Greek Equities Update

Some people call me a perma-bear but they fail to realise that I am actually able to go long when the opportunity is there. Currently 99.9% of risk assets are massively over-valued. One of the few good opportunities out there are Greek equities.

From a bottom of 0.83€ to 1.32€ trading today, Greek equities are up more than 60% in a matter of 4-5 months. And we're talking here about the index; not a random outperforming company.

I have opened a long position on them back in June, and that position is now nicely performing. Much more than the gold, silver, oil and another mania-era priced assets.

My personal opinion is that the 0.83€ was a buying opportunity of a lifetime. I'm not sure we'll see it again. but should the prices dip with the rest of the risk assets, I'm keeping myself prepared to buy more.

From Pharmaceutical Salesman in Greece to Janitor in Sweden

This is a very long report on Bloomberg, about this pharmaceutical salesperson who has lost his job in Greece and got to the last resort of accepting a janitor job in Sweden...

Unfortunately, irrelevant of how sad and gripping this story is, and I do emphatise; I'm still shocked that Karachalios still fails to realise that:

• It's not his current situation that is abnormal, it's actually his previous situation of being highly paid to sell drugs over the market price because the government was subsidising the drugs and creating an artificial market that wouldn't have otherwise existed. (see first highlight)
• Greece drove itself into the abyss, with corruption from the government handing out money to everyone and corrupting the masses — not a conspiracy by France or Germany. (see second highlight)
• Closing his eyes for 10 years and not to worry is actually the stupidest thing he could say, or do. The Greeks have kept their eyes closed since WWII as most of people in the Western Civilisation have: they have drunk the cool aid, elected liars and incompetents as their political leaders — those who would promise less work and more benefits, entitlements and so forth — and the same fools who didn't want to face reality all the way down into the abyss now want to close their eyes and expect somebody else is going to fix their problems. (see third highlight)

Simply disgusting if you ask me.

(Bloomberg) — As a pharmaceutical salesman in Greece for 17 years, Tilemachos Karachalios wore a suit, drove a company car and had an expense account. He now mops schools in Sweden, forced from his home by Greece’s economic crisis.

“It was a very good job,” said Karachalios, 40, of his former life. “Now I clean Swedish s---.”

Karachalios, who left behind his 6-year-old daughter to be raised by his parents, is one of thousands fleeing Greece’s record 24 percent unemployment [...]

“I’m trying to survive,” Karachalios said in an interview in Stockholm. “It’s difficult here, very difficult. I would prefer to stay in Greece. But we don’t have jobs.”

Greece is in its fifth year of recession, with the economy expected to contract 6.9 percent this year, the same as in 2011, according to the Athens-based Foundation for Economic and Industrial Research. Since 2008, the number of jobless has more than tripled to a record 1.22 million as of June, out of a total population of 10.8 million.

[...] Their family now crams into a small apartment, while her husband, Nikos, works for a landscaper and her teenage children struggle with Swedish lessons.

“It was not easy for them,” she said. “My daughter said lots of times, ‘I hate Sweden -- I want to go home.’” [...]

An intense man with flecks of gray in his thinning black hair, Karachalios said he has lost 20 to 30 pounds since moving to Sweden. His hands are stained with grime. Instead of the suits and ties he once wore, he now dresses in jeans and work boots. His suits remain in Greece.

[...] Karachalios’s troubles began in early 2010 when the Greek government, which provides health care, forced drugmakers to cut their prices by as much as 27 percent. To reduce costs, his then-employer PharmaSwiss fired him and two other salesmen, leaving his former supervisor to manage the accounts, he said. Karachalios searched for jobs and eventually spent two months in 2011 as a telemarketer in Athens. He quit after not being paid. An ill-fated attempt to start a retirement home cost him months of work and most of his savings.

Determined to move, Karachalios considered Australia before rejecting the immigration process as too expensive. He had a friend in Sweden, had visited before and knew its reputation.

“I knew they were very organized,” he said. “Everyone pays their taxes and it’s fair. There is no cheating.”

Karachalios arrived in March. His friend helped him find a room to rent and he pays 4,500 Swedish krona ($670) a month for a room in a quiet apartment complex that houses other immigrants, many from the Middle East.

His studio has no stove or oven, just a hot plate and microwave. He has a single dish, and when he has a guest, he eats out of a plastic container that used to hold feta cheese. A tiny Greek flag is taped to the wall. The room came with a television though Karachalios said he never watches. In the evenings, if he has the energy, he studies Swedish.

Because of his background in health care, Karachalios at first applied for jobs caring for the elderly. He was rejected without an interview because he didn’t speak Swedish.

To find a job, he began knocking on doors of restaurants and janitorial companies, and eventually found a position cleaning rental houses. It was hard, lonely work that didn’t allow a break for lunch, he said. His first week wasn’t paid because he was told he was being trained. After his second week, when he was paid for only 32 hours instead of the 40 he said he worked, he wasn’t called back.

In July, he found work with a cleaning contractor run by another Greek. Although the hours are long and the work difficult, Karachalios said he is at least treated fairly.

In Greece, Karachalios was paid between 2,500 and 3,000 euros ($3,143-$3,772) a month, after taxes. In Stockholm, he makes 80 krona an hour. Based on a 40-hour work week, that equals about $1,907 a month.

“I was doing something more glamorous but I don’t mind this work,” he said. “I feel alive again. When you are unemployed too long, it’s very hard. I was angry all the time.”

[...] There are now 1.4 million foreign-born people in Sweden, or 15 percent of the population, an increase from virtually none at the end of World War II. While Sweden prides itself on being a tolerant and progressive nation, an anti-immigration party drew 5.7 percent of the vote in 2010, the most ever, said Klas Borell, a Swedish professor of sociology.

[...] Karachalios wakes at 5 a.m. with the sun already up because of the long Swedish summer days. He checks Facebook on his phone for news from Greece and takes the subway one stop to Rinkeby, a gritty working-class neighborhood. Near the station is a parking lot where people without homes sleep in their cars, leaving their shoes and bottles of water outside the doors.

At a litter-strewn gas station just off the highway, Karachalios waits for a van to pick him up. Other migrant workers, headed for other destinations, wait nearby. He smiles with anticipation: once he’s in the van he’ll borrow a co-worker’s iPhone to talk with his daughter, Katerina, on Skype.

[...] In Sweden, struggling to make sense of Greece’s decline, Tilemachos Karachalios suggests a conspiracy by Germany and France to economically cripple the country in order to seize its Aegean oil reserves. He’s also bitter about comments made by former Greek Prime Minister George Papandreou, who said in interviews abroad in 2009 that corruption and tax evasion were to blame for Greece’s problems.

“Who, me?” Karachalios said. “I’m not lazy. I didn’t steal from the government. I was honest and they made me like this, to come here.”

[...] “I’m tired of all this,” he said. “I want to close my eyes and wake up in 10 years and not have to worry.”

Migrants to Sweden from within the European Union are free to look for work and can settle if they can provide for themselves or have family there. Although the unemployment rate is 7 percent, finding work can be difficult if new arrivals don’t speak Swedish, said Arto Moksunen, director of Crossroads, a nonprofit group in Stockholm that has provided assistance to 3,000 migrants since March 2011. [...]

How the Plan for a Euro-Exit Would Rollout

RT interviews Roger Bootle, winner of the £250,000 Wolfson Prize for developing a practical plan to dissolve the Eurozone.

This is a very interesting interview and explains how the Grexit and the many other exits from the Eurozone to come will most likely happen.

The plan makes a lot of sense from a political point of view, as politicians will never allow for a real decline in wages and welfare. Even the case of a dual currency (say Drachma and Euro) is taken into account.

If you have any Euro exposure, you must watch this. The main thing to remember, is that if you have Euros in your account, and your country exists, you lose your Euro. But if you keep them outside of your country, you get to keep them. Be very careful about where you keep your money!

Greek Equities — Finally Bottomed?

I've written a couple of posts recently, stating that it would be a good entry point for an investors who's quite courageous and contrarian, to buy the ATHEX index, Greece main equity index:

• With Already 94% Decline from Its Peak, Is The Greek Equities Index, the Largest Bear Market in History?
• GRE Greece ETF Update and Charting the PIIGS Main Equity Indices [UPDATE]

I have myself initiated a position — which unfortunately remains too small so far — in GRE, the ETF that I used as a proxy for the Athex 20. My broker is telling me that my average buying price, including transaction costs (high on such a penny stock) is 0.913€

During the past few days, the ETF on the index has soared to about 1.15€ (see chart below):

I am now wondering if we have finally bottomed (my post about the 94% drop from peak seems to have picked precisely picked the bottom), and with my position more than 20% up in a few days, it's difficult to have the guts to buy more here.

I will nonetheless look at buying some more, and will carefully watch what is happening on this market. This might be buying opportunity of a lifetime as far as Greek equities are concerned.

Bloomberg News Sues the ECB As ECB Tells Court Releasing Greek Swap Files Would Inflame Markets

I think this one is so obvious that I won't put any more comment than cheer Bloomberg for suing all these corrupt entities and try to spread the truth.

(Bloomberg)  June 14, 2012 — The European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency.

Bloomberg News is suing the ECB to provide the documents under European Union freedom-of-information rules. The papers may help show the role EU authorities played in allowing Greece to mask its deficit for almost a decade before the nation’s troubled finances necessitated a 240 billion-euro ($301 billion) bailout and the biggest debt restructuring in history.

Disclosing the files when Bloomberg News first sought them in 2010 would have “fueled negative perceptions about Greece’s ability to honor its debt,” ECB lawyer Marta Lopez Torres said at a hearing of the European Union’s General Court in Luxembourg today. “It’s the same now with Spain” which “isn’t able to borrow money,” she said. “Markets are reacting in very volatile ways. It’s affecting the euro economy.”

[...] “Markets will perform better when they have transparency,” Timothy Pitt-Payne, lawyer for Bloomberg News, told the court. “The question is who knew what; and when did they know it?” 

Bloomberg’s lawsuit, filed in December 2010, requested access to two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg News. 

The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB, the Executive Board said in the cover note.

These documents “played a role” in shaping policy and “highlighted there were issues” when the ECB undertook a review of its eligibility criteria for collateral in its funding operations, the ECB lawyer told the court.

[...] “The public has a right to know how EU authorities may have allowed Greece to hide its deficit, which helped trigger Europe’s sovereign debt crisis,” said Matthew Winkler, editor- in-chief of Bloomberg News. “Greater transparency results in more accountability, and we seek this information to understand how this debt debacle unfolded in an effort to avoid repeating it.” 

The Greek government didn’t originally disclose the swaps, designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. The swaps allowed the country to increase borrowings by 5.3 billion euros, Eurostat, the EU’s statistics agency, said in November 2010.

In April 2009 -- seven months before the Greek crisis erupted -- ECB officials spotted “a swap operation in unusual terms,” according to the March 2010 document. [...]

CDS Protection Buyers Burnt Second Time by Corrupt ISDA — How Much Longer Until That Product and the Markets Around It Disappear?

Is the whole CDS market a game of chicken? And smoke & mirrors?

Buyers of CDS on the Greek government bonds had to fight against the ISDA which was claiming that the "voluntary hair-cut" creditors were getting was not a credit event, and now, the subordination of the sovereign debt of Spain seems to be falling under the same category. Who are these people kidding? Would you keep on buying insurance if every time you have an incident the insurer asked you to go and Zuck yourself? Well it seems like the path the CDS is on is a slippery slope and most likely the whole market will disappear during the deflation of the financial product Great Mania.

Via ZeroHedge:

And just as ISDA was starting to become somewhat credible again, we get this from Bloomberg:

• Spanish CDS Trigger Unlikely on Subordination, Says ISDA *Dow Jones

From Reuters:

Credit default swaps on Spain are unlikely to trigger as a result of the 100 billion euro bail-out of the country's banking system announced over the weekend, according to leading derivatives lawyers.

The European Stability Mechanism's senior creditor status has led to questions over whether a subordination credit event will be triggered upon Spain receiving loans from the permanent bailout fund. In contrast to the IMF's preferred creditor status, which is implicit rather than legally documented, the ESM's treaty actually specifies its seniority to other creditors - a clause that some analysts reckon could trigger CDS.

There have been subsequent reports that Spain's emergency loans may be funneled through the temporary bailout fund, the EFSF, before the ESM becomes into force in July to avoid a potential credit event. Such measures may prove unnecessary, though, as derivatives lawyers have cast doubt on the possibility of ESM rescue money triggering CDS.

"I can't see any basis on which this would constitute a subordination credit event as it doesn't change the terms of the claims held by the other creditors," said Simon Firth, a partner in the derivatives practice at Linklaters.

"It's actually impossible to have a restructuring credit event based subordination without something that affects the rights of existing bondholders. In the absence of some kind of agreement or change of law, then I don't see anything that will [do that]," said Firth.

Nigel Farage: The euro Titanic has now hit the iceberg

Very interesting speech from Nigel Farage earlier today at the European Parliament, available on YouTube. The interesting part is how this bailout of Spain will actually further weaken Italy, which is already on the brink of collapse and a confirmation of something we had previously discussed on this blog: a Greece default of Euro-exit would make the ECB bankrupt.

Here's the transcript, with my highlights:

"Another one bites the dust. Country number four, Spain, gets bailed out and we all of course know that it won't be the last. Though I wondered over the weekend whether perhaps I was missing something, because when the Spanish prime minister Mr Rajoy got up, he said that this bailout shows what a success the eurozone has been.

And I thought, well, having listened to him over the previous couple of weeks telling us that there would not be a bailout, I got the feeling after all his twists and turns he's just about the most incompetent leader in the whole of Europe, and that's saying something, because there is pretty stiff competition. 

Indeed, every single prediction of yours, Mr Barroso, has been wrong, and dear old Herman Van Rompuy, well he's done a runner hasn't he. Because the last time he was here, he told us we had turned the corner, that the euro crisis was over and he hasn't bothered to come back and see us. 

I remember being here ten years ago, hearing the launch of the Lisbon Agenda. We were told that with the euro, by 2010 we would have full employment and indeed that Europe would be the competitive and dynamic powerhouse of the world. By any objective criteria the Euro has failed, and in fact there is a looming, impending disaster. 

You know, this deal makes things worse not better. A hundred billion [euro] is put up for the Spanish banking system, and 20 per cent of that money has to come from Italy. And under the deal the Italians have to lend to the Spanish banks at 3 per cent but to get that money they have to borrow on the markets at 7 per cent. It's genius isn't it. It really is brilliant. 

So what we are doing with this package is we are actually driving countries like Italy towards needing to be bailed out themselves.

In addition to that, we put a further 10 per cent on Spanish national debt and I tell you, any banking analyst will tell you, 100 billion does not solve the Spanish banking problem, it would need to be more like 400 billion. 

And with Greece teetering on the edge of Euro withdrawal, the real elephant in the room is that once Greece leaves, the ECB, the European Central Bank is bust. It's gone. It has 444 billion euros worth of exposure to the bailed-out countries and to rectify that you'll need to have a cash call from Ireland, Spain, Portugal, Greece and Italy. You couldn't make it up could you! It is total and utter failure. This ship, the euro Titanic has now hit the iceberg and sadly there simply aren't enough life boats."

The Reason Why The European Leaders Trying So Hard to Keep Greece in the Eurozone

Nigel Farage has an eloquent speech about that:

Greece outside of the Eurozone may even be an inspiration for Portugal, Spain and many other countries.

There, you have it: the first reason, which we've mentioned many times here, is the belief that the whole banking sector of their respective country will collapse, and the second reason, is that the whole of the Euro might collapse, as countries start seeing the benefits of defaulting and leaving the single currency.

With Already 94% Decline from Its Peak, Is The Greek Equities Index, the Largest Bear Market in History?

During the Great Depression, the Dow declined 89% from the peak to finally find the bottom.

The GRE ETF hit today 0.875€/share, which means that it is now somewhere about 94% down from the peak. At this price, I'm a buyer. Unfortunately, I wasn't in front of my screen today, so I missed on the opportunity — for now, as this market seems to be bottomless!

Is this the largest bear market in history?
Are you aware of any worse peak to trough performance for a flagship equity index?
With the Greater Depression unfolding before our eyes, are other equity indices on the same path, with Greece just taking the leading?

GRE Greece ETF Update and Charting the PIIGS Main Equity Indices [UPDATE]

The GRE Greece ETF is now trading at below 1.00€ (low of 0.985€) meaning that from the peak of about 14.00€, the drop has been more than 90%. One could wonder how much lower it can go.

Here's the details about the ETF, as captured from the French prospectus of the fund (click for larger image):

Conclusion: there's still room for further drop, as the banking sector still represents 33% of the index. 

[Update: initiated a small position on the ETF, bought at 0.985€ per share]

My friend SS has been kind enough to provide me on demand many charts and market data, and here's what he sent me on request yesternight: the charts of the main index of each of the PIIGS countries:

Greece: Top at 5346, currently trading at 553. This is a drop of 90%from peak. And it's a stock index of the 20 largest Greek capitalizations. 

Portugal: Top at 13729, currently trading at 4870. This is a drop of 65%. Same comment, this is the an index made of the largest companies in Portugal and my guess is that we're far from the bottom.

Ireland: Top at 10,000 bottom at 2,000 (drop of 80%) currently trading at 3,000. This is still a drop of 70% and my guess is that we're far from the bottom. 

Spain: Top at 16,000 currently trading at 6,500. This is a drop of 65%. My guess is that we're far from the bottom

Italy: Top of 44,000 currently trading at 13,000. This is a drop of 70%. And my guess is that we're far from the bottom

Greece’s biggest anti-bailout party, Syriza, said for the second time in as many days that it won’t join a unity government — ECB’s Honohan Says Greece Euro Exit Can Be Managed

Greece's anti-bailout party is sticking to its guns and won't join a unity government. It might become one of the first time in recent history that democratically elected people would actually respect their campaign promises!

(Bloomberg) May 13, 2012 — Greece’s biggest anti-bailout party, Syriza, said for the second time in as many days that it won’t join a unity government, pushing the country closer to new elections that have sparked concerns about a euro-area exit. 

“Syriza won’t betray the Greek people,” leader Alexis Tsipras said in statements televised on state-run NET TV after a meeting brokered by President Karolos Papoulias between the party and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.”

The paragraph just above from Alexis Tsipras is a lifetime lesson in politics: "Syriza won't betray the Greek people": I hope it doesn't and stick to their campaign promises, but what Alexis Tsipras is asking for, is for Syriza to actually join the unity government, to save the banks, (and hence he's calling them to betray the people and their promises). And he calls that "not betraying the Greek people". 

The Greek society has been destroyed by the last 70 years of people like him leading the country to its financial and democratic bankruptcy. Yet, he's trying to push the burden on Syriza, and pretending they are the ones destroying their society.

Lifetime lesson for me, and I hope for everybody who's reading this. One thing you can be sure of, is that the media and history books will convey only Tsipras interpretation, instead of the truth.

After printing hundreds of billions of Euros, trying to save European banks from a Greek default, the money is down the sink now, and it seems like the ECB finally realised that this battle against the inevitable won't be won, and that the markets will prevail. I hope Trichet is watching this mess, the result of his arrogant, ignorant, and destructive policies.

It is now qualified as a "non-attractive" event, while 2-3 years ago, it was "the end of the world".

(Bloomberg) May 12, 2012 — A Greek exit from the euro could be “technically” managed yet would damage confidence in the monetary union, said European Central Bank Governing Council member Patrick Honohan. 

A departure by Greece would be “a rather destabilizing kind of event” for the rest of the euro area and all sides are working to try to avoid it, Honohan told a conference in the Estonian capital, Tallinn, today. “It is not necessarily fatal, but it is not attractive.”

Greek Man Set Himself on Fire As Bank Refuses To Renogociate His Overdue Loan

It really hurts me every time I read or hear that the greeks are fighting against the lifeline the EU is giving them, or even when I hear that the Germans should bail out the Greeks.

To put things straight again: Greek banks and their European lenders have been bailed out, but not the citizens.

This gutting picture (courtesy of Reuters) illustrates why the Greek people should revolt, and take their corrupt politicians down, leave the European Fascist Union, and default the public and private debt. OK the picture is not from today, it dates back in September 2011. But hopefully, you get the point.

A man sets himself on fire outside a bank branch in Thessaloniki in northern Greece September 16, 2011.  The 55-year old man had entered the bank and asked for a renegotiation of his overdue loan payments on his home and business, according to police, which he could not pay, but was refused by the bank.

Greece Elections Update

Here's the short summary of the news of the past couple of weeks in Greece, followed by Bloomberg reports news trails:

• The main historical parties have lost their majority and extremes, anti-bailout parties, have taken the lead in Greece.
• Greece is likely to leave the Euro as early as next month.
• The IMF and the EU are unwilling to re-negociate the bailout terms, while they are the weeks at the mercy of Greece, which as the creditors has all the power. So both the IMF and the EU are either complete fools, or are just bluffing.
• Greece Euro-Exit debate goes public
• Greece Elections trigger an outflow of deposits
• Greece will try to stay in the Euro but disengage from the bailout measures — For how long will they try, before giving up again, as it's simply NOT POSSIBLE for them to stay in the Euro, and remain solvent without defaulting?

(Bloomberg) May 4, 2012 — Voting in Greece’s May 6 general elections begins at 7 a.m. and finishes at 7 p.m. Athens time. A total of 9.85 million citizens, including 360,000 new voters, are eligible to vote at one of the 20,560 polling stations around the country.

(Bloomberg) May 6, 2012 — Greek voters flocked to anti-bailout parties, projections showed, throwing doubt on whether the two main parties can put together a government strong enough to implement spending cuts to ensure the flow of bailout funds.

New Democracy led in the election today with 18.9 percent of the vote, according to projections based on partially counted ballots on state-run NET TV. Pro-bailout socialist Pasok got 13.4 percent. On the other side of the debate, anti-bailout party Syriza got 16.6 percent and Independent Greeks got 10.5 percent. Based on those figures, Pasok and New Democracy would fall one short of the 151 seats needed to win a majority.

(Bloomberg) May 6, 2012 — Alexis Tsipras, the head of Syriza, which elections today showed could be Greece’s second-biggest party, said the Greek people had given him a mandate to do whatever he can to cancel the bailout agreement with the European Union and International Monetary Fund.

The result today shows that Greeks, and Europeans, want “to cancel the memorandum of barbarity,” Tsipras said in statements televised in Athens on state-run NET TV. He said he would begin talks with parties of the Greek left tomorrow to achieve that goal.

(Bloomberg) May 6, 2012 — Alexis Tsipras became the surprise package of the Greek election by telling Angela Merkel to get lost.

“The people of Europe can no longer be reconciled with the bailouts of barbarism,” Tsipras, 37, said on state-run NET TV late yesterday after his Syriza party unexpectedly came second in the country’s election. “European leaders, and especially Ms. Merkel, should realize that her policies have undergone a crushing defeat.”

Tsipras’s calls to tax the rich, delay debt repayments and cut defense spending struck a chord with voters angry at austerity measures imposed by the European Union and the International Monetary Fund in return for bailouts. [...]

The result put Syriza ahead of the Socialist Pasok party, potentially derailing efforts to implement the terms of the country’s financial lifeline. Syriza, which means Coalition of the Radical Left, won 16 percent of the vote, projections showed. That exceeded the 13 percent won by Pasok, one of the two pillars of the political establishment since 1974. New Democracy, led by Antonis Samaras, topped the poll with 20 percent.

The result, the best since the party was founded in 2004, puts Tsipras in a position to try and form a government should New Democracy fail to put a coalition together in the first round of talks.

(Bloomberg) May 7, 2012 — Greek stocks tumbled the most in six months after the country’s two main political parties failed to achieve a combined majority in yesterday’s election as voters flocked to anti-austerity parties.
[...]

Syriza leader Alexis Tsipras said today his party will honor its election pledge to overturn austerity policies, rejecting an overture to join a national salvation government with New Democracy.
Venizelos Proposal

(Bloomberg) May 8, 2012 — Greece’s Syriza party leader Alexis Tsipras, charged with forming a government, told his pro-bailout counterparts they must renounce support for the European Union- led rescue if there is to be any chance of forging a coalition.

Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their pledges to implement austerity measures by the time he meets with them tomorrow to discuss forming a coalition. Samaras said he would not do so, and would support a minority government if necessary.

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters in Athenst oday after receiving the coalition-building mandate from President Karolos Papoulias. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”

Political wrangling after the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of a second, 130 billion-euro rescue. Parliament is split down the middle on the two bailout deals negotiated since May 2010, as the country at the epicenter of the debt crisis again risks exit from the euro.

(Bloomberg) May 8, 2012 — Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

(Bloomberg) May 9, 2012 — Swedish Finance Minister Anders Borg said Greece won’t be able to ease terms of its international loan package as the euro area’s most indebted nation faces the prospect of a government led by anti-bailout politicians.

“It will be very difficult to backtrack in the International Monetary Fund program,” Borg, whose country stands outside the euro, said in Stockholm today. “It’s not acceptable to lower demands.”

(Bloomberg) May 9, 2012 — From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro.

Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes.

“If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels yesterday. “They will decide whether to stay in the euro zone or not.”

(Bloomberg) May 10, 2012 — Concern over whether Greece will keep the euro after the May 6 election caused an outflow of deposits to Cyprus, Phileleftheros reported, without saying how it obtained the information.

Depositors are seeking Cypriot banks and subsidiaries of Greek banks on the island, the newspaper said.

(Bloomberg) May 10, 2012 — Greece’s Evangelos Venizelos, the socialist Pasok leader and former finance minister, said he saw the first “good omen” in four days of attempts to form a coalition government that would avert a new election.

He spoke after Democratic Left leader Fotis Kouvelis outlined a proposal for a unity government that will work to keep the country in the euro and the European Union while negotiating a gradual “disengagement” from bailout austerity measures.

The ECB To Become Insolvent and To Raise Capital Should Greece Default

(Bloomberg) May 10, 2012 — Greeks May Hold $510 Billion Trump Card in Renegotiation

Greece’s next government may hold a trump card worth more than $510 billion if it heeds voters’ demands to renegotiate its bailout with the European Union. 

The nation owes about 400 billion euros ($517 billion) to private bondholders, public bodies such as the International Monetary Fund and European Central Bank and other creditors, according to data compiled by Bloomberg. About 252 billion euros of that’s due to official organizations that used their status to avoid the losses suffered by ordinary bondholders when Greece restructured its debt two months ago. 

Greek voters are demanding their leaders renegotiate the terms of rescue packages that have imposed unprecedented austerity on the country since 2010.[...] 

The ECB also stands to lose much if Greece walks away from its obligations. First, the central bank bought about 50 billion euros of the government’s bonds to push down yields and help the nation retain access to the capital markets. [...] 

The Athens-based central bank has also issued 18 billion euros more banknotes than the size of its economy would indicate as Greeks tuck bills under their mattress or spirit them out of the country, Whittaker said. That would bring Greece’s total liability to the ECB to 172 billion euros. 

The ECB “would have to do a capital call on the rest of the members if there was a default,” said Darren Williams, chief European economist at AllianceBernstein Holding LP in London, which manages about $420 billion. “It would be a meaningful hit. So, yes, the Greeks do have some leverage.”

Time to Get Bullish on Greek Equities? Take 2

Back in September 2011, I wrote a post titled Time to Get Bullish on Greek Equities? My conclusion was that even after a 87% decline from the peak in the flagship Greek equities index, the Athex 20, another 50% drop shouldn't be unexpected, and that Greek equities were still very expensive.

Well, my analysis and prediction turned out to be correct, since the GRE Athex 20 ETF hit a new all time low of 1.10€ yesterday, which is about a 40% drop from when it was trading at 1.90€ in September.

I won't an as much in depth analysis as the first post, but we are indeed now reaching levels which make it worthwhile to consider buying the index. There are still many banking shares in the index, making it likely to really fall to my target area of 0.95€ but I'm definitely keeping an eye on this ETF, and I might even start building a small position, which I would then increase depending on what happens next.

With Greece on the verge of total chaos (I'll write a post about that as well), there's blood in the streets and the bottom should be near!

The Rise of the Fascist European Union — part 2

This is a follow up from the post I titled The Rise of the Fascist European Union published just a few days ago.

Here are two more blow to democracy, but those who are supposedly trying to save it by destroying it.

Via Mish: Sarkozy refuses to agree to referendum on EU fiscal treaty.

Mr Sarkozy, who is trailing the socialist François Hollande in opinion polls seven weeks before the presidential election, came under pressure to promise a referendum on the pact after he pledged to consult the people directly on significant issues if re-elected.

“No,” he replied when asked on French radio yesterday if he would put the treaty to a public ballot. “If you’re dealing with a treaty with 200 articles, 250 articles, I can’t see how you’d formulate a clear question.”

And Merkel along with parliamentary complicity and in complete opposition of the people's opinion, pushed for the Greek bailout:

Feb. 28 (Bloomberg) -- Chancellor Angela Merkel won a parliamentary vote on Greek aid after warning German lawmakers that pushing Greece out of the euro would risk “incalculable” damage, defying a public backlash against more bailout funds. 

In a ballot that showed dissent in her coalition growing, 496 members of the lower house, or Bundestag, backed the 130 billion-euro ($174 billion) package yesterday in Berlin; 90 voted against and five abstained. While questions on Greece’s remaining in the euro “have their justification,” Merkel warned that a failure of the euro might endanger the European Union and the global economy. 

“Angela Merkel’s strident insistence that bailing out Greece is vastly preferable to the alternative was important,” Kit Juckes, head of foreign-exchange research at Societe Generale SA, said in a note today as he forecast the euro rising to $1.50. “Europe’s leaders have always stepped back from the edge of the abyss after flirting with disaster.”

Of course, the bankers being bailed out are supportive of these fascistic behaviours and ideas.

The Rise of the Fascist European Union

Since the markets topped back in 2007-2008, democracy has been losing ground everywhere in the Western world, but in Europe it's been probably worse than anywhere else.

Don't get me wrong, the most fascist country for now is the US, and they have been on the track since the late 1990s. But the US fascists have followed the the rule of law: law makers and government officials have embraced those ideas, and voted them through, and the Supreme Court has been basically shut down. In Europe, it's lawlessness and lies that are bringing the fascist ideas and actions, in complete disregard of the rule of law and democracy.

Here's a short list of the illegal and anti-democratic actions so far:

• Ireland: Irish people forced to bailout the European banks
• Greece: Prime Minister, democratically elected replaced by a non-elected Prime Minister
• Italy: Mario Monti, non-elected technocrat replaced the democratically elected Berlusconi as Prime Minister.
• ECB: buying sovereign bonds in complete illegality

Well, things have made another nasty and dangerous turn with the new "Greek Bailout" plan, which is nothing but a bailout of the French and German banks who are creditors to Greece, and a complete pillage of Greece:

• Greece Needs New Constitutional Provision Imposed by the Troika

Eurogroup Statement of conditions placed on Greece:

The Eurogroup also welcomes Greece's intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and internally-generated funds destined to service Greece's debt by, under monitoring of the troika, paying an amount corresponding to the coming quarter's debt service directly to a segregated account of Greece's paying agent.

Finally, the Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be introduced in the Greek constitution as soon as possible. ....

• Troika Demands 38 New Changes in Greek Tax, Spending and Wage Policies in Next 6 Days

 And

• Growing Air of Concern in Greece Over New Bailout.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

“This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders,” said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development. She was one of several independents who joined 43 lawmakers from the two largest parties in voting against the loan agreement.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

In the meantime, the UE officials are still asking for more lawlessness:

Feb. 10 (Bloomberg) -- The European Central Bank should participate in efforts to reduce Greece’s debt, said Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers.

“The ECB must look, within the framework of its independence, what sort of contribution it can make to the debt reduction of Greece,” Juncker told reporters in Brussels today. “I hope it will find something.”

And the ECB is obliging — see also Japan and the Myth of Independent Central Banks:

Draghi’s $158 Billion Free Lunch to Boost EU Bank Profits 

Feb. 13 (Bloomberg) -- Banks are benefiting from a European Central Bank subsidy that could reach 120 billion euros ($158 billion), enough to pay every bonus at financial firms in London for the next 24 years at today’s levels. 

Royal Bank of Scotland Group Plc, BNP Paribas SA and Societe Generale SA are among more than 500 banks that took 489 billion euros of three-year loans from the Frankfurt-based ECB at a December auction. The loans currently carry a 1 percent annual interest rate, less than a quarter of the 4.3 percent average yield on euro-denominated senior unsecured bank debt of all maturities in the past year, according to Commerzbank AG. 

With borrowing estimated to hit a record 1.2 trillion euros after a second auction later this month, banks may save 120 billion euros over three years. That could boost 2012 profit by about 10 percent for lenders in Italy and Spain, according to estimates by Morgan Stanley.  

“This is very much a free lunch,” said Arnd Schaefer, an economist at WestLB AG in Dusseldorf, Germany. “Banks can get money for just 1 percent and then lend it on for much more. That’s pretty good.”          

There's much more in the report, so you can read it in it's entirety if you're interested in what the ECB is doing.

And also, this other report about the ECB changing the rules of bond, creating subordinate versus senior level bonds on the very same instrument, depending on who is holding it:

Feb. 17 (Bloomberg) -- The European Central Bank’s plan to shield its Greek bond holdings from a restructuring may hurt private investors while paving the way for debt insurance contracts to be triggered.

The ECB will exchange its Greek debt for new bonds with an identical structure and nominal value, though they’ll be exempt from so-called collective action clauses the government is reportedly planning. That implies senior status for the ECB over other investors, according to UBS AG, and the use of CACs may lead to credit-default swaps protecting $3.2 billion of Greek bonds being tripped.

“It may appear that the ECB is receiving preferential treatment, raising questions about whether the ECB is senior to private-sector bondholders,” according to Chris Walker, a foreign exchange strategist at UBS, the world’s third-biggest currency trader. “If a coercive default does indeed eventually take place then a CDS event seems very likely with all the negative consequences for risk appetite that may bring.” 

Jim Grant Interviewed on Bloomberg TV Discusses the ECB the EU Mess

Jim Grant was interviewed on Bloomberg TV yesterday, Nov the 11th. Unfortunately, the video on Bloomberg.com is broken. Luckily, the video is also available on YouTube, but embedding is disabled.

ZeroHedge has done a good job at summarizing the interview:
On the three thread by which the world currently hangs:

i) by the financial probity of Italy

ii) by the determination of Greece to implement austerity measures

iii) and by the responsibility of our money spinning central bankers

"These are very slender threads indeed."

On what the ECB will do:

The ECB has expanded its balance sheet mightily under Trichet. We have a new leader and we have a new imperative. I dare say Europe is going to print money.

On central bank monetization and its implications:

The Italian yields did not fall on their own. It raises questions of overall integrity of market prices. In the US the Fed has nationalized the yield curve. In Europe much the same is going on: the SNB is expanding its balance sheet at astonishing rates of speed. The world over there is seeing immense money printing and there is a huge race to debase on the behalf of the sponsors of paper money.

Central banks are insolvent:

The ECB has a ratio of non-AAA rated assets to equity of 14 to 1. What the ECB has been doing is stepping in where private money fears to tread. In the private sector we call the heading for trouble... The New York Fed is leveraged 100 to one.

And the kicker analogy which is absolutely spot on:

The ECB is now implementing the MF Global trade.

He also discusses:

• Immense money printing by the Swiss National Bank (SNB)
• The farmland price bubble in the US: everybody is chasing it, the income yield of about 2.5%, which is at the lowest of the past 40-50 years. In the late 80s, at the bottom, they were yielding 7-8% and trading for about 10% of the current value.

I would add that once must be mad to buy farmland which is such an illiquid asset and which will be prone to all the government manipulation and extortion as soon as the second leg of the Greater Depression settles in, with confiscations, price fixings etc.

ISDA Says Greek 50% Writedown Not A Credit Event

ISDA says Greek 50% write down is not a credit event, and hence will not trigger CDS payments. The massive fraud perpetrated by the ISDA is simply unbelievable.

Needless to say, this is yet another massive transfer of wealth from people whose forecasts were right to those who are plain and simply losers.

What is going to be interesting is to find out whether there will be litigations around this decision, and even more importantly, whether the CDS market and instrument will survive in face of such a blatant fraud and theft.

Oct. 27 (Bloomberg) -- The European Union’s agreement with investors for a voluntary 50 percent writedown on their Greek bond holdings means $3.7 billion of debt-insurance contracts won’t be triggered, according to the International Swaps & Derivatives Association’s rules. 

ISDA will decide if the credit-default swaps should pay out depending on whether it judges losses to be voluntary or compulsory. European leaders said in today’s agreement they “invite Greece, private investors and all parties concerned to develop a voluntary bond exchange” into new debt. 

A last minute agreement was reached after banks, the biggest private holders of Greece’s government bonds, were threatened with a costly full default, according to Luxembourg Prime Minister Jean-Claude Juncker. The involvement of the Institute of International Finance, which represents lenders, also helped progress toward an accord that the EU could portray as non-mandatory.

“As long as the agreement is voluntary, then CDS aren’t triggered,” said Cagdas Aksu, an analyst at Barclays Capital in London. “Provided it’s voluntary, CDS wouldn’t be triggered unless the Greeks missed a payment.” 

David Geen, ISDA’s general counsel in London, didn’t immediately respond to e-mailed questions.

Greece Accelerates Cuts to Wages and Pensions

Sept. 22 (Bloomberg) -- Greek Prime Minister George Papandreou’s government said it will accelerate budget cuts, targeting civil servants’ wages and pensioners to keep emergency loans flowing and avoid default.

Measures announced yesterday following two rounds of talks with the European Union and the International Monetary Fund include: a 20 percent cut in pensions of more than 1,200 euros ($1,650) a month, according to a government statement; pensions paid to those younger than 55 will be shaved by 40 percent for the amount exceeding 1,000 euros and wages will be lowered for 30,000 state employees.

Basically, I can only support cuting the wages and pensions of overpaid public servants. But the fact that they cut it to bail out foreign lenders is not acceptable nor should it be admitted by the Greek voters themselves.

It seems like everybody think it is ok from Greece to default on their nation's pension promises but not on the foreign investors, banks and speculaturs who lent them money?!