Tuesday, 27 April 2010

It’s all Greek to me

“Goldman, Greece, those will be never ending stories”, a friend of mine told me today. “They’ll be pulling the markets up and down and all we have to do is to anticipate those moves and get the most out of them” – he envisaged a nice scenario.

The Goldman case might be a tip of the iceberg. It may drag on and on, the bank might hire excellent lawyers and prove it just bent the law. In the coming weeks I do not predict this case might trigger a bigger correction on the markets, but if regulators and politicians decided to accuse other banks or restrict proprietary trading, the momentum of bull market would be up in the air.

Now the latter. Greece has been facing problems for months on, the deterioration has recently grown apace, but when I saw yields on 2Y Greek bonds had soared to 17%, spread between 10Y German and Greek bonds had exceeded 700 basis points I asked myself if my eyes were deceiving me or if the editor of the hapless news item had made a typing error. But after checking a few other web pages and making sure that S&P agency categorised Greek debt as “junk” and downgraded Portugal’s rating. It’s kind of astonishing to see a Eurozone country rated as issuer of junk bonds.

Stocks tumbled across the Europe, in France CAC 40 index plummeted by impressive 3.82%, trading on Warsaw stock exchange closed ay 16:30 what means nothing else but that tomorrow it will open be far below today close.

What next? Will we be facing the second wave of crisis or will the concerted action of other countries head off the worst scenario? German and French institutions hold a large chunk of Greek debts, so they have a vested interest in coming with aid. As for me, Greece will sooner or later default on its debts, quite probably in mid-May when it will have to roll over much of it. The best idea would be let Greeks leave the Eurozone and let it face the music. Insolvency is just a matter of time, so should other countries chip in to prolong Greek agony? For months things haven’t looked as dangerously as they’re doing now.


adthelad said...

a video from 2008



adthelad said...

I was hoping you'd respond - either with 'what a load of crap' or 'I've mentioned all this before + link'. Maybe when you have a moment?

student SGH said...

I have to apologise to you Adam, but my Onet-crap-poczta has filtered the e-mail notifying of your comments as spam. I've changed the setttings and the will be just marked SPAM. It doesn't matter to their f*cked up system that I put blogger e-mail address onto the white list...

Adam, my opinion is closer to "I've mentioned it before" click on the label crisis or stock exchange to see my posts.

My conclusions are:
1. Stock market valuations usually greatly vary from intrinsic values of stocks.
2. As a speculator who plays actively stock exchange I can tell you it's a casino and nice way of growing rich if you know when to get in and when to pull back
3. Stock market is definitely not for widows and orphans and if you see grannies purchasing equity fund units, it's not only the hallmark of coming bear market, it's a blatant example of human folly.
4. No government should protect speculators and even investors from crashes. They should have a legal protection but manage the market risk on their own.