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Greek goes to a barber and says…
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Finally. With news commentary that involved talk of deadlocks and disagreement on some occasions yesterday. The leaders of the EU have reached an agreement whereby private bond holders of Greek debt will commit to a 50% haircut on those debts, important to note that this is only the case for private sector debt, not total Greek debt.
Although being short on specific details the European rescue fun boosted its capacity to 1 trillion euros to help shield the euro zone from the crisis. However with many other nations Ireland, Portugal, Spain and Italy feeling the heat can the Euro zone really afford euro wide haircuts? With help being offered to Greece, what incentive is their to these other nations to tighten their belts to 'limit' the damage.
There is talk of Chinese intervention to help support the EFSF, AFP reported “France favors China taking part in efforts to stem the euro zone debt crisis by helping boost its bailout resources, a senior government official said Wednesday.”
An announcement earlier from the EU stated that they will be submitting Eurobond ideas on the November 23rd
At time of writing EURUSD has pierced through the important 1.4000 psychological area and is showing sustained momentum to the upside. European stock markets are seeing strong gains of between 2-4% and US stock futures are up between 0.5-1%
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The devil is in the details, and I'm sure that all Hell will break lose when these details are sprung on the public. I expect "austerity" to take on a more WW II meaning.
http://georgesblogforum.wordpress.com/2011/10/26/wage-slave-2012-update-...
A haircut is just a reduction in the NPV of the bond.
If you own a $1,000 10y at 6% and you bought it for $1,000, you will make $600 in interest and get your $1,000 back in year 10 for a total of $1,600.
A haircut of 50% in this scenario means you paid $1,000 and will get back $500 in 10 years.
However, since "sweetners" to the interest rate and/or time are involved , the implied scenario is that the interest payments over the life of the bond will still ensure that the total amount to be returned will exceed $1,000, even if only by $1.
The $500 loss is a current year tax write-off, which at the corporate rate of 35% reduces the actual loss and provides a current year boost to income (if held to maturity) would have been 10 years away.
While there are many such economic and accounting adjustments (especially where margin is involved), the investment itself ($1,000) is left no worse after 10 years than investing in anything less than a 5 year (negative returns) and is nothing like finding your stock cut in half by a failed business model.
But the banks were not at the meeting. Who can decide for them?
""only the case for private sector debt, not total Greek debt.""
I assume this means other governments. Does it mean banking also??
Who decided for the private bondholders? If I am correct, they have to ask one by one! And if some don't agree, they can provoke cross-default!
Good to see the Chinese are there....always a Bigger Sucker to come along..but I though tthe Chinese were busy buying all the foreclosures in the usa driving up the RE prices.....?
LMAO
Ouch, that my ear not hair, you idiot!
"I said haircut, you imbecile! Why are you starting below my waist---AAAIEEEE!"
Castration Default Swaps no workee.
The greek sez: Just a little trim please.
China will help the same way a dope pusher helps out the junkie.
“France favors China taking part in efforts to stem the euro zone debt crisis by helping boost its bailout resources,....
Honestly what is the point.... a trillions upon trillions in continuous bailouts that will forever increase and be required because the maths cannot be denied. They are just forever blowing the balloon bigger and bigger. I guess they like really really big explosions.
Who says that France's opinion makes any difference to China? China has said repeatedly that it will not buy Euro debt until the house is put in order, and the needs of a debt junkie like France will not sway them.
"Journey into the heart of darkness." In the USA the CDS contracts were honored and Lehman brothers failed as a consequence. That is not to be the case in Europe. I do not recall these contracts being signed in bad faith. Indeed...were it not for these contracts Greece could not have "lied their way into the European Union." Now these contracts are to be denied. Does it not then say the union itself is lie? Clearly we have a victory...for the Supreme Court of the United States--and all the judges, lawyers and history that serve her.
Greek goes to a barber and says...
Take a little off YOUR sides....
Greek goes to the barber and says.....
I made 100 billion euros today.....and there will be more coming.
I find the idea of China providing assistance to the EFSF quite amusing. This would be like a cancer patient donating to a comatose patient an organ for transplant.
Just for the record here are three facts about Greece:
1. Even if it had no debt it still does not have a budget surplus at the moment.
2. It imports more foodstuffs than it exports, which means that its citizens do not even feed themselves.
3. It still has a substantial balance of trade deficit.
With leakages like these who are they kidding about success?
Most of foreign drain goes to Middle East for petroleum.
Euro drains are also foreign drains: related to the first are funds to Germany and France for automobiles and military goods.
Greece is out-and-out bankrupt (... along with the rest of us.)
So would China then sell some US treasury IOU's to buy E.U.assets? Is that why we see the bond in the red?
Yes.
You are probably right. Germany is gloating and it reminds me of the German commandant during World War II who announced to the joy of the prisoners in the camp that they would all be getting a change of underwear. After the applause from the priosners died down, he went on to say:
The Poles will change with the Jews, the Jews with the French and the French with the Poles.
They have shuffled the proverbial deck chairs and heaven help those that do not have CDS in the form of gold or silver.
wait for it. CME margins hikes coming, then another chance to buy more.
If this were to happen ( and I agree with you that it could well happen), it would simply confirm the value of gold and the lack of credibility amongst the regulators/manipulators/governments.