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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • COMING WEEK MARKET MOVERS: PREPARE FOR 2012’S RISKIEST WEEK THUS FAR 1 comment
    Mar 3, 2012 10:43 PM | about stocks: SPY, DIA, UUP, UDN, FXE, ERO, URR, ULE, EUO, DRR, FXA, FXB, FXC, FXD, FXF, FXEN, FXY, JYF, CYB, GLD, CNY, USO, DUG, USL, NBO, DBV, ICI, CEW, PHYS, SLV, OIL, SDS, RSW, BXDC, SPXU, SH, EWC, EWA, TLT, XHB, ITM

    Part 2: Coming Week Market Movers

    The following is Part 2 of our weekly review and preview strategy guide for traders and investors of all major asset classes via both traditional instruments and binary options, covering coming week's market movers and trade ramifications

    Here are the top likely market moving events for this week. Together they suggest the highest volatility risk thus far in 2012.

    1. Greek Bond Swap Deadline & Results To Bring Default?

    Thursday March 8th could be a dramatic but ultimately insignificant day on which the EU once again defers an eventual Greek default. However it may also prove to be the day the historic first EU default occurs, and it's that risk that makes this THE potential market mover of this week.

    In case you missed it, here's the key background.

    Thursday March 8th is the deadline for private bondholders to 'voluntarily' exchanging their current Greek government bonds in exchange for new ones worth about 25% of the old bonds (as of last week), assuming Greece even repays this debt at all.

    If Greece gets the minimum 75% participation rate needed from private bondholders that would then make it likely that the International Swaps and Derivatives Association (ISDA) rules the swap voluntary (despite the 75% loss at minimum!) and not a default.

    No, we too don't really understand how a 75% loss, or anything close to it, can be deemed voluntary, but such are the surreally desperate standards believed to be in place.

    However, if less than 75% agree to this deal, then, because Greece can't repay its current debt load, it will essentially force all bondholders to accept the deal anyway. It can do that legally because 2 weeks ago Greece retroactively added a Collective Action Clause (CAC) allowing it to impose these conditions on bondholders. That in turn would strip away any final pretense that the deal is anything other than an outright default.

    Opinions on the near term ramifications vary from a mere temporary fear driven pullback (until the latest temporary band aid is applied) to outright panic and market collapse as all GIIPS and most major EU banks face impending insolvency as their debt is deemed too risky and thus too expensive to issue).

    The fact that global risk appetite remains in an uptrend, with most global stock indexes at or near at multi-year highs, suggests that markets believe all that will once again be deferred and ultimately avoided, because, well, it just must be. The consequences are too terrible to face.

    Given those consequences, the ISDA might somehow still refuse to call the default a default. The consequences are unlikely to be much different. The default insurance known as Credit Default Swaps would lose all credibility. Without any way to hedge default risk, GIIPS bonds would still be viewed as far riskier than previously thought.

    Just like in July 2011, when haircuts were first officially introduced and GIIPS bonds became much riskier, contagion will start again as GIIPS bond yields would adjust for that risk, and spike beyond what these nations can afford to pay. Under this scenario too, they are shut out of bond markets, along with the EU banking system that holds most of these bonds, and face imminent insolvency.

    Thus far the ISDA has refused to rule Greece in default because until March 8th the outcome is uncertain, It has indicated that only the actual use of the CAC clause, not its mere the insertion and threat of use, constitutes default.

    So by the end of Thursday we'll have a good idea about whether the bond swap is voluntary or not. The final ruling from the ISDA is due Monday March 12.

    If Thursday ends badly, things could go South fast. The next day, EU leaders are scheduled to make their final decision on the second Greek bailout (originally approved back in July 2011). They could reject the bailout if they believe their banks are ready to absorb the losses from a Greek default and those that may follow. However, recent history suggests that if the banks aren't ready, and that the EU will agree to pay €130 bln (or at least some of it as it will not be released all at once) to buy some more time.

    If the EU rejects the bailout, it's safe to assume that the EU leadership is ready to keep its banking system alive.

    So Thursday's the next of an increasingly frequent series of hurdles the EU must jump to stave off a crisis.

    Mark it down Thursday's the day.

    Even without the Greek drama Thursday and Friday, this week would qualify as the biggest of the month for event risk. Here's what else is coming:

    TO VIEW THE REST OF THIS ARTICLE PLEASE VISIT http://globalmarkets.anyoption.com AND FIND ARTICLE BY SAME NAME UNDER THE WEEKLY TAB.

    Our apologies for the inconvenience. My partners want these posts to introduce visitors to our website. Your visit helps keeps these posts coming to you free of charge. Thanks in advance for your help.

    If you want to know more about how to protect yourself against risk of crashing markets and currencies, stay tuned for details about my coming book, THE SENSIBLE GUIDE TO FOREX, SAFER, SMARTER WAYS to SURVIVE and PROSPER from the Start. It's the first book to show how prudent, traders and long term investors with limited time and risk tolerance can tap forex markets to hedge currency risk and improve returns. See my profile page for details

    DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN'T BE TELLING YOU FOR FREE, NOW WOULD WE?

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • Author’s reply » short, useful for all investors & traders, preview of what to watch next week, likely prime market movers & lessons for coming week & beyond

     

    For further details on building an income stream that’s diversified among the strongest dividend payering stocks in currencies with strongest long term trends, see my coming book, The Sensible Guide To Forex: Safer, Smarter Ways to Prosper from the Start (John Wiley & Sons, 2012) and see the Book Description for details. My profile page on seekingalpha.com and linkedIn.com (under Projects or Publications) has further details. . It’s due out September 2012, available now for pre-order to lock in the discount.
    3 Mar 2012, 10:46 PM Reply Like
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