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Greek Bondholder Talks Stalled, Agreement Unlikely By Monday Deadline

Tyler Durden's picture


We will shortly present an extended analysis of just why the broader media is once again wrong in their interpretation of who has the upper hand in the Greek bankruptcy "fresh start" negotiations (because while Greece may not have formally filed bankruptcy, or insolvency, or whatever one wishes to call it, the talks right now are basically determining what post-reorg Greece will look like, and specifically its fresh start accounting balance sheet with or without an EOD trigger), and why hedge funds have controlled the process all along.

In the meantime, we were not at all surprised to learn this morning that not only has an agreement not been met ahead of Monday's critical Eurozone FinMin meeting (the first of many for 2012) in Brussels, but talks have "stalled". Dow Jones reports: "Talks between Greece and its private sector creditors over a debt writedown plan appeared to stall Saturday as the banks' top negotiator left Athens amid signs of fresh disagreements over how much Greece would pay its bondholders in the future. Officials close to the talks said they may not conclude before a meeting Monday of euro-zone finance ministers where a second bailout which will keep Greece from defaulting is supposed to be discussed. Without a deal on the write-down of the debt held in private hands, the loan can't be released. Institute of International Finance chief Charles Dallara, who has been negotiating with Greek officials on the bond swap plan for the last two days, left Athens Saturday as hurdles remained over the interest rate the new bonds would pay private sector creditors. "Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon," said a person with direct knowledge of the talks." Which is why any statements that Greece, or the ECB, has all the leverage are total rubbish - if Greece wanted to get the deal done over Hedge Funds' dead bodies, it would have. It hasn't. And yes, a forced cram down of UK-indentured Greek bonds is still a possibiliy, but we will shortly make all too clear that should Greece proceed with this last ditch scorched earth approach, it would mean a complete overhaul of the entire PIIGS bond market, and why a sell off in €800 billion of it would be imminent.

In the meantime, some more details from Dow Jones:

IIF spokesman Frank Vogl said that Dallara had a personal engagement in Paris and had to leave but that a team remains in Athens. Dallara is not expected to return to the Greek capital over the weekend.


A Greek Finance Ministry official said the IIF chief will continue negotiations with Finance Minister Evangelos Venizelos by phone later Saturday.


The talks, which started up again this week after nearly breaking down a week earlier, come as Greece scrambles to put together a debt-restructuring plan ahead of a Monday meeting of euro-zone finance ministers in Brussels where the debt deal is expected to top the agenda.


However, this now appears unlikely.


"We may not be able to reach a deal before Monday's eurogroup. This is unfortunate because the finance ministers were supposed to have crucial talks on the (second) bailout loan provided there was a deal on the haircut," a senior eurozone government official said.

What this means is that with the March 20 cash outflow "hard deadline" now less than two months away, and absolutely no trace of a deal on the table, the haed default deadline is starin Europe in the face, even as everyone has been giddily gobbling up risk assuming everything is taken care of.

Reaching a deal with private creditors is a key precondition for Greece to receive a fresh, EUR130 billion bailout from its European partners and the International Monetary Fund.


The aim is for a voluntary restructuring of some EUR206 billion of debt Greece owes its private creditors by exchanging old bonds for new ones worth half the value. That would wipe out EUR100 billion worth of Greece's EUR360 billion debt pile--saving the country some EUR4 billion a year in interest payments--but forcing steep losses on bond holders.


The two sides appeared to be closing in on a deal that would give creditors new bonds paying a 3.5% coupon for shorter maturities and rising to a cap of 4.6% on longer-dated bonds. The average coupon would amount to around 4%


Earlier, people familiar with the matter said that the IMF and Germany don't believe Greece's debt would return to sustainable levels if the average coupon on the new bonds is around 4%, pushing for a lower coupon.


"We were discussing technical and legal issues having agreed in principle to an average coupon of 4%, but the IMF insists this won't be enough to bring (Greece's) debt back to sustainable levels," said another person with knowledge of the talks. This is the second

intervention by Germany and the IMF in debt talks in the last eight days over the coupon rate.

Reuters adds that the ever-cheerful Dallara (who had a "sure deal" when Greek bonds were trading about 300% higher), has now left the country:

The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters.


Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.


The IIF said on Friday that the elements of the deal were coming into place, adding: "Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy."

And to think: a €9 billion hedge fund blocking position is all it would take to kill all this "decisiveness" and the "opportunity." Much more on this topic shortly, in a post to cover the downside scenario, which now appear inevitable, next steps.


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Sat, 01/21/2012 - 11:57 | 2084054 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A Greek default is priced in.

Sat, 01/21/2012 - 12:08 | 2084067 Lord Welligton
Lord Welligton's picture

Could lead to civil war.

I don't think that has been priced in just yet.

Portugal to follow suit?


Sat, 01/21/2012 - 12:12 | 2084089 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Portugal default:  Priced in.

Sat, 01/21/2012 - 13:16 | 2084226 e2thex
e2thex's picture

USD====>IMF======>Greece, Portugal====>Austerity Discussions(Cafes, Sun, Wine)====>Rewind

Sat, 01/21/2012 - 17:34 | 2084979 Vaiman
Vaiman's picture

Wow.  Bloomberg was offering a different story yesterday.....laced with some good ole hopium.

Greek Debt-Swap Accord ‘Coming Into Place’

Doesn't sound like it's coming into place.  Maybe into "a" place....a place of more frustration, deadlock and failure!


Sat, 01/21/2012 - 18:02 | 2085018 phungus_mungus
phungus_mungus's picture

Bloomberg isn't the only retard factory in the media reporting all is going to be fine, a deal is in place, etc...

The crack rock these loons are hitting must be ginormous! 


Sat, 01/21/2012 - 18:57 | 2085119 SeattleBruce
SeattleBruce's picture

Oh the difference 1 day can make...or 2 hours...or just a source of information that isn't totally captured by TPTB...

Sat, 01/21/2012 - 12:13 | 2084093 agent default
agent default's picture

Don't think so.  Basically the EU/IMF will make certain that Greece will be so thoroughly crushed and ground that no other country will want to go ahead with a similar debt reduction process.  The Greeks don't get that this PSI nonsense will turn out far worse than an immediate and outright default.

Sat, 01/21/2012 - 15:03 | 2084513 JLee2027
JLee2027's picture

Don't forget the old mantra that when you owe the money, the debt enslavers own you. However, if you owe the enslavers huge and unpayable amounts of money, you own them. 

Greece is not the one who is desperate here.

Sat, 01/21/2012 - 15:25 | 2084586 CrashisOptimistic
CrashisOptimistic's picture

For he 90th time, there is no default.

If Greece were declare they are not repaying the debt, the banks can just nod and smile and ignore them, and continue to compound the interest and penalties forever.  If Greece then ever holds an asset outside Greece or the EU, the banks can get a local court to confiscate it.

This is forever.  There is no default.  A sovereign default doesn't work.  It used to be if a country owed another money, and then did not repay it, it would mean war and annexation of territory.  

Banks have no armies, and even if they did, Greece doesn't have assets inside Greece that could be confiscated.  The last thing banks want is a sovereign state of their own so they don't want territory, either.

So forget defaults.  They don't exist.


Sat, 01/21/2012 - 16:43 | 2084854 roy10
roy10's picture

You cannot confiscate anything from a sovereign government. That’s the entire idea of being sovereign. There is no recourse for the bond holders.

Sat, 01/21/2012 - 18:27 | 2085063 CrashisOptimistic
CrashisOptimistic's picture


Of course you can.  Greece has state owned shipping.

Sat, 01/21/2012 - 18:41 | 2085085 roy10
roy10's picture

You can't = no law allows it.

Sat, 01/21/2012 - 19:30 | 2085191 Vaiman
Vaiman's picture

I would think a default would be similar to a bankruptcy.  The slate is wiped clean and nothing can be collected, no judgement against the creditor remaining, nothing owing.

Sat, 01/21/2012 - 21:17 | 2085441 CrashisOptimistic
CrashisOptimistic's picture

It would be, but there is no international bankrupcy court.

Simply that.  Greece can declare they won't repay the debt.  The banks don't have to listen.  They can compound the numbers and send requests for payment every quarter.  Greece ignores it and can never hold assets in overseas banks.

There is no law on this matter.  The Greeks borrowed the money.  The creditors want their money back.  Period.

There is no bankruptcy court with international jurisdiction.

Sun, 01/22/2012 - 00:19 | 2085787 sun tzu
sun tzu's picture

You're such a fucking idiot and wrong on every point

Sun, 01/22/2012 - 03:43 | 2085985 spartan speculation
spartan speculation's picture

WRONG .  they're trying to change greek law now so that bond holders can take assets from their government in case of a default. as it stands now bondholders in an event of a default get what they deserve nothing. 

Sun, 01/22/2012 - 13:02 | 2086542 sun tzu
sun tzu's picture

the greeks need to start lynching some politicians if that happens

Sun, 01/22/2012 - 00:18 | 2085785 sun tzu
sun tzu's picture

You're full of shit. Plenty of countries have defaulted and I haven't seen their assets seized. 

Sat, 01/21/2012 - 22:44 | 2085621 Calmyourself
Calmyourself's picture

So nothing changes until people are hungry.. I am glad you all say this better than me, no rule of law, means no contracts, no CDS, no derivatives no nothing just a slide into fascism cheered by the complicit media and the completely soporific sheep..

Thu, 03/29/2012 - 05:58 | 2299928 marusca91
marusca91's picture

jocuri cu bile it would mean a complete overhaul of the entire PIIGS bond market, and why a sell off in €800 billion of it would be imminent. ben 10

Sat, 01/21/2012 - 18:16 | 2085042 supafuckinmingster
supafuckinmingster's picture

If I owe the bank $1000 it's my problem. If I owe the same bank $1000000000 it's their problem.

Sat, 01/21/2012 - 13:20 | 2084237 true brain
true brain's picture

Like I said before: hedgefunds win if Greek defaults. first they cash out their cds, then their shorts on the market will pay off big time, way more than any loss on the bonds. it's cold calculation and cold hard cash.

Sat, 01/21/2012 - 13:36 | 2084289 vote_libertaria...
vote_libertarian_party's picture

I suspect the counter party risk is immense.  Thus the reason it will not be triggered.  Even if the losses are 70%.


Plus, being off balance sheet, does anybody know what was the total value of the insurance bought?  $100B?...$500B...$1T???  You don't have to own the bonds to buy the insurance.

Sat, 01/21/2012 - 13:50 | 2084321 bgilliam83
bgilliam83's picture

exactly right.  This shit show is fascinating.  My dog tootsie might have some Greek/piigs CDS for all I know, but the big catch is that's a bet you do NOT want to end up winning for a number of reasons.  There is no right answer for either the hedge funds or Greece!  Get ready for some blood shed my friends.

Sat, 01/21/2012 - 14:11 | 2084379 Tijuana Donkey Show
Tijuana Donkey Show's picture

Does your dog work for Goldman? I'd be more worried Tootsie is selling CDS, on margin.....

Sat, 01/21/2012 - 15:36 | 2084644 bgilliam83
bgilliam83's picture

No, but she would be a good nomination for the next treasury secretary.

Sat, 01/21/2012 - 22:57 | 2085060 Tyranny is Love
Tyranny is Love's picture

Correct me if I'm wrong but Lucas Papademos is still the Prime Minister of Greece and Evangelos Venizelos is the finance Minister.

As I understand it both are owned by Goldman Sac's, and  Papademosis' a member of the Trilateral Commission (possible Bilderberger?). What are the chances that either of these two are acting independently? What ever happens with Greece on the 20 of March will be what is planned to happen.

Sat, 01/21/2012 - 14:43 | 2084458 dracos_ghost
dracos_ghost's picture

A bigger question is who are writers of CDS's at this point. If the hedgies win on a default, the bigger banks win on a default, who is selling the protection?

Sat, 01/21/2012 - 15:04 | 2084519 Lets Hang Parliament
Lets Hang Parliament's picture

It'll be the "smaller" banks then. But not to worry they have all passed the ECB capital stress testing criteria. What's that funny smell of burning garlic and spaghetti?!

Sat, 01/21/2012 - 18:45 | 2085096 trebuchet
trebuchet's picture

US German French UK banks and Insurance companies e.g. Allianz 

Sat, 01/21/2012 - 22:58 | 2085648 Calmyourself
Calmyourself's picture

Virtually every bank of size in the world is insolvent no one is paying on the CDS which is why there will not be a payout..  Ben and the boys will just change the rules, no law or contracts no problem..

Sun, 01/22/2012 - 00:22 | 2085792 sun tzu
sun tzu's picture

I don't know who is selling the insurance, but I know who will be paying. 


US taxpayers

Sat, 01/21/2012 - 13:31 | 2084271 disabledvet
disabledvet's picture

they never are, are they. One of my all time favorites is going into the collapse of 2008 "financial services have now discovered a business model that makes them immune from the business cycle." Yeah right!

Sat, 01/21/2012 - 12:06 | 2084070 LawsofPhysics
LawsofPhysics's picture

It matters not, move the deadline.  The new age solution to all difficult problems is to always appear to be working on a solution but to never actually have a solution.  Same as it ever was.

Sat, 01/21/2012 - 12:09 | 2084081 Boilermaker
Boilermaker's picture

Exactly.  They'll just redefine everything again and again and again.  Throw in a couple of 'meetings' of the G20 and they'll just perpetually delay everything.

Seriously, who gives a fuck now?  It's a make-it-up-as-you-go world now.

Sat, 01/21/2012 - 15:05 | 2084521 JLee2027
JLee2027's picture

They've been doing that for 2 years on Greece. Time's up.

Sat, 01/21/2012 - 18:31 | 2085075 CrashisOptimistic
CrashisOptimistic's picture

The problem with that scenario is they run a huge deficit.

They have to fund it.  Germany says no.  Their interest rates are so high they can't borrow privately.

I would agree with you if the delay delay delay only applied to the old debt.  There is, however, a difference between dragging out interest payments and borrowing new debt.  

No one will lend.  

Let's all take a step back and remember that all these fixes are just new debt.  They are borrowing new money to make interest payments and EVERYONE involved is carefully ignoring what happens after they cobble together a tranche for March.  They will then have new debt earning new interest, fiscal contraction of GDP and another tranche required in June.

Sat, 01/21/2012 - 12:13 | 2084091 LetThemEatRand
LetThemEatRand's picture

This is not my beautiful ponzi scheme.

Sat, 01/21/2012 - 12:30 | 2084127 Spastica Rex
Spastica Rex's picture

Obscure Talking Heads reference +1

Sat, 01/21/2012 - 20:56 | 2085386 StychoKiller
StychoKiller's picture

"And you may ask yourself:  My God, What have I done?"

Sat, 01/21/2012 - 19:33 | 2085196 Terra-Firma
Terra-Firma's picture

ponzi works on the upside and downside. It's about feeding the direction and has no basis in reality.  Ponzi is a bidirectional, the outcomes the same. BUST!

The upside is perpetuated by easy money as is the down side. The key is who profits; and by profit i mean financially, economically, politically and militarily.

The euro mess is really a political power play. The US housing ponzi was a financial play that morphed into a political and soon to be military play.  The way i see it, the only way for the US to maintain its standard of living is to own the present value of the future value of oil. The worlds most valuable resource.

Sat, 01/21/2012 - 12:11 | 2084087 Stack Trace
Stack Trace's picture

Is a Portugese and Italian default priced in?

Sat, 01/21/2012 - 12:14 | 2084092 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Priced in!

Sat, 01/21/2012 - 12:39 | 2084146 francis_sawyer
francis_sawyer's picture

Damn those Europeans are good... I still have a tough time "pricing in" how much I have to spend on a dinner tab to get some bunga bunga at the end of a date...

Sat, 01/21/2012 - 12:50 | 2084174 Schmuck Raker
Schmuck Raker's picture

"In" is all that matters. "Pricing"...less so.

Sat, 01/21/2012 - 18:56 | 2085114 nodhannum
nodhannum's picture

How much you have to spend? Good lord, you are giving it away for free or paying for it? I've never paid for it in my life. Paying for it is sexist..treating women as sex objects and treating yourself as a money or career object.

Sat, 01/21/2012 - 20:51 | 2085373 oogs66
oogs66's picture

Are weak earnings priced in?

Sat, 01/21/2012 - 13:56 | 2084352 SMG
SMG's picture

Day after day, I sit here and think to myself:   "This is it, this is finally the trigger.  The system is finally going to clear and we can get to work on starting over." But alas it never comes  It's hard to wait.

Sat, 01/21/2012 - 20:58 | 2085392 StychoKiller
StychoKiller's picture

Hard to "Transform", when you're in stasis-lock! :>D

Sat, 01/21/2012 - 18:47 | 2085098 midtowng
midtowng's picture

How is this possible? I read just the other day that the bailout agreement had just happened.

Of course it read the same thing the week before. and the week before that. And the week before that.

In fact, the central bankers have saved the financial world from its own screwups pretty much every week for the last several years.

Sat, 01/21/2012 - 12:00 | 2084059 williambanzai7
williambanzai7's picture

Fear not say the Euro Polyannas...

Sat, 01/21/2012 - 12:14 | 2084094 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Europeans have emotionally priced it in.

Sat, 01/21/2012 - 12:29 | 2084125 Roy T
Roy T's picture

Sounds VERY bullish to me then  :)

Sat, 01/21/2012 - 12:00 | 2084061 Irish66
Irish66's picture

Can someone explain how you can just change the bonds from Greek law to UK law.

Sat, 01/21/2012 - 12:05 | 2084069 Lord Welligton
Lord Welligton's picture

If they were sold under UK law in the first place, not uncommon, they are subject to UK law.

Sat, 01/21/2012 - 12:14 | 2084090 London Banker
London Banker's picture

International creditors prefer debt issued under English law as English courts are widely viewed as being more likely to rule neutrally on any dispute that arises, and English commercial law is well defined and well understood globally.  By contrast, no one knows Greek law and no one trusts Greek judges to rule against Greeks.  As a result, much of the international securities market is issued subject to English law regardless of the nationalities of the debtors or creditors or the currency of contract.

Sat, 01/21/2012 - 12:18 | 2084104 Irish66
Irish66's picture

Thank you.. so do we know how much is under UK and how much is under Greek Law?

Does it really matter and can they just change it?

Sat, 01/21/2012 - 12:54 | 2084185 Schmuck Raker
Schmuck Raker's picture

I believe about 90% was issued under Greek law.

Sat, 01/21/2012 - 13:19 | 2084233 Blank Reg
Blank Reg's picture

It turns out, over 90% of Greek debt is governed by the terms of Greek law. Which offers much less protection than the UK laws governing the remaining ~10%.


Here's the link:

Sat, 01/21/2012 - 13:35 | 2084281 disabledvet
disabledvet's picture

ooops. "I'm sorry...Credit Default Swap doesn't translate into Greek. Could you say that term again?"

Sun, 01/22/2012 - 03:53 | 2085993 spartan speculation
spartan speculation's picture

Its translation is "Ghamesso " 

Sat, 01/21/2012 - 13:43 | 2084312 Irish66
Irish66's picture

3. Collective Action Clause (CAC)

  • English law-Greek bonds can have changes imposed on all bondholders, if a majority agrees
  • Greek law-Greek bonds have no such clause
  • Isn't this clause why the talks ended yesterday?

Sat, 01/21/2012 - 15:27 | 2084607 CrashisOptimistic
CrashisOptimistic's picture


One would think the Greek government could retroactively apply CACs to ALL Greek bonds, even after they are signed.

All EU courts would uphold the move.

But it may be that the hedgies would file suit in US courts.  That would be interesting.  One is not supposed to be able to change a contract after it is signed, but I'm sure lawyers could dig to find precedent if that is what is required to keep the juggled balls in the air.

Sat, 01/21/2012 - 17:09 | 2084926 ucsbcanuck
ucsbcanuck's picture

"One would think the Greek government could retroactively apply CACs to ALL Greek bonds, even after they are signed."

Even the ones held by the ECB?

"All EU courts would uphold the move."

The UK courts might uphold the move but declare that some of the bondholders were coerced into it as it was retroactive. Hence why the bondholders want UK law.  


Sat, 01/21/2012 - 18:59 | 2085125 nodhannum
nodhannum's picture

Tell that to senior GM bond holders.

Sat, 01/21/2012 - 21:01 | 2085397 StychoKiller
StychoKiller's picture

Calvinball -- who wants to play?

Sat, 01/21/2012 - 21:03 | 2085401 StychoKiller
StychoKiller's picture

Calvinball -- who wants to play?

[edit:]  All right, what is going on with the site today??

Sat, 01/21/2012 - 12:00 | 2084062 Fips_OnTheSpot
Fips_OnTheSpot's picture

Keiser report just put it right.. the Greek have the trumps. Let 'em default and wipe off the dust after settling.

Sat, 01/21/2012 - 12:03 | 2084065 hyper-critical
hyper-critical's picture


Sat, 01/21/2012 - 12:04 | 2084066 lizzy36
lizzy36's picture

What were the odds?

Damn near 100%? And to think they have only had 5 months to close this thing.

Pretty sure a dork could close a cheerleader faster than that. 

Sat, 01/21/2012 - 12:16 | 2084096 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

That's not saying much.  Cheerleaders is easy.

Sat, 01/21/2012 - 12:31 | 2084131 LetThemEatRand
LetThemEatRand's picture

Weren't W and his Halliburton built drone clone Rick Perry both cheerleaders?

Sun, 01/22/2012 - 13:04 | 2086547 sun tzu
sun tzu's picture

Sounds like you want to toss their salad.

Sat, 01/21/2012 - 13:09 | 2084212 WonderDawg
WonderDawg's picture

Not back in my day. Cheerleaders were like trophies. Bag one and you're a hero.

Sat, 01/21/2012 - 19:01 | 2085128 nodhannum
nodhannum's picture

If you are in med or law school.

Sun, 01/22/2012 - 13:04 | 2086549 sun tzu
sun tzu's picture

or a feetsbawl playa

Sat, 01/21/2012 - 12:18 | 2084099 HD
HD's picture

 Actually, I have some experience in the dork to cheerleader area and it takes a good nine to eleven months to close a cheerleader with considerable effort and investment. You need a little alcohol and unresolved daddy issues to get closer to the five months.

  However, getting the cheerleader to "go greek" was beyond my abilities at the time...

Sat, 01/21/2012 - 12:30 | 2084132 lizzy36
lizzy36's picture

If i could have given you a +100 for that comment i would have.

Thanks for the laugh.

Sat, 01/21/2012 - 12:39 | 2084144 HD
HD's picture

Thanks Lizzy - nice of you to say.

Sat, 01/21/2012 - 13:39 | 2084298 disabledvet
disabledvet's picture

so if i loaned you some money and you refused to pay me back would you sue me in Human Rights court too?

Sat, 01/21/2012 - 13:39 | 2084301 disabledvet
disabledvet's picture

How about if i actually violated your human rights?

Sat, 01/21/2012 - 14:21 | 2084401 Tijuana Donkey Show
Tijuana Donkey Show's picture

Not if you go greek.....

Sat, 01/21/2012 - 19:08 | 2085144 nodhannum
nodhannum's picture

No problemo. I once had a cheerleader tell me we had to go Greek because she was holding out for a med student and she wanted to stay a virgin to show him to help close the deal. Go figure. Welcome to UNC-CH!

Sat, 01/21/2012 - 12:07 | 2084074 SIOP
SIOP's picture

Am I the only one that's become completely desensitized to all these Greek "the end is near for Greece" news that seem to occur every 5 minutes?



Sat, 01/21/2012 - 12:17 | 2084098 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

No, you are not.  Everyone has priced it in.

Sat, 01/21/2012 - 12:58 | 2084194 john39
john39's picture

no doubt the plan all along.  can't fix the problem... but you can manipulate the reaction.

Sat, 01/21/2012 - 12:08 | 2084076 Boilermaker
Boilermaker's picture

You realize they'll just find a way for this not to be a credit event....right?

Markets, especially banks, will fucking soar on this news....I shit you not.  They have that kind of control on the equities markets. 

Sat, 01/21/2012 - 12:15 | 2084079 Caviar Emptor
Caviar Emptor's picture

Spillover effect to Portugal already being felt as yields climbed to Euro-era high. Speculation that Portugal will imminently try to enforce haircuts as the next weakest link


From the article: The thinking is, if Greece gets private bondholders to write-down losses on their Greek bond investments, thereby reducing its debt load, what’s to stop struggling Portugal from seeking to do the same?

Sat, 01/21/2012 - 12:38 | 2084141 roy10
roy10's picture

I think the ECB/EU has pretty much given up on Portugal. Their reform program is not working and the economy is spiraling down.

One Europe is done with Greece, they will turn to deal with Portugal. Expect some PSI deal in Portugal during 2013.

Sat, 01/21/2012 - 12:48 | 2084170 Caviar Emptor
Caviar Emptor's picture

Yup. And after Portugal....Spain? 

As we predicted here on ZH: Greece is just the first domino. All Euro high-debt countries will now want to rush to be next in line for debt restructuring that they can do to delay crushing austerity. Also that means we're in a new phase of the crisis: defaults and haircuts were supposed to not be possible from 08-12 but now they are. And once they start it's hard for them not to accelerate

Sat, 01/21/2012 - 15:50 | 2084703 roy10
roy10's picture

Spain is very far away from a default. A few years away. Italy is closer.

In any case, as long as the ECB is firewalling Spain/Italy, they will not default. The crisis is going to continue for years to come with the eventual defaults of all PIIGS countries, but it’s going to be a very slow process.

Sat, 01/21/2012 - 17:12 | 2084928 ucsbcanuck
ucsbcanuck's picture

May not be as far as you think. Many of the Spanish banks hold tons of Portuguese debt. Wipe out that debt - and they could be insolvent.

Sat, 01/21/2012 - 18:25 | 2085058 roy10
roy10's picture

Portugal isn't that close either. Maybe 2 years away. Now that the ECB is all in, the process is going to be very long.

Sat, 01/21/2012 - 21:06 | 2085411 StychoKiller
StychoKiller's picture

A Trillion here, a trillion there, pretty soon you're talking (un)real Fiat money!  :>D

Sun, 01/22/2012 - 03:58 | 2085995 spartan speculation
spartan speculation's picture

If Greece defaults the rest of the PIIGS will be stepping over each other to be next to default. 


Sat, 01/21/2012 - 13:37 | 2084292 disabledvet
disabledvet's picture

are they operating under Greek law too?

Sat, 01/21/2012 - 12:10 | 2084080 RobotTrader
RobotTrader's picture

As if anything happening in Greece matters.....


SPY is now advancing in many different foreign currencies, making new highs in Euros and British Pounds.

Bottom line is that the SPY is now in a global bull market.$spx:FXE,$spx:FXY,$spx:FXC,$spx:FXS,$spx:FXA,$spx:FXM,$spx:FXB,$spx:FXF|D

And despite the screeching of the doom-sayers on King World News, the Trade of the Decade has been in the specialty retail stock group.

Looking at these charts simply makes your jaw drop:

And if anybody doubts that the Dow is in a new bull market, check out the massive breakout in MSFT yesterday on 2x normal volume, as Newmont Mining gets chain-sold.

Eventually the retail investor will start stepping back into stocks and the trillions invested in Fixed Income will also start migrating back to equities.

If that happens we'll see a multi-year meltup in equities that could last for years.

And the same perma-screechers here will still be scratching their heads, wondering what happened.

I publicly stated here on this board that when the Dexia bailout news hit the tape and we had that massive move off the lows on October 2, the intermediate lows were in.



Sat, 01/21/2012 - 12:19 | 2084110 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You don't need to write all that, just, "It's priced in".  We don't need to rationalize markets anymore to comment on them, we just need to see what the central planners have done with the numbers and trust that it has all been priced in.

Sat, 01/21/2012 - 12:57 | 2084191 atlee
atlee's picture

Keep telling yourself that and once everyone is convinced and fully committed to the long side, they will come and clean your clocks with a healthy dose of reality. Laughing all the way I might add.

Sat, 01/21/2012 - 13:30 | 2084265 ucsbcanuck
ucsbcanuck's picture

LH is being sarcastic atlee

Sat, 01/21/2012 - 13:29 | 2084266 ucsbcanuck
ucsbcanuck's picture

LH is being sarcastic atlee

Sat, 01/21/2012 - 15:59 | 2084730 atlee
atlee's picture

If he would just add Clapton or Richards to that name he would be my fav poster.

Sat, 01/21/2012 - 19:41 | 2085216 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Them guys ain't dumb!  What about "Cooder"?

Sat, 01/21/2012 - 21:09 | 2085415 StychoKiller
StychoKiller's picture

Would you settle for Jimmy Page?

Sat, 01/21/2012 - 12:50 | 2084111 Caviar Emptor
Caviar Emptor's picture



Earnings beats falling behind previous quarters


Reuters) - Even though it's just begun, the fourth-quarter earnings period is having trouble keeping up with the robust results of the recent past.


Some 60 percent of Standard & Poor's 500 .SPX companies that have reported results so far this earnings season have beaten profit expectations. That compares with 68 percent at this point in the reporting cycle for the third-quarter and is well below the 78 percent that exceeded estimates in the second quarter, according to Thomson Reuters data.


That is despite lowered analyst expectations. Estimates have dropped sharply since July, largely because of worries about the impact of Europe's debt crisis on U.S. sales.


If the beat rate stays at 60 percent until all results are in, it would be the lowest for any quarter since the fourth quarter of 2008, when the country was reeling from an economic recession.


There go your record earnings. When momentum weakens....


Sat, 01/21/2012 - 12:39 | 2084142 oogs66
oogs66's picture

One of your better posts. Some actual details. Though for the record you do seem to call for massive new bull rally multiple times a day

Sat, 01/21/2012 - 12:47 | 2084168 centerline
centerline's picture

Man, you are really trying to light this place up today!  I can see a regular junk-fest coming your way.

Really, too many people try to mix trading with investing and the real world.  Trading is still alive.  Traditional investing is dead.  And the real world is arguably a mess.

Reality is that the system is far too complex, and governments will do everything in their power to keep the game going.

I could see on the edge a couple of years at most.  2015 maximum... maybe.  There is a limit here to the exponential math coupled with other factors such as aging baby boomer population, increasing cost of oil extraction/production, growing social tensions, etc.  The frantic pace at which civil liberties are being attacked ought to be a clue as to how close some sort of event may be.

There of course is the possibility that being in the markets through the coming event horizon is a wise move.  I think it would be foolish not to awknowledge this possibility.  But, I wouldn't want to be "all in" on this bet.  There is also a chance the casino will be nuked with no chance of escape for the average person.



Sat, 01/21/2012 - 13:14 | 2084222 WonderDawg
WonderDawg's picture

Well said, Centerline. You present a rational and logical case. I'm of the belief that the markets are just about ready to roll over, next week, if they didn't hit the high last week. I'm betting on the downside, but as you said, I'm definitely not going all in on any scenario just yet.

Sat, 01/21/2012 - 13:33 | 2084275 ucsbcanuck
ucsbcanuck's picture

Actually - trading and investing are the real world.

Trading is based on short-term dynamics in the real world. so it's more emotion-driven.

Investing is based on long-term dynamics in the real world, so it's more fundamentals driven.

Problem is that right now both dynamics are uncertain, so I'm staying out.


Sat, 01/21/2012 - 14:20 | 2084395 centerline
centerline's picture

I will contend that you are right about trading and investing... BUT, this is part of the problem. People are forced to take risks (more and more each year) in order to have a chance to send kids to college, retire, etc. People are being forced INTO the casino.

Let's look at retirement funds for example. It used to be that companies put aside cash for this. Then it became necessary to invest to compound the savings. At that stage, risk, return, duration, etc. were considered. Now, it is all about return. Everything else has been tossed out for yield - else the funds roll over.

Clearly this won't end well. Risk is real and has a price.

Sat, 01/21/2012 - 17:21 | 2084952 ucsbcanuck
ucsbcanuck's picture

You do have a point - people are being forced into the casino because there is no better choice. 

Add politics to the mix - because people have their life savings in the casino, if the casino crashes, there go their life savings. They'll get angry with the government at that point. Can't have that. So the government is forced to intervene.

I don't like it - it almost feels like the markets have become emotional and politicised.

Sat, 01/21/2012 - 13:47 | 2084319 Spastica Rex
Spastica Rex's picture

I'm starting to think the illusion will continue on for a long, long time. However, the construct will be relavent to fewer and fewer people. My hunch is that the top 20% in the USA will do fine for the remainder of my lifetime - maybe another 25 or 30 years - if I'm "lucky" enough to live that long. Expectations will be managed down for everyone else, coupled with the promise that if the lower classess will just work harder and be more competitive, the "middle class" will always be open to them.

Sat, 01/21/2012 - 13:25 | 2084250 spiral galaxy
spiral galaxy's picture

You're right!  Overlay the DOW chart on ZH impending doom articles for since March of '09 and the DOW has been on a steady matter the news, doom or gloom.  It 'hesitated' briefly from July-Sept 2011 for the Greek crisis but has since moved on......problem solved!...whatever the solution may be.....printing, can kicking, haircuts, new governments, austerity, etc., blah.  It makes no difference, just up, up, and up!  And it looks to continue it's trek to 14K before the end of the year given elections, more money printing, more economic aid (think housing). consolidation of power, etc.  It's a monster that can't be stopped and ignores any reality.  Just UP!  Sadly.

Sat, 01/21/2012 - 19:22 | 2085171 SeattleBruce
SeattleBruce's picture

Now, adjust for inflation (make the returns real returns), and compare to gold.  Also, compare with German stocks during Weimar.

Not as pretty...

Sat, 01/21/2012 - 13:41 | 2084309 disabledvet
disabledvet's picture

I'm still long the Army, Navy, Air Force and Marine Corps as well! I must admit i was wrong on my Marine Corps call. There's still time tho! Still time!

Sat, 01/21/2012 - 14:02 | 2084359 bgilliam83
bgilliam83's picture

Weimar Germany had quite a bull stock market.  If this tells me anything it's batten down the hatchets for the USD currency reval

Sat, 01/21/2012 - 15:06 | 2084526 Max Fischer
Max Fischer's picture



With some exception, it is always the posts with the most junks that are the most accurate and prescient.  I'm willing to bet that RoboTrader's unwavering bullishness will be the only prediction to be proven true by the end of the year. 

All the daily nonsense about paper/physical decoupling, silver shortages, Comex implosions, Peak oil, hyperinflation, industrial panics, death of the US dollar....  all of it will be laughed at by the end of the year - just as it was this past year.  

Will RoboTrader be the only guy right at ZH?   

Max Fischer, Carpe Hunc  

Sat, 01/21/2012 - 15:14 | 2084553 Fuh Querada
Fuh Querada's picture what are you buying - specifically ?

Sat, 01/21/2012 - 16:21 | 2084788 css1971
css1971's picture

It's a bear market bounce. Oil won't allow it to be anything else.


Sat, 01/21/2012 - 19:28 | 2085185 SeattleBruce
SeattleBruce's picture

"All the daily nonsense"

And what about debt, it only matters to individuals and US states?  No, it WILL matter because there's math involved, impossible math.  Just a matter of when.  Til then, though, yeah, daily nonsense.  But not here, just most everywhere else, like the offices of CBs, halls of national legistlatures, 'oversight' and ratings bodies, press and editorial rooms, corporate board al...

Sat, 01/21/2012 - 15:12 | 2084551 Fuh Querada
Fuh Querada's picture

@rabid traipser

I just love your knife-sharp retrospective analyses. Thanks a bunch.

Sat, 01/21/2012 - 12:10 | 2084082 Stack Trace
Stack Trace's picture

Can't they just end this farce now? I have an end of the world party to plan.

Sat, 01/21/2012 - 12:10 | 2084083 PORTA PORTA
PORTA PORTA's picture

On Okt 26/27th summit, they "decided" on specific strategy and targets, in regards to Greek PSI ect...

On Jan 30th new summit, they have to decde again on new facts and go back to parliaments and demand the NEW GO AHAEAD... on what??

- haircut 65-70% ( instead of 50% Oct 26/27th )

- New Loan Facility, more than 130b decided on Oct 26/27th. The number will reach 150/180b to my opinion.

in any case since PSI preseeds the New Facility,, we will have 40 days of uncertainty world wide, untol the PSI is final and done ( approx 15 Febryary )

BUT... you crazy bastards...

Without the New Facility there is t=no "cheeze" = 30bio cash quality collateral for the PSI... its the egg and the chicken paradox. That is, they need the New Facility FIRST !!?? get the 30b, assume collaterals to PSI...


and as we speak, they dont have any kind of mandate fron parliaments to enter in the deals theya are into today!

its a mad GOAT world.

here is the latest ISDA report on Greece

Of course there is a solution on the chicken-egg paradox ( PSI/New Facility ) they can propose a "bridge loan facility" an advance of the New Facility ( UNDER ENGLISH LAW ) ... to proceed with PSI.

All i see forward is 40 days of hell, world wide.




Sat, 01/21/2012 - 12:10 | 2084084 tim73
tim73's picture

Negotiating with Greeks is a decade (or two) long process and you will forget what were your goals in the first place but at least the food is good (and booze)! And you might end up marrying (and divorcing) a Greek girl (or two) :)  

Sat, 01/21/2012 - 12:10 | 2084085 roy10
roy10's picture

Either the market doesn't believe there's any chance of a hard Greek default (unlikely) or the hard default would be a meaningless event for the markets.

I think the obsession over Greece is completely unwarranted at this point. The ECB has pretty much firewalled Italy and Spain with its never-ending bond buying program (yeah… “temporary and limited”) and the LTRO liquidity injection.

IMO, we will probably see a collective action clause, as I’m sure this agreement will not achieve full participation. Now, we really need to move on from Greece. It's yesterday's news.

Sat, 01/21/2012 - 15:15 | 2084562 CuriousPasserby
CuriousPasserby's picture

I think the obsession is to keep the CDS from being triggered or the whole system comes crashing down.

Sat, 01/21/2012 - 15:40 | 2084656 roy10
roy10's picture

Greek CDS will not bring the system down. I still believe the CDS will be triggered since there won't be sufficient participation.

Sat, 01/21/2012 - 19:32 | 2085192 SeattleBruce
SeattleBruce's picture

What system?  Doesn't appear to be much of a system left, just putting out fires.  They're making it up as they go...dunno how you can control things very well that way.

Sat, 01/21/2012 - 19:59 | 2085242 roy10
roy10's picture

They just gave banks 400B Euros. That could cover Greece, Portugal and Spain.

Sun, 01/22/2012 - 05:01 | 2086055 spartan speculation
spartan speculation's picture

you do realize derivatives market is unregulated has 100's of trillions bounced back n forth just so banks can collect a fee for nothing. what could possibly go wrong there .......... you also realize lehman brothers and bear sterns caused a financial freeze that took roughly 10 trillion dollars to thaw out ??? 


if I'm a hedge fund I pour billions into Greek CDS, otm puts, and buy greek bonds ...... Hello we are here to discuss  haircuts on your greek bonds..... hello ....hello ? lol 


1 thing the stock market hasnt priced in is this Bernanke can not print money with oil at 100/brl if he does it goes to 140 highs or beyond and that will destroy millions of jobs again. the market bulls are not buying on improving earnings or growth they are buying in anticipation of QE. 

Sat, 01/21/2012 - 12:11 | 2084086 dick cheneys ghost
dick cheneys ghost's picture

does mean that the big banks would finally implode? cause thats what im waiting for...

Sat, 01/21/2012 - 12:15 | 2084095 PORTA PORTA
PORTA PORTA's picture

Here is a "letter" a friend of mine ( so called "bondholder" ) wrote... it is VERY INTERESTING !!!


To Mr Loucas Papadimos Prime Minister of Greece ( not elected !! )


Mr Charles H. Dallara IIF


Ms  Christine Lagarde IMF


CC  Mr Samaras, Mr Tsipras, Ms Paparyga, Mr Karatzaferis ( leaders of opposition ) Chairman of the Greek Parliament, All members of the Greek Parliament


For the past three years a program of economic measures was applied in Greece that has not been successful in reaching its objectives. The increase in taxes, pension reductions and all the other measures that have been taken has led to a deep recession. Government revenues have essentially remained the same as two years ago while the economy has plunged from an GDP of 255 billion to 215 billion or a total reduction of 15%. These policies have made the Greek Government debt unsustainable. The sustainability of debt as you all know is a relationship between GDP growth and interest rates. In this case the growth became negative and the interest rates increased to 32% from 3.1%. We agree that the Greek economy was rigid, bureaucratic, and had not used its opportunities offered by its integration in the EU effectively. However despite all of the above the economy was vibrant. The real issue of the economy was the Pension Funds inability to pay pensions and health care. In 2012 the Central Government that guarantees pensions has to pay € 14 billion out of its budget for these services. Demographics (a problem that all western economies will face sooner than later) as well as the inability of Government to collect the pension contributions had a role to play in the inability of pension funds to meet their obligation. But the largest cause of this “bankruptcy” of the pension system was due to the mismanagement and “theft” of pension funds by the Greek governments since the 50’s. We cannot however turn a bankruptcy of a pension fund system to a bankruptcy of a country. Unless this fundamental issue is addressed we will continue to have PSI s restructuring etc. and the problem will not go away as demographics and reduced economic activity will require more and more funding by the Government of Greece. It is a vicious circle that has no end. We have run our economic models that shows that if this pension liability was to disappear tomorrow from the government accounts the deficit would be 3% (including the reduction in the interest to be paid due to lower borrowing costs). In two years from now Greece will have a surplus. World renowned financial institutions have concurred with our analysis. Our proposal is as follows:
  1. The Government entity that was created to hold Greek Government assets (holding company) is endowed with all the assets of the Greek Government.


  1. It issues a €30 billion bond issue with specific assets as collateral, not all of them, under English law. The proceeds of this issue are used to meet pension fund obligations for 2012-2013.


  1. The holding company, constitutionally now, undertakes to pay pension funds deficits. Proper asset management and new potential sources of revenue (gas, oil) will ensure that pension obligations are met. If it cannot meet all obligations than pensions need to be reduced. Here again competent and honest management will be required. The expertise of World Bank and EU on pension fund management will be welcomed


  1. Proper asset management will require that the holding company invests its cash reserves, as all pensions plan do, in the real economy. This would provide funding for new enterprises run by young innovative entrepreneurs. We cannot allow our youth to leave the country.


  1. The Greek government produces a restructuring plan for all of its activities. That is where the expertise of World Bank and EU will also be required given the lack of talent in our politicians.


  1. It presents this restructuring plan to the MARKETS. Having eliminated the pension liability from its books the numbers show that the country can again borrow from the markets at attractive rates without having to resort to any restructuring. Only a 30 billion loan will be required to fund the transition period.
  This proposal in our view eliminates the root cause of the problem and allows the central Government the option to raise money from the markets without the possibility of a default.

We are a proud nation with a long history. We have been mismanaged. This proposal protects our future wealth that is hidden in our soil and seas. It allows us to have a say in our destiny. Anything else, that takes our freedom to act, will fail.



Sat, 01/21/2012 - 19:01 | 2085129 trebuchet
trebuchet's picture

some solid sensible elements, if you think Reikhart (head of EU task force in Greece is not aware of it), go for it.


Uh i think they are working on pension restructuring..

But io would renumber the points before sending coz it looks like your friend cant count



Sat, 01/21/2012 - 12:18 | 2084102 Boilermaker
Boilermaker's picture

My short positions on REITs and the XLF are going to get fucked at 9:30am on Monday...right?

Sat, 01/21/2012 - 12:45 | 2084161 roy10
roy10's picture

Just like any day during the last month.

Sat, 01/21/2012 - 13:36 | 2084290 Randall Cabot
Randall Cabot's picture

You shorted the XLF?

Sat, 01/21/2012 - 15:45 | 2084676 Boilermaker
Boilermaker's picture

I mean the XFL.  It actually worked out pretty good.

Sat, 01/21/2012 - 12:26 | 2084121 eckart
eckart's picture

germany/europe will crush the hedge funds (and rightly so)

Sat, 01/21/2012 - 17:23 | 2084960 ucsbcanuck
ucsbcanuck's picture

Over Greece maybe. But that sets a precedent for the other PIIS bonds. Why would I hold Portuguese bonds for example?

Sat, 01/21/2012 - 12:28 | 2084124 HD
HD's picture

Help me out here.  If there is a deal what is the likely outcome? I know the market will scream everything is "fixed" - but what is the reality? These are real losses on someone's books - whats the counter party risk? These Hedge funds have to know CDS will never be allowed to trigger...

Sat, 01/21/2012 - 12:31 | 2084130 Boilermaker
Boilermaker's picture

..."but what is the reality?"

A:  Whatever they want it to be.

Sat, 01/21/2012 - 12:33 | 2084135 Spastica Rex
Spastica Rex's picture

Reality is for pussies and poor people.

Sat, 01/21/2012 - 12:43 | 2084155 Boilermaker
Boilermaker's picture

Add taxes and laws and I'm all yours.

Sat, 01/21/2012 - 13:31 | 2084272 Randall Cabot
Randall Cabot's picture

And for people who can't handle drugs.

Sat, 01/21/2012 - 15:55 | 2084716 roy10
roy10's picture

You can't force anybody into a voluntary swap. It's clear that not all hedge funds will agree to the swap, which means that the Greeks will either pay them off at par, or force them into the haircut, ths triggering CDS. I think the latter will happen, since it's political suicide to pay these guys at par.

Sat, 01/21/2012 - 17:24 | 2084962 ucsbcanuck
ucsbcanuck's picture

Triggering CDS is also political suicide - can you imagine the headlines? "Those Evil Weapons of Mass Destruction, the CDS, have been Triggered"

Sat, 01/21/2012 - 18:42 | 2085088 roy10
roy10's picture

It will have no effect. They have been trading at deafult levels for 2 years.

Sun, 01/22/2012 - 05:05 | 2086061 spartan speculation
spartan speculation's picture

yeah no effect, just like bear sterns and lehman brothers had no effect. i hope your kidding !! 

Mon, 01/23/2012 - 02:33 | 2087919 ucsbcanuck
ucsbcanuck's picture

Sure, agreed. However the MSM will still jump all over it and make it sound like their leaders caved.

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