Good news everyone - Greece is "fixed."
Just look at the happy, happy people celebrating in the streets - looking toward a bright future of lower wages, gutted retirement plans, reduced government services and endless, endless debt payments against which their government, who were put in place by the IMF and ECB, have mortgaged 136% of the entire value of their nation's assets to the IMF and ECB.
Look hard because it's soon to be the future of Italy, Spain, Ireland, Portugal, France the U.K. and the U.S. as well as austerity claims a major victory for bondholders as they twisted the arms of the Greeks until they snapped and then they put the knife in to hold them in place and began twisting the legs until they snapped and then they shoved a "rescue package" down their throats. And to think in the old days we used to have to have a war to destroy another country - how silly - now we can do it with contracts!
As pointed out by the London Telegraph: In 1953, the U.S., Canada, Britain, France, Greece and other signatories at the London Debt Agreement of 1953 granted Germany's Chancellor Konrad Adenauer a 50% haircut on all German debt, worth 70% in relief with stretched maturities. There was a five-year moratorium on interest payments. The express purpose was to give Germany enough oxygen to rebuild its economy. The Wirtschaftswunder whittled down the burden of German debts to modest levels within a decade. Germany emerged as a vibrant democracy and a pillar of the western security system.
Greece, on the other hand, is being shown no such mercy and hasn't got a chance in hell of emerging from anything until 2025 - even according to the ridiculously optimistic IMF and ECB forecasts that seek only to kick this can as far down the road as possible so that people will stop asking awkward questions about the overall viability of the EU. 150,000 government jobs now have to be cut and 50,000 businesses will close (many burned down early to avoid the rush last night) in a nation of 11M people (and leaving every day). That's like the U.S. agreeing to 4.5M government job cuts and 15M businesses shutting down (five people employed per business average) to "fix" our economy.
Over 40 members of the Greek Parliament from the ruling party chose to be expelled, thrown out unemployed onto the burning streets of a nation with no future - rather than go along with this farce last night. That was one-fourth of the New Democracy Party's Members and 20 of of 153 of PASOK's lawmakers. We can expect those same people, along with the parties that were against this from the start, to call for new elections and run on a platform of overturning this agreement - making the whole thing meaningless - unless the IMF intends to march troops into Athens to enforce the treaty and begin hauling away landmarks.
We get a preview of U.S. austerity this evening as President Obama rolls out his 2013 budget proposal (year starts in July) that calls for $350Bn in short-term spending that is unlikely to be approved and another $476Bn, six-year highway bill that is woefully inadequate while aiming to cut the PROJECTED deficit by $4Tn over the next decade, mainly by taxing the wealthy - good luck with all that.
Our projected $1.33Tn deficit in 2013 has been cut, despite the stimulus, to $901Bn by the president - essentially using the tax increases and spending cuts he promised in September so no surprises there but, as of this morning, Congress has refused to even put his measures up for a vote. Obama is pressing for a new 30% minimum tax on people earning more than $1 million annually (the "Buffett Rule") and he wants to let the Bush Tax cuts expire on people earning more than $250,000 a year with a cap on itemized deductions at 28%.
This plus very small increases (too small) in corporate taxes, increase revenues so much that we are able to add a $350Bn stimulus (to grow the economy and generate more revenues) AND knock $400Bn off the deficit WITH Obama's healthcare program kicking in as well as Obama has cut $2.50 in spending for every dollar in taxes raised - a feat NEVER accomplished before. Will there be applause? Will there be accolades? More likely, there will be a crucifixion ...
Without Obama's proposed changes (which should have been passed THIS year but have been shelved by Congress), by the next Presidential campaign in 2016, the U.S. is projected to have $24Tn in debt (up 50%) against a $17Tn GDP for a Greece-beating debt to GDP ratio of 138.9%. At that point, we can expect the Troika to be coming for us - looking to jam a restructuring down our throats. That's the future the GOP will be running toward as they reject Obama's Budget out of hand.
With all this fun and excitement, I'm very glad we took the bullish money and ran last Thursday and and we took the bearish money and ran last Friday, ending up much more cashy and flexible into the weekend. As usual, the pre-market is up 1% on all the excitement over Greece being "fixed" - as it has been pretty much every Monday this year (I wonder what they will do next Monday, with no more Greece to fix?). We already caught oil (/CL) for a ride down from $100 to $99.50 in member chat this morning and it just popped up to $101.62, which gave us another entry at the cross below $101.50 and hopefully they open up here so we can do another USO or SCO trade (see last week for those fun trade ideas).
We'll be impressed if the market makes new highs but that's way up at 12,920 on the Dow, 1,355 on the S&P, 2,935 on the Nasdaq, 8,110 on the NYSE and 835 on the Russell and THEN we need to see the SOX and Transports turning around - all preferably WITHOUT the dollar (now 78.895) crashing through the floor (see here for chart of that ongoing relationship).
Time for the bulls to put up or shut up - it's going to be an interesting week.
Additional disclosure: Positions as indicated but subject to change.