The new "Deal" coming out of Europe is a lose-lose-lose-lose agreement!
The real problem is not the Greek debt but rather the Greek CDS market which towers over the Greek bonds issued. The bond holders and "system gamers" bought massive amounts of CDS's to cover their exposure but with the "voluntary" 50% payoff nobody knows what to do with the CDS payouts. Here's the latest:
Greek Accord Won't Trigger Credit-Default Swaps, ISDA Rules Say
http://www.businessweek.com/news/2011-10....-rules-say.html
The ISDA knows that their damned if they do and their damned if they don't trigger the CDS payouts! Now all those banks that said they had no exposure to Greek debt have to admit that they actually WERE NOT hedged properly with CDS's after all.
If the CDS's don't payout let's look at the losers:
- Greece still has to pay 50% on bonds issued and has no future prospects for issuing new debt or coming out of their economic woes.
- Greek bond holders are only going to get 50% return on their "safe government" investments and will have to take an immediate writedown.
- Credit Default Swap holders likely will NOT get paid out because this "mandated" deal is classified as "voluntary"
- Banks that claimed to have hedged their Greece exposure with CDS's now have to declare their true exposure that has already been devalued by 50%
- The CDS market, which was already a shaky part of the Quadrillion dollar derivative complex, has now proven to be an unreliable hedging mechanism
And on and on and on...
This "Stability" that the EU has just provided should only last a matter of DAYS before the world is turned upside down!
Stay safe out there.
Bix Weir
www.RoadtoRoota.com
The real problem is not the Greek debt but rather the Greek CDS market which towers over the Greek bonds issued. The bond holders and "system gamers" bought massive amounts of CDS's to cover their exposure but with the "voluntary" 50% payoff nobody knows what to do with the CDS payouts. Here's the latest:
Greek Accord Won't Trigger Credit-Default Swaps, ISDA Rules Say
http://www.businessweek.com/news/2011-10....-rules-say.html
The ISDA knows that their damned if they do and their damned if they don't trigger the CDS payouts! Now all those banks that said they had no exposure to Greek debt have to admit that they actually WERE NOT hedged properly with CDS's after all.
If the CDS's don't payout let's look at the losers:
- Greece still has to pay 50% on bonds issued and has no future prospects for issuing new debt or coming out of their economic woes.
- Greek bond holders are only going to get 50% return on their "safe government" investments and will have to take an immediate writedown.
- Credit Default Swap holders likely will NOT get paid out because this "mandated" deal is classified as "voluntary"
- Banks that claimed to have hedged their Greece exposure with CDS's now have to declare their true exposure that has already been devalued by 50%
- The CDS market, which was already a shaky part of the Quadrillion dollar derivative complex, has now proven to be an unreliable hedging mechanism
And on and on and on...
This "Stability" that the EU has just provided should only last a matter of DAYS before the world is turned upside down!
Stay safe out there.
Bix Weir
www.RoadtoRoota.com