Greek Default 2015 Poll

(30-06-2015, 12:48 PM)specuvestor Wrote: If you stretch the tenor long enough... basically all debt can be repaid. Inflation alone will help to depreciate the debt on a real basis.

Not so sure about that... borrowing to repay an earlier debt? as in the case
of Greece?

If memory serves me correct, Greece initially owed under 200B a couple of years back.
Had they taken more sensible approach of managing it instead of snow balling it, debt would have been manageable by this time. They choose not to. The choice they have now is between a rock and a hard place, either way it wont end up well.

If they are self sufficient it is still possible to exit the Euro and have their own currency, but they are not. In fact they import everything and export very little. Their market will be in chaos, if their own currency is not welcomed by international community(and looks likely so), there would be hyper inflation. Probably much worse than accepting the austerity measures.

No one would know exactly what would happen, because it has never happened before. But its impact on global financial markets would probably be limited. The drama has been going on for years, quite amazing that they creditors actually allowed them to kick the can further down the road when there almost no chance of them running a balanced budget.

But comparing Greece and the poorer neighbors, the pension cuts are not as dramatic as it seems. And if you look at north korea, most people there do not even have electricity. if North Korea abandon its nuclear ambitions, it is probably the world's most sustainable/environmentally friendly country. They consume very little of everything(with the exception of Kim Jong Un, he cant be consuming little).

(30-06-2015, 05:29 PM)Big Toe Wrote: If they are self sufficient it is still possible to exit the Euro and have their own currency, but they are not.

Quote:Whether Greece will default means very little for the country itself.

This is not what I understand wor. If grexit occurs, the wealth of the middle class will be devastated unless miraculously, the value of the stocks, property and other assets remains the same as measured in euros... tio boh? Without a prosperous middle class, how does an economy remain / become strong?

^^ Like I posted, it will be a trasnfer of wealth from the populace, specifically those with onshore assets, to the currency sensitive sectors including exports and tourism

(30-06-2015, 02:12 PM)Porkbelly Wrote:

(30-06-2015, 12:48 PM)specuvestor Wrote: If you stretch the tenor long enough... basically all debt can be repaid. Inflation alone will help to depreciate the debt on a real basis.

Not so sure about that... borrowing to repay an earlier debt? as in the case
of Greece?

Not talking about refinancing. Indeed as per my other posts, refinancing serves a very important function of having a milestone to reassess credit risk.

What I mean is this: Imagine taking a loan of S$1m 50 years ago when Singapore was independent. That's a lot of money back then and probably only a corporate can do that. Fast forward to now and many people with condo or pte properties have $1m loan. Move forward another 50 years and probably most heartlanders can have S$1m loans.

Say if Greece can extend their loan tenor to 100 years or more then it is not a big problem. This is what we call inflate away the local debt as long as economy is on real growth. The $1m notional debt remains but the value is not as per 100 years ago. Thing is lenders are also not stupid

Put the above in context of why people would even buy centennial or perpetual bonds.

In theory the long tenure would work, but in real life, it is hardly the case.
Greece cant even come close to a balanced budget. How many more years before they can cough out enough money to pay the interest on its loan. How many more years before the figure stops snowballing? If it takes a couple of years to double, it would not be long before it reaches 1 trillion in debt.

But all is not lost, perhaps they will get back to even eventually. But that is a long long time away.
What I am more worried about in the short term is the confidence we have within the Eurozone and thus I have exited
all positions I have in Sg Mkt and reduced my exposure in the US since a few weeks back. The record highs also prompted me to come to this decision. Mr Mkt may take this opportunity to have a healthy correction, history states events like this is minor but I think its better to proceed with caution.

So far so good, on market reaction of the default. The next focus, should be on the Grexit... The noise sustained for so long, Mr. Market already accounted it already, and only minor adjustment needed...

Asia steadies, euro bears Greek burden

SYDNEY - Asian share markets were in a guarded mood on Wednesday as Greece became the first developed economy to default on a loan with the IMF, setting the scene for another day of uneasy action.

While an unwelcome milestone for Athens, it came as no surprise to investors after weeks of stop-start talks and the euro only faded a little to $1.1135 .

"There is so much uncertainty, speculation, truth and partial truth that many markets are in stasis; waiting to see which way this goes," said Emma Lawson, senior currency strategist at National Australia Bank.

Calming after two days of wild swings, MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> inched up 0.1 percent.
Japan's Nikkei <.n225> firmed 0.2 percent, a second day of small gains as it stabilizes after Monday's steep fall.
http://www.todayonline.com/business/euro...ainty-high

(01-07-2015, 09:52 AM)CityFarmer Wrote: So far so good, on market reaction of the default. The next focus, should be on the Grexit... The noise sustained for so long, Mr. Market already accounted it already, and only minor adjustment needed...

I was out catching falling knives in the GREK ETF using funds set aside for speculative positions. Going in tranches.

(30-06-2015, 11:07 PM)Big Toe Wrote: In theory the long tenure would work, but in real life, it is hardly the case.
Greece cant even come close to a balanced budget. How many more years before they can cough out enough money to pay the interest on its loan. How many more years before the figure stops snowballing? If it takes a couple of years to double, it would not be long before it reaches 1 trillion in debt.

But all is not lost, perhaps they will get back to even eventually. But that is a long long time away.
What I am more worried about in the short term is the confidence we have within the Eurozone and thus I have exited
all positions I have in Sg Mkt and reduced my exposure in the US since a few weeks back. The record highs also prompted me to come to this decision. Mr Mkt may take this opportunity to have a healthy correction, history states events like this is minor but I think its better to proceed with caution.

Just to give you some perspective: about 20 years ago Phillippines was almost bankrupt with 40% of income going to debt INTEREST payments.

At the height of the GFC each icelanders on average owed US$300k to the international community.

Inflation and economic growth over an extended period can take care of debt, even for Germany post WW2. The bigger problem is when there is no growth for various reasons, including corruption, disouraged populace etc.

In 1998 Fed orchestrated 6 banks to bail out LTCM's 4b loss. Today that would probably be a one day news.

If the tenor is drag long enough it will not be an issue. Same thing with extending banks NPL schedule. That's why there is some advantage of kicking the can down the road. In fact it is a viable SOLUTION, problem is more psychological/ moral hazard: If one does that then people are lazy to find an even more ROBUST SOLUTION. People tends to move towards the easiest path... path of least resistance

Perspective from U.S. traders:

"We are very, very deep into the infinite Hall of Mirrors that is Game Theory."

Deep in the Greek hall of mirrors

Yes it's game theory now of who blink first. I stick to my guess that they will reach an agreement probably before referendum. I think in general the Greek & EU populace don't mind Greece out of Europe, but the EU leaders are more aware of the ramifications.

(25-06-2015, 11:43 AM)specuvestor Wrote: It's actually quite hard to call... my guess is that it will end with an agreement around June 30 or few days later with a technical default. That's why I didn't vote

Trick is to consider what are the scenarios when 1) Default with no agreement 2) Technical default with agreement 3) No default; and what timeline one looks at

Most people don't realise that Greece cannot be kicked out... there is no provision in the EU for that. It can only choose to get out by act of local parliament or referendum.

Either way ECB is making clear that the Greek financial system is important to the orderly monetary union mechanism and EU is getting more vested by the ECB actions. Like I said German leaders understand the implications... problem is the populace might not.