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Posts Tagged ‘greece default’

And they say gold is going sideways…..

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This is what the bankruptcy of a western nation looks like…do you really want to run to a dollar?

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This is a wonderful house centrally located in Fira with caldera view.  It is 280m2 in size and is actually comprised of two homes, one on top of the other.   The home has a courtyard, area for roof garden.   Bedrooms and livingrooms with high 5m cielings, and lofts in both houses.   The home needs repairs but is structurally sound.

Price 670.000 euros firm, Reduced from 800.000

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A little visual aid from Mark Lundeen compating the current gold bubble to the stock market bubble from 1980-2000, we aint seen nothing yet.

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by Christopher Laird, PrudentSquirrel.com | April 7, 2010

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Something big is up, and it’s possible the Euro is going into a real crisis within two months…Is this the next big market surprise ala Lehman? Not exactly like Lehman, but of the scale of that crisis that shook the entire world and almost caused worldwide bank shutdowns in Fall 2008? I am beginning to think so, and have been discussing this looming new worry for subscribers, IE we are right at the cusp of something big for the Euro and the European Union, not only financially but very much so politically. Imagine what a real Euro crisis would do to – everything!

Alert that Euro on verge of real crisis

We are so concerned by recent developments with Greece as a canary in the coal mine for the Euro that we just issued an alert to subscribers that we foresee a big blow up for the Euro in about roughly one month’s time. That is USD bullish and gold bullish, and bearish for about everything else out there. And this has many other implications for US Treasury bonds, the China Yuan revaluation issue and many others. This Euro situation is a huge potential bombshell, possibly outgunning all previous huge crises we faced over the last 2.5 years. That’s right, the Euro situation can outgun all the worst financial chaos we have seen so far, and lead to massive currency instability worldwide. This is a big deal if it happens as we foresee.

If you noticed in the last week or so of trading days, the USD and gold often went up together. Gold and the USD are fundamentally inverse, the USD pricing most commodities, even gold if you will – especially gold. That particular gold / USD inverse is tied to the fact that the USD is still the world’s paper reserve currency still and is not losing that status yet – and gold is the world’s precious metal reserve currency.

When the USD and gold rise together, trouble is near

Now, when both rise together, you can be assured that flight to safety and liquidity/cash is in effect…

The biggest reason for the USD rising at this time is flight to safety due to concerns about the Euro. And money coming out of emerging markets that are peaked out and falling. The Euro makes up over half of the US Dollar index currency basket. So, when the Euro has trouble, the USD is the biggest beneficiary along with gold.

‘This Ain’t happening.’

It became clear last week that the EU bailout with the IMF for Greece was basically hot air. Greek bond spreads rose last week to their highest level versus Germany last week; the bond markets saying the proposed Greek bailout deal was just smoke and mirrors. Since this Greece story has been out for months, it became clear that all the Club med states and the so called PIIGS (I don’t like that term but everyone is using it to refer to those states, Portugal, Ireland, Italy, Greece and Spain) are even larger versions of the looming Greek tragedy, with even larger debt problems. And their time is running out this year too.

Must have $20 billion within two months

Why is Greece causing such a stir, its economy is small compared to say Spain, who is next in line in this crisis…? Because Greece has to refinance about $50 billion worth of bonds over the next number of months, a big $20 billion chunk due to roll over in two months. Greece is now at the door of insolvency.

The fact that the EU cannot come to terms with a relatively small bailout of $50 billion for Greece shows the internal dissention in the EU over the bailouts of the Club Med guys (PIIGS), with Germany finding it politically impossible to sign a deal. Greece is being left to its own devices. That ain’t good. Not good at all.

IMF solves nothing

Getting the IMF involved is viewed by markets as a last ditch effort, and reflects terribly on the EU monetary union and political union. It is said that using the IMF here merely confirms the political paralysis in the EU over this situation, and reflects terribly on the EU and the Euro. Major political paralysis is not something a major potential reserve currency can tolerate. Calls in Germany and elsewhere to kick out repeat EMU (European monetary union) offenders with huge financial deficits, Greece running something like a 13 pct of GDP deficit yearly. It’s going bankrupt.

Money is fleeing the country. A big surge of money flight to international banks in Switzerland, UK, Cyprus in the last week or so. In short, Greece is rapidly developing a sovereign bond crisis. That is nothing new, but the timing is, in light of the fact they need about $20 billion over the next two months. And money fleeing the country…is particularly worrisome.

There are many facets to this EU situation and they are bleak as hell for the Euro. This appears to be the next looming ‘big one’ crisis. We have kept subscribers well informed of potential outcomes for the Euro, and we also called the USD rally at end of Nov 2009, and a gold bottom in Dec 2008. We have made a lot of great currency calls way ahead (by months) of anyone I know of. We also called the 2008 summer commodity peak in April 08 warning the USD would rally, again months ahead of anyone I know of.

We have some basic defensive strategies to cover these potential events – a market crash and a possible Yuan revaluation. In any case, we have made some incredible calls for the last two years on the overall markets, calling huge swings in the USD, currencies, gold and commodity markets at key times, predicting trends that lasted 6 or more months out from our calls. There is a chart showing several of the major ones we called in the last 2 years on our site. Our newsletter is 44 issues a year with mid week email alerts.

Even though our newsletter is named PrudentSquirrel, it is probably one of the best currency newsletters for big currency calls you will find out there. The name reflects our ultra conservatism.

Copyright © 2010 Christopher Laird

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…just look at this chart

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As I have been saying all along, the situation here is dire and unless zero hedge posts it, no one seems to believe me.   Greece will default and the domino effect will be huge.   I think gold will be a good preserve of wealth.   Real estate will also be if there is a currency depreciation but you have to wonder how they will tax property.

Here is the zerohedge article

The soap opera that just refuses to die, is just getting better and more bizarre by the day. The latest lunacy out of Greece, as reported by Market News, is that the near-bankrupt country is now imposing its own conditions on the bailout, saying it wants to amend the deal struck recently by Eurozone lenders, and wants to bypass the IMF’s financial contribution, and eliminate the role of the IMF entirely, as it is “concerned that intolerably stringent conditions would be imposed by the International Monetary Fund in exchange for aid.” Did anyone over in Athens even bother to read the fine print of what austerity means? It is good of the nation to finally wake up before suckering in US taxpayer dollars that, of course, would have never been repaid. And with that America, and the IMF, should wash their hands off the whole offer, and throw the ticking time bomb squarely into Merkel and Sarkozy’s court where it belongs, together with the $1.5 trillion in Club Med bank claims that the Eurozone is on the hook for if, and certainly when, things go sour.

More from Market News:

“The reason is that since the summit, [Greek] Prime Minister [George Papandreou] has been receiving information from the IMF about the possible measures and reforms it would be asking in exchange for  financial support,” said one senior official. “The measures are tough and might cause social and political unrest. After that, various cabinet  members voiced their opposition to the IMF contribution.”

Curious, what did Mr. G-Pap expect? That reducing a cash deficit of 16% to something like 3% was going to be as simple as downloading the latest Ricky Martin song to his iPad? Oops. Oh and guess, what, all that stuff about Greece not needing help (yes, yes, hold your laughter), was bullshit after all:

Several Greek officials have already voiced their concern that the agreement reached by Eurozone leaders requires a lot of time to be put into effect and that the procedure is bureaucratic. The sources said the Greek government will be seeking a clearer European mechanism, without the participation of the IMF, which will be speedier and will respond immediately to a country’s official request for financial support.

“What the government wants is to improve the deal and iron out the details that have not been decided yet,” the senior official said. “There is a strong chance that Greece might be forced to ask for financial support after all, despite official statements to the contrary, and it is essential that the terms and conditions be clear.”

Oh, and remember when G-Pap said he welcomed the IMF’s (aka US taxpayers’) participation? Yeah… he was just kidding about that.

Greece’s apparent aversion to IMF involvement represents a sharp reversal from just a month ago, when Papandreou said his government would go to the IMF on its own if European leaders couldn’t agree on the details of an emergency package.

Also, once this news is fully digested by the market, we expect the GGB 10 Year yield (currently at 6.5%) to primptly go north of 7%, once the implicit guarantee of lower rates in the future is eliminated.

While the IMF might insist on tough fiscal conditions in exchange for funds, it would almost certainly charge lower interest rates on loans than Greece’s fellow Eurozone members. The EMU deal struck at the summit states that bilateral loans from Euro area states are to contain “no subsidy element” — in contrast to the IMF’s traditional practice.

In a nutshell what Greece is doing is, simply said, lunacy. In its attempt to once again take the easy way out, and to prevent losing already non-existent political favor with the masses, the administration is literally risking a full out sovereign bankruptcy.

Since the contingency aid deal was announced late last month, some analysts have wondered why Greece would bother borrowing from its fellow Eurozone states when it could get money so much more cheaply at the IMF.

And some high profile officials at the European Central Bank warned that the conditions requested by the IMF would actually be more lenient than those already required by the European Union’s Stability and Growth Pact.

ECB Executive Board member Lorenzo Bini Smaghi, for example, argued that the conditions imposed by the IMF “are generally not stronger but rather weaker than those that we in Europe have now agreed on.” He warned that, in the event of IMF involvement, “these weaker conditions will become the new standard and replace the EU’s Stability Pact.”

Once again, Greece defines what shooting oneself in the foot truly means. At least, post bankruptcy, the Greeks will have a good climate, good music and drink. Now… where is that Sotheby’s auction of Santorini?

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