Greek Stocks Enter Bear Market As Privatization Program Crashes But Does Not Burn

Tyler Durden's picture
"It all began with Greece," and as Mark Grant notes today, "somebody, somewhere is going to take a hit." It appears the 'news' is piling up thick and fast in the 'islands' nation. As Reuters reports, Greece did not receive any binding bids for natural gas producer DEPA. This was part of the asset-sale program demanded by the TROIKA, with Hellenic Petroleum's sale later in the year now potentially on hold. The sad truth is that the country cannot pay their bills, cannot pay their pension obligations, cannot fund social services and is just about out of money to even run their government. The reality is; they are bankrupt again and there is no way out without some form of debt forgiveness and more money. Debt forgiveness, alone, will not cut the mustard now by itself and some kind of end game may well be near. That is increasingly reflected in 2012's no-brainer trade as GGBs are now back below 60 and down over 10% from their highs and the Athens Stock Index just entered bear market territory, down 20% from its highs.
 
Greece may reconsider when it sells its biggest oil refiner Hellenic Petroleum, Deputy Energy Minister Asimakis Papageorgiou said on Monday after Athens failed to receive any binding bids for natural gas company DEPA.
 
Athens had planned to privatise Hellenic Petroleum in the last quarter of 2013 as part of an asset sale programme demanded by its European Union and International Monetary Fund lenders.
It seems the market is getting nervous...
 
and one only has to glance at the reality in Greece to know that this chart is remarkable by any measure of hope. As Southwest's Mark J. Grant explains below, "Somebody somewhere is going to take a hit. Somebody somewhere is going to have to supply more capital in this race to the finish"
It all began with Greece.
 
From the first moment up until today the Greek bailout has been a disaster. Draghi made his “Save the World” speech. The Greek equity markets have rallied mightily. The Greek economy has sunk into the Mediterranean Sea and the people of Greece have suffered the slings and arrows of a barbaric plan that even the IMF has admitted is a failure.
 
The financial projections of the ECB, the EU and the IFM have had all of the accuracy of a sixth grade elementary class making projections in Hoboken. No disrespect to New Jersey. It is unclear to me if these three agencies were living in a world of opiated fantasy or if eternal hope was the driving force or if the motivation was an intentional scheme to mislead everyone. I would like to err on the side of unintentional to be kind but these people cannot have been that uninformed or that misguided in their calculations.
 
I first entered the fray on January 13, 2010 stating that the country would go bankrupt. The yield on their ten year Treasury was 4.38% on that day and while the yield has seen over 30% since then it has never seen 4.38% again even after the Draghi gambit.
 
I have further predicted that Greece will stand, suffer and take it until the money is shut off. We may be getting close to that point now and what has always been an interesting Greek tragedy may now be entering the final acts.
 
The IMF, according to Der Spiegel, has now indicated that they will not lend Greece anymore money until the shortfall of $6.07 billion is made up. This is a problematic position for Europe. The ECB has already said that they will not be taking any losses in their portfolio so that leaves the various stabilization funds to take the hit or the various nations of Europe to do the debt forgiveness dance or to put up more actual cash themselves. Germany, who has elections shortly, has already said that they would not be participating in either a new money giveaway or a debt forgiveness scheme and so everyone is in a gridlock with no new money for Greece to be forthcoming unless it is broken.
 
In the meantime the financial condition of Greece just keeps getting worse. Every new report gives us numbers that are worse than not only the absurd projections but worse than anyone has imagined or feared. The worst case scenario has not even been close to the actual case scenario as the pension fund obligations of the country now stand at almost 19% of their current GDP. 
 
The sad truth is that the country cannot pay their bills, cannot pay their pension obligations, cannot fund social services and is just about out of money to even run their government. The reality is; they are bankrupt again and there is no way out without some form of debt forgiveness and more money. Debt forgiveness, alone, will not cut the mustard now by itself and some kind of end game may well be near. 
 
If Greece does blow up the losses will be staggering which is why that Europe has kept them alive. If the IMF holds to their word and refuses additional aid then Europe is finally going to have to confront the issue instead of engaging in their usual can kicking. The cheese is beginning to bind. 
 
Somebody somewhere is going to take a hit. Somebody somewhere is going to have to supply more capital in this race to the finish at Marathon. Jason and the Argonauts are about to re-enter the Straits of Messina and the sea monsters, Scylla and Charybdis, are going to have to be dealt with and someone must decide which catastrophe to face once again. If the decision is made not to make the crossing then Mutiny may well be on the horizon!