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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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  • Nine Reasons Why Greece, PIIGS Approaching Irreversible Slide To Default 6 comments
    Apr 11, 2010 7:51 AM




    In sum, like other emerging market nations, it has entered a vicious cycle in which market skepticism creates higher borrowing costs and actually pushes the country closer to the abyss, its demise becoming a self fulfilling prophecy. Once that momentum begins, it is very hard to stop decline in confidence

     

    1. Fitch Downgrade Means No More Room To Fall Before Junk Bond Status: Fitch’s downgrade of 2 notches from BBB+ to BBB- means the next level down is junk bond status, leaving Greece with no collateral to use for borrowing from the ECB. This after the ECB yielded and agreed to accept the BBB+ rating after 2010.

     

    1. Yield on Greed Debt Is Now Above Many Countries With Lower, Junk-Rated Bonds: What does that tell you about where Greece’s ratings and thus yields, are going?

     

    1. A Quickening Death Spiral Has Started:

     

    1. Extreme austerity measures cut GDP and tax receipts, spur capital flight from banks

     

    1. EU’s March 25th Rescue Accord Failed, Eroding EU Credibility: The EU needed a big, timely, decisive rescue package with an announcement shock effect similar to Washington’s guarantee of the too big to fail banks back in September of 2008. It needed to show that no matter what, the EU would not let Greece default, even if it meant effective EU stewardship and economic occupation, and Greece had to agree to it. Instead, neither Greece nor its rescuers have approached the issue with this level of life-or-death seriousness. Both sides have chosen to bicker, bargain, and attempt to hold out for better deals in a deadly game of chicken. The result, the EU’s credibility is damaged, and the EU was the last hope for the markets, as Greece has long ago lost credibility.

     

    1. Greece Selling Short Term Bills Into A Steeply Inverted Greek Yield Curve: The Greek Yield Curve is inverted from 3 months to 5 years. Yet Greece will attempt to sell 26 week and 52 week paper, after having failed to sell long term bonds. Looks like the rates will be too high once again, even if there is demand.

     

    1. Greece needs to find €10 bln by May. The EU and/or IMF will probably give them that one way or another. However this is just delaying the inevitable. Greece needs another estimated €30 bln to make it through the year.

     

    1. EU Failure on Greece Endangering Other PIIGS Block Members. Spain alone needs to sell €30 bln of bonds in July. It is in better shape than Greece. However, as noted in Contagion Spreads: PIIGS Credit Default Spreads Rising On Greece Default Fears, Spain and its fellow PIIGS colleagues are watching in horror as their own borrowing costs are rising to new highs on fear generated by Greece’s woes. Should Spain need help, there will be little or no cash left in the EU accord. Markets know this, which in turn sparks more fear and higher rates, pushing Spain and the others closer to the edge themselves. Note that Spain and Italy have debt loads many times larger than Greece’s, and that fact alone may doom them unless the EU can inspire confidence and get borrowing rates down.

     

    Time for that global intervention I mentioned over a month ago in 10 Reasons Why There Will Be An International Solution For the PIIGS ?

    Disclosure: No position

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Comments (6)
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  • dfbell
    , contributor
    Comments (1555) | Send Message
     
    Thanks for the info. All 8 of your reasons are #1? LOL

     

    Pick your death bullet, any bullet ...
    11 Apr 2010, 12:37 PM Reply Like
  • Delojozafado
    , contributor
    Comments (543) | Send Message
     
    So we just hold DRR and add to it on any pull back. That is my take on this. Portugal is next.
    17 Apr 2010, 05:52 PM Reply Like
  • Michael Clark
    , contributor
    Comments (8539) | Send Message
     
    Cliff, I'm looking for your reports every day now. Thanks for keeping our eyes on the ball.
    6 May 2010, 07:23 AM Reply Like
  • Cliff Wachtel
    , contributor
    Comments (1776) | Send Message
     
    Author’s reply » thanks for kind remarks, Mike. We aim to please. Always glad to see your comments. Getting pretty hairy, huh?
    9 May 2010, 07:52 AM Reply Like
  • WiZlon
    , contributor
    Comments (16) | Send Message
     
    Me too. Cliff's articles are a must-read for me, I check for updates twice daily. :-) This guy knows his stuff and is able to make sense of it. That's a tremendous achievement for anyone at this time, given the volatility and unpredictability we have in the markets these days.
    9 May 2010, 10:36 AM Reply Like
  • Michael Clark
    , contributor
    Comments (8539) | Send Message
     
    Cliff: It is getting hairy. It seems like every generation either gets a dark youth or a dark old age. Our parents had the first; looks like we're getting the second.

     

    Keep your helmet on.

     

    MJC
    9 May 2010, 11:05 PM Reply Like
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