kkwan - 08 October 2011 03:59 AM

StephenLawrence - 08 October 2011 02:59 AM

Only if the market isn’t positioned for it.

The risk is what ever it is regardless of the ratings agencies and they are now behind the market.

I think you’ll find American bonds went up when the debt was downgraded because it was pretty much bound to happen as it is for France and the UK.

But the Dow, S & P and Nasdaq all closed negative.

Yes, I follow the footsie, what I know is you could have bought futures at about 4900 at their worst during the day(s?) after the downgrade and it’s now 5300, about 9% from bottom to Friday close.

I expect it’s a similar story with the US? Dunno for sure haven’t got the data.

Stephen

When Greece leaves the Eurozone, some French and German banks will have great losses, and must be saved (again). The banks invested in Greek bonds because they were pretty secure: the EU would not let drop Greece just like that. So the banks have the gain, and the European tax payers will bleed for the bank’s losses. So may be the question is only which measure is the best: helping Greece, and so the banks, or the banks directly. Or just let the crisis happen. The Europeans will pay anyway…

GdB - 08 October 2011 06:52 AM

When Greece leaves the Eurozone, some French and German banks will have great losses, and must be saved (again).

Why? (Don’t worry this aint philosophy )

my guess is that the holders of greek bonds would make money if Greece leaves the eurozone.

kkwan says they are 40% of their face value, why wouldn’t they rise to 50% of their face value for instance, on better economic prospects?

Stephen

One way to view this: the Germans must choose between bailing out Greece and bailing out their banks when Greece drops out of the euro and devalues.

Many of these EU countries have always had high unemployment-Greece, Italy, Slovakia, Spain, Ireland, etc.
When did economics start calculating that nations, or whole trade groups can sustain themselves with high unemployment?  These countries were comfortably able to pay their citizens not to work for decades. Everyone’s on the dole!  The other half is working for the Govt!  Then there’s some working for manufacturing and service.
They can’t do that anymore…why?
It doesn’t have to be a complicated analysis. One looks around the globe and realizes that China has a GDP of 9% and India has a GDP of 8%.
The bigger issue is this: We have entered a new global program.  There are no models to predict with.  There are too many unknowns.
There are a few facts. Historically these issues always lead to big wars.
Domestically we can see here that this insidious new trade policy, global program is having negative repercussions. This new regime slowly inserted itself into our political/economic system by infiltrating both parties.
The reason it is a negative effect for the US is because it allows a small minority to gain wealth, while literally millions are losing their jobs to overseas manufacturing. The small minority are the ones who import these foreign goods at super cheap prices, and then sell these goods at seemingly cheap prices at a high mark-up!(real high! 200-2000% high!)
I don’t know about Greece or Ireland, or Slovakia, or Italy, but I have to assume the same thing is happening there.

Chris Crawford - 08 October 2011 07:55 AM

One way to view this: the Germans must choose between bailing out Greece and bailing out their banks when Greece drops out of the euro and devalues.

There is that assumption again, if Greece devalues the bonds will go down. I don’t know enough to be sure but if I had to bet I’d bet the other way.

Stephen

The EU has a trade deficit with China.  All EU countries separately have trade deficits with China.
Germany gets the lions share of export trade with China…..43% of all EU exports to China leave from Germany!
Next is France with 11% Then U.K. and Italia with 8% respectively.
Germany is also the largest importer of Chinese goods.
So!  Somebody’s got the jobs and someones got the Euros to buy and sell! 
Poor Greece, poor Slovakia!  What were their stakes in the EU?
A psychological reward for finally being able to stand shoulder to shoulder with their economic juggernaut neighbors!  Maybe that’s all…
A promise to improve some of their failing infrastructure…another rail line, better sewers…
I mean what happened to the Euro dream?  Everybody should have been able to get rich off of all the untapped consumers in Slovakia, all the room for expansion in places like Spain, all the big spenders in Greece…
But there are no jobs.  There never were any jobs in those countries.  Germany, France, UK, and others had all the jobs to go around for the EU.
The rest…like Ireland, Greece, Spain, Slovakia took out big loans to give money to the people so they could buy stuff. Houses, washing machines, and loads of brightly colored Chinese crap. That was your bubble! Then the loans ran out, and the people still don’t have jobs! Now the money’s come due.
Places like Germany are whining ‘cause they can’t understand why that artificial stimulus didn’t jump start places like Greece and Ireland, and Slovakia!
Germany is holding the bill, just like Greece!  Germany gets 43% of the exports to China out of all the EU nations!!