldn’t pay your mortgage but had a chest of gold coins you refused to sell ?

    We sold our Gold and weren’t even in trouble at the time !

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  • Gold is a sore point for the Greeks – the Nazis stole their reserves during WWII, and Germany has never made good..

    They don’t have enough gold to cure the problem, although it would help a little. However, hanging on to it would endow a new Greek currency with a small measure of credibility.

    Leaseback on a few islands would probably provoke more public angst than cash – they just need to crash out of the euro now and move on from there.

    BTW – the country that might offload gold in the not too distant future is Italy – they have an immense reserve…

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  • I looked at CDSwaps IT at a HSBC during the crash. Hopefully I can give you some insight into what might happen. The problem with the Greek Default is that it’s one thing for the bond to default, another for the rating agencies to downgrade them and another for the London commitee of the International Awaps Dealers Assoc (London-ISDA) to declare a credit event. Three different things.

    The problem is that if the credit agencies declare a default and the London-ISDA don’t – this raises a huge problems of crediblity. Those who bought insurance on the bond (ie used the CDSwap to insure bonds they held) will want to see a credit event because the Rating Agency has now downgraded the bonds credit risk and it can no longer be included as a high quality asset – up until that point they will not have lost money on the bonds, but now they have to sell them they will. Those who took out insurance will not be happy – and may go bankrupt selling the bonds.

    This will mean that the entire CDS (soverign) insurance market is basically worthless. I’m sure those who have just lost billions of dollars will create the biggest ($trillion) legal law suit in history against the ISDA – the entire soverign CDS market could vanish almost overnight. The ISDA will loose credibility and the swaps market could dry up.

    The alternative – of a credit event – would be French and German banks first in firing line. In fact there is good evidence that at least one French bank will default. Next the Irish (who simply cant pay either) followed by the Portugese will probably have to declare events.

    So in my opinion this whole thing will be decided in the courts and I think those suing the ISDA will win (if the ISDA dont declare a credit event) simply because what the judge will look at is whether the bond contract has been breached and most importantly whether the value at risk has – not whether the bond holders are still happy or not – because that is not what the CDSwap is insuring against. The CDSwap holders are insuring against losses and risk and that is the business of the Ratnig Agencies to decide. There is also some case history here and the ISDA have previously simply followed the finanical judges (be they the tax man filing for bankruptcy) etc.

    So the alternatives are both very dire – and one will have to almost certainly happen before July 2013 (because at that point nobody is ging to buy any of the PIGS bonds because the EU gets seniority preferences). I think the best thing that can be done is that large amounts of cash is built up to protect the EU banking system against the PIGS soverign defaults.

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  • 13. str 2007 said…’I don’t understand why Greece can’t sell its Gold or do a long lease on a couple of Islands.’

    Greece selling their gold would be the equivalent to paying even more interest on a fictious debt that in the current climate is impossible to

    balance. As for ‘us’ selling off our gold, I dont remember a referendum on the matter, or agreeing to Gordon Brown announcing the fact to

    the small gold market prior to doing so.

    Go figure, go Iceland.

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  • The Germans don’t seem too bothered by this – its wasn’t widely reported yesterday. Think they, quite rightly, don’t rate the ratings agencies. Although Angie Baby’s not very popular so Germany may not be willing to help much more. Makes me think of ther Helen Reddy song. “Angie Baby, you’re a special lady – living in a world of make believe…”

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