Seeking Alpha

It appears likely that Portugal will be the next to restructure its debt and exit the euro zone,...

It appears likely that Portugal will be the next to restructure its debt and exit the euro zone, says economist Nouriel Roubini. Greece should be gone by next year, and with several other euro-zone countries in trouble, including Italy and Spain, Roubini sees Portugal as the weakest and next to fall.
Comments (44)
  • I feel better already. I rather missed Mr. Roubini's boundless negativity.


    Every calamity is always going to be "next month," "next year," etc. One would think that some might see a pattern here.
    9 Mar 2012, 08:23 PM Reply Like
  • Tack my friend. It seems nobody is even concerned that
    Dr. Doom might have noticed that Greek's recent GDP number shrank by 7.5%.


    Awesome ! No ? How in the name of SA can any of the projections of payments be made ? I know Greece must leave the Euro and Merkal pretty much changed the language way back when to let them bow out .


    Only about a dozen new billionaires believed him a few years back when the GS an MS an JPMs sold all those delicious mortgage packages worldwide.


    This time I think he is being conservative in going out that far,,,,,,,,
    10 Mar 2012, 02:42 AM Reply Like
  • Da:


    Besides the fact that these self-seeking publicity doomsters scare the bejesus out of some folks, completely sabotaging their ability to make sensible investments and, ergo, money in the markets, they are usually wrong. It doesn't matter that they were right once upon a time. That's like Meredith Whitney, too, being right once in her life, then predicting the imminent demise of the municipal bond market. (At least she made me handsome profits from buying on the resultant hysteria.)


    The fact of the matter is that it really no longer matters whether Greece, or Portugal, leave the euro, or not. The advent of LTRO provided a mechanism for backing the banks, which was/is the only thing that really could cause problems. Once that Fed-like mechanism was installed, Greece and its bonds are a nonissue; they simply no longer matter.


    Now, of course, one can simplistically extrapolate and say that Greece will be followed by Portugal, by Spain, Italy, yada, yada, but this is simply fearmongering, not instructive as to what's likely to occur within the EU community in the foreseeable future. (I might add that both Spain and Italy has much higher debt levels in the past, relative to GDP, and they're still here, not bankrupt.)


    The growing strength of the U.S. economy and increasing import growth, as just reported, is going to assist Europe, too. If the EU engages, also, in monetary expansion, via more LTRO or other methods, and this lowers the value of the euro, that, also, will prove of great benefit, both increasing their export competitiveness and reducing their internal consumption. All of this would be positive.


    Constant betting on calamity is an overly-emotional reaction I usually generally associate with youth and inexperience, but it sure is a profitable enterprise for a few, who have made a career in scaring folks. It's a shame that those who get spooked are rarely among the beneficiaries.
    10 Mar 2012, 07:36 AM Reply Like
  • Tack, I am saying Dr Doom will be right ,but, look at every talk an comment i made in the past few days ! Greece is doomed,but, who cares. The US market is on hold until Ben speaks this week an hints weather he is too bullish to keep twisting or all the slow GDP chatter will bring him back to his cautious tone. This way the QE hopiums can dream.
    The market lives an dies with the Fed... Don't fight it.


    I see the market acting like last year. Last years chart will look like this year and the ELECTION is over.


    Obama walks right in. He is virtually unchallenged.. I don't consider Mitt as credible an he is light years over the other weasels........


    I have been at this market game 65 years and the last 5 have been the absolute best ! The market is an easy game and in the last 5 years I learned about 3X ETFs up an down.. Triple digit gains in two an over 50% in 3........


    PS Remember JCT's comments way back ?
    10 Mar 2012, 07:56 AM Reply Like
  • Da:


    Tend to concur with your election outlook, as much as it makes me cringe. Am just hoping that the Repubs hold one or both houses of Congress, so we can have what's always best for the country, political gridlock.


    I guess I am skeptical about the belief that this economy and market only driven by QE, as there really hasn't been any genuine QE since June 2011 ("Twist" is not really QE), and things are strengthening even faster. I see the likelihood of new QE as virtually zero.


    Glad your ETF trading has made you happy. I utilize an entirely different strategy, based on value and yield. I am equally happy.
    10 Mar 2012, 08:06 AM Reply Like
  • Tack, they will hold the House ,but, with a smaller majority and Obama will have some coattails,but, the Rep's have a big advantage in the Gov jobs now and the redistricting should save the House. The Senate will be close of even a draw,but, Obama has Gaft McBiden.


    And, true the twist isn't pure QE ,but, it does keep the 10 an 30 year low. If those bond yield pops the deficit gets so bad the market will tank......Despite anything going on with individual companies.


    But who cares. I will keep the mega yielders an have TBT an a 3X ETF short..........I don't fight the Fed or the Market an just go with it.
    10 Mar 2012, 08:25 AM Reply Like
  • Da:


    Just curious. When you say a 3X ETF short, you mean an ETF on what?
    10 Mar 2012, 08:53 AM Reply Like
  • Yep, I have used SPXU and a 2X SDS too. Also, TVIX and i'm not really sure how that thing works with volatility,but, I have made a bunch of 10 point 2 day gains.....Beginners luck ?


    Well, the last few months I have not used them as we've been on a rocket ship ,but, I have used ZSL an DTO and they have been kind.
    10 Mar 2012, 08:59 AM Reply Like
  • Da:


    Well, I was just wondering if you were shorting Treasuries and the market simultaneously, which would seem to me to be self-neutralizing. I can see holding a Treasury short, though, but exercise caution with 2X and 3X short ETF's, if you plan to hold for any sizable time, as they are constantly reset, due to leverage, and that can completely foul up their tracking an cost you money. As you may have noted TVIX hasn't' remotely followed the VIX lately in relative percentage terms.


    For me, I'm not a trader or market guesser. I just look constantly for out-of-favor sectors and undervalued high-yield plays, then, stake out positions in them, collect the goodies and await price recovery. It's worked splendidly for over 15 years, easily outperforming the overall market.
    10 Mar 2012, 09:08 AM Reply Like
  • Tack, I don't hold them. I play with them an look for 2 to 3 points a day. Almost never hold overnight. And I am loaded with the mreits an a bunch of other mega yields, so, I put 10% of the profits recently into TBT at 18 & 18.20........
    I think if the 10/30 year pop if the Fed stops twisting that gain will offset the mriet drop an still keep collecting the dividends. Will see ,but, I feel good.Or maybe they both go higher if the economy is good.


    I never used to be a trader,but, now I am not that mobile an lost my drivers license,so, cabs to the beach for brunch an occasional diner when the granddaughters can break away from volleyball an school social stuff. The market is pure fun now and no longer a job.
    10 Mar 2012, 09:18 AM Reply Like
  • Europe: The only buyer out there for certain European sovereign debt is the EU/ECB. That is not healthy or sustainable for the long-term.


    One point to remember about the ECB and Fed's balance sheets is that at no time has anyone even remotely discussed an exit strategy.


    Regarding the US economy, I track container traffic on coming into the US from Asia and there is no import growth. The amount of containers coming into and out of this country is flat to down 1% from a year ago.


    If things are so strong in the US then why did GS lower GDP estimates on Friday to 1.8-2% and a MS strategist on CNBC say they see 1% growth.


    Even if you look at retail sales, they were flat in January.
    10 Mar 2012, 10:38 AM Reply Like
  • DU:


    Did you see the just-reported trade numbers? Apparently, imports are growing significantly, even if arriving by submarine.
    10 Mar 2012, 10:39 AM Reply Like
  • Submarine might be the only way they are getting here.


    Chinese and European PMI's are below 50 which means contraction. So how are they shipping more goods here when they are contracting and the container numbers are flat?


    Something does not jive with the economic data.
    10 Mar 2012, 10:47 AM Reply Like
  • DU:


    Chinese imports and exports continue to grow, but the exports at a slower rate. PMI indicating "contraction" doesn't mean a net negative; it means a lower positive. Even though China's PMI is barely below 50, it's been rising for three straight months.


    The US. economy is advancing rather briskly in the private sector and will suck up even more imports in coming months. This will negatively impact GDP calculations, as presently formulated, but this isn't any indication of economic weakness. On the contrary, as both exports and imports expand on a absolute basis, it indicates accelerating strength.
    10 Mar 2012, 10:59 AM Reply Like
  • If 50 means a lower positive where is the negative line?


    50 is regarded as the line between expansion and contraction.


    The port traffic confirms the high 40's PMI even with a lag.


    If our manufacturing sector was expanding at a brisk pace then why is there such a gap between the PMI (57 which indicates a 4+% GDP) and GDP estimates (1-2%)?


    Unfortunately, I am not seeing the expanding export and import data. Even if we just focus on exports who is buying our goods? Europe is in recession and China is showing weak growth.


    I am just not seeing this strong expansion in the data.


    The market reminds me of 2011 where we got off to a hot start then fell apart and we rattled around before a year end rally put us into the positive for the year.
    10 Mar 2012, 11:48 AM Reply Like
  • DU:


    1) If growth is 10% and becomes 8%, it's "contraction," but still positive.


    2) The reason PMI can be and likely will be always higher than GDP is because the standard GDP formula subtracts imports from exports, so, the U.S.being a consumption machine, the better the economy does, the more we import, the worse the trade balance becomes, and the more pressure is put on GDP numbers. (As presently constructed, GDP is a terrible indicator of actual economic performance.) (P.S. If you don't see the expanding exports and imports, then you either didn't read or didn't believe the just-issued report.)


    3) We fell apart last year because Japan had an major earthquake and nuclear crisis, Thailand was flood out, people fretted absurdly that the U.S. would default on its debts, and the ratings agencies downgraded U.S. debt. Besides those minor details, yes, this year looks exactly the same.


    There are lots of people, seemingly paralyzed by one fear or another, who can't seem to accept the continuing economic expansion that's been reported for many months consecutively. It's damaged their investment performance measurably.
    10 Mar 2012, 04:54 PM Reply Like
  • David, there must be some disconnect as the Panama canal traffic has grown nicely and Panama is behind on the expansion ,but, pushing hard because the need is there. The US an EU are slow an slowing,but, much of LA an Asia is growing. China cut forecast to 7.5% ,but, they probably will come in the low 8s an their on their next 5 year domestic growth plan.


    I agree with the lower GDP estimates as there all LATE to the game. What most don't get is the market. It moves to it's own tune and since there is no where to put your money. Since the EU banks were the recipients of 75% of the world trade before we hit this horrible patch... I see a colossal switch. The new banks are the big multinational corporations. There safe an pay great yields and can buyback shares to continue to have the earnings to continue to pay.


    Thus, where are you going to go.1 or 2 or 3 % GDP your probably best off in stock. And, Fed Ben and the ECB are lending almost free to banks and there buying bonds to be safe. They don't lend to business because of the risk and the companies doing well do need it.


    Don't let US numbers fool you. The US is limping along even with 20% below the poverty line. Sad ,but, true.
    10 Mar 2012, 05:41 PM Reply Like
  • Oh, yes, bulls are best junkies, addicted to endless monetary morphine, ie. QE's, LTRO's, etc. Bulls simply can not rely on "growing strength of US economy", because that is a joke, and especially will be a joke in six months, when US economy begins its contraction.


    Now, Tack, you and I (I hope) will be here in six months, and I will surely remind you of these words. We will see who was right.


    In the meantime, you could pay attention to China's government inverted yield curve, swelled trade deficit and PMI below 50, as well as EU in recession. But, I am sure you are counting on more and more monetary morphine to goose the markets, because it surely doesn't do anything for the economy.
    10 Mar 2012, 07:10 PM Reply Like
  • Trader:


    Since the low on October 3rd, when numerous vocal pundits here were saying don't go near the market (and still are!), the market is up 21.2%. When I look at my own portfolio and add the 5% in dividends I have collected during this period, my return is about 30%.


    While you didn't notice, QE ended last June (Twist is not QE because buys and sells offset), and the economy has trended continuously higher, and markets have followed, after the absurd panic attack over fear that the U.S. would default on its debts and the meaningless debt downgrade.


    Now, do you think it's a good bet that the market will be down more than 35% in six months? That's just for me to break even (assuming another 5% in dividends). I rather doubt it. You want to make that bet and go short? Go ahead.


    Now, I'll be adjusting my portfolio, as I always do as its components trend higher, so even if the market declines, I'll decline less, and I'll make more once again when things reverse. I've been doing this for 17+ years, through all kinds of panics and downturns, so I doubt it's suddenly going to stop working, now.


    You'll have to discover your own formula for making money.
    10 Mar 2012, 09:14 PM Reply Like
  • Listen, Tack, I don't care about your portfolio, your returns, and your lectures that were obviously supposed to show that you were a market genius making huge returns on the stock market. I simply don't care. I am talking about the simple fact that bulls are addicted to endless QE's, and thus completely unable to deal with real economy, simply chasing free money goosing the markets.


    ZIRP is not QE? LTRO I, LTRO II... Now, seeds of inflation have been sown in emerging markets, and frankly, I don't care about that too; Governments will have to. As my own investment is concerned, it is none of your business.


    I just wonder what bulls will do when all extra liquidity money is withdrawn from the markets? In fact, I already know the answer: market will crack in the big way, leaving every single bull trapped. Just the way you deserve. Then, the real economy will set in.
    11 Mar 2012, 05:16 AM Reply Like
  • Trader:


    You don't care because you want to make what is fundamentally a political statement, not offer useful information for making money. This is an investment site. One must play the cards on the table, not fantasize about how things "ought to be."


    My "lectures," as you would put it, are aimed at trying to advise people how to make money over the longer term. I've been using a carefully refined approach, which I have often discussed, of selecting out-of-favor sectors and buying spreads of yield-related entities, and it's worked very successfully for a long time in a variety of market conditions.


    Yeah, so we may see elevated inflation. And, higher rates, too. I tend to see that, myself, in the future. So what? One modifies one's portfolio accordingly to plan for such conditions. It has nothing to do with being labelled a bull or bear.


    As for your assertion that liquidity will dry up, take a look at where all the liquidity is now. Equity volumes are relatively low, not high. Cashflows are often reported to be away from equity funds. Truly massive amounts of money are sitting in cash, gold and ultra-low-yielding bonds. Markets have big reversals when all the money is "all in," not when it's already sitting quivering on the sidelines. The situation now bears no relationship to 2008; rather it looks more like its opposite.


    So, you keep "knowing" the answer, but the better question is what do you recommend to make money, now or in the future? And, if your own approach is "none of anybody's business," what good is your commentary, except as editorial venting?
    11 Mar 2012, 06:16 AM Reply Like
  • Twist is QE3 because the intent is to lower long-term interest rates and force more money through the system.


    Once can also point to the coordinated swap move as QE since it puts the US on the hook and bails out the European banks.


    Here is a good explanation of the swaps:

    11 Mar 2012, 09:41 AM Reply Like
  • DU:


    Twist sells equal amounts of shorter-term debt for each longer-term instrument purchased. It's not clear to me how this alters currency balances significantly, if at all.


    LTRO is certainly TARP-like, but it's not clear that it's QE-like. U.S. participation, likewise, doesn't alter currency in circulation, either dollars or euros.


    P.S. Contrary to the link's assertion that Twist has weakned the dollar, since Twist was announced the dollar has rallied by approximately 10% versus the euro and 5% versus the yen.
    11 Mar 2012, 09:55 AM Reply Like
  • The short end of the curve has been so manipulated keeping rates at or near 0 that any marginal selling (most of the funds came from interest and principal repayments so there was very little selling) would not affect rates.


    The long end is being pushed lower but unfortunately nobody is borrowing.


    The banks have taken any money borrowed and just stashed it in cash. They are not moving the currency through the system like expected to it is just sitting on balance sheets.


    The point of the link was to show how the US is now a defacto creditor of Europe and the European banks.
    11 Mar 2012, 10:07 AM Reply Like
  • DU:


    "nobody is borrowing..."


    Numerous banks have reported significant increases in business lending.


    Consumer credit, generally, has been on the upswing, too, since diving during the recession. Certainly, auto loans are up. Housing is just starting to murmur, and the construction industry is growing, again.


    That something positive must be happening seems to be indicated by the fact that corporate revenues and consumer spending have been trending higher for many months. It seems to fly in the face of claims that the money is all parked somewhere and not getting used.


    It seems to me that the risk, going forward, is that loan demand is escalate significantly, and the liquidity is there to serve it, so the money supply and monetary velocity could both increase relatively quickly. Now, I am quite sensitive to the possibility of increased inflation at some point, and I suspect the Fed will not act sufficiently quickly to quell it in the early going, so my investments tend to respect that possibility. I am avoiding any and all low-yield, fixed-rate debt, in favor of convertible and floating-rate issues, and have increased my holdings in real estate, chemicals and energy.
    11 Mar 2012, 11:56 AM Reply Like
  • Does anyone really care what he thinks anymore?
    9 Mar 2012, 08:29 PM Reply Like
  • Its just good that he remains so negative. How can Portugal be next to exit? At this point, wouldn't they be first?
    9 Mar 2012, 09:20 PM Reply Like
  • Yes, I do. Tack has been posting his opinions an some are good and some I don't agree with,but, enjoy reading. He doesn't troll. He an I disagree an were both up 30+% with different strategies.


    vireoman, on the other hand.. Who values yours. Your like count ain't nothing to brag about.
    11 Mar 2012, 05:31 AM Reply Like
  • Pandora's Box has been opened with the Greek deal, now all the other PIIGS are lining up, which will be disastrous for the EU and the Euro
    9 Mar 2012, 08:46 PM Reply Like
  • Portugal is not Greece. They have some pride.
    9 Mar 2012, 09:49 PM Reply Like
  • Pig,


    Forget pride.


    Do they have any money?
    9 Mar 2012, 10:27 PM Reply Like
  • Pride? Greed cures pride. Their unions prefer the money of the Germans to any pride.
    9 Mar 2012, 10:30 PM Reply Like
  • Yes TP,but, they just hit 16% and their GDP is shrinking..
    Math ?????
    Send them your barber an i'll split the tab with you. Lets do our part.
    10 Mar 2012, 08:27 AM Reply Like
  • Portugal's problem is that they have followed the EU/IMF's plan and their economy has only gotten worse.


    It is hard for the EU/IMF to justify bailing out a country that never made structural changes and fudged their books to get into the EU and then turn around and deny a bailout to a country who is following the rules.
    10 Mar 2012, 02:29 AM Reply Like
  • Right. Just like Spain just told the ECB an IMF what to do with there deficit levels.


    Viva la austerity and the shrinking GDPs..
    And the Lord said all budgets shall be balanced.......
    10 Mar 2012, 02:46 AM Reply Like
  • And the alternative? Do what the US does and run a 8.5% deficit? For how long? Even a six year old recognises you can't reduce debt by making more debt. The opportunities were missed over the last 10 years to do things right. Now we're at a point were there are no easy solutions. If real wages have out-shot competitive levels by 20-30%, then that is the level that it needs to contract by. I thought this place was fairly immune to the political b.s. of quick and painless fixes.


    Spain at least has some leeway, as their debt levels are moderate and the ECB has bolstered them enough to keep rates low, but what is the point of agreeing upon €-wide fiscal discipline, when the terms get broken right off the bat? This is the same ill-discipline that got Europe into this mess from the beginning. Then it was the big boys: France and Germany that couldn't keep within the Maastricht criteria. They set the precedence. Now no-one feels obliged. Pretty much the death-knell of the €. Good riddance if it finally crashes.
    10 Mar 2012, 05:53 AM Reply Like
  • Yes and the world needs to tell all Americans to f themselves and drop the US $ as the reserve !
    Then the US is worse then Greece.


    So say Sec Jimmy Baker the 3rd.


    Read Professor Meltzer's new book !
    10 Mar 2012, 07:34 AM Reply Like
  • Folks,,,,Portugal's debt problem is a much smaller issue if you look
    at their outstandings ( just do a little research as opposed to relying
    on Roubini)
    11 Mar 2012, 06:54 AM Reply Like
  • It may be smaller but the key is who holds the debt and who gets caught in the eventual restructuring.


    A writedown by any pension plans or banks could push either one into receivership.


    This is why the private sector bore the brunt of the restructuring and the pension funds were left out.
    11 Mar 2012, 09:35 AM Reply Like
  • About Greece: let's not forget that German banks, French banks, European banks, all the world's banks, in fact, kept loaning Greece money, kept lowering interest rates to lure Greeks to borrow more, pushed rates down to 0% in order to try to get the Greeks to borrow more. Why did the banks give the Greeks more and more money? So the Greeks would buy more and more German, French, English and American products....


    That's bad (and stupid) banking. Now, suddenly, the Germans want their money back. The world wants its money back. But the banks made a bad business decision. When did it become the world's responsibility to save banks from their own stupidity.


    Kick the Greeks: it's easy to do, especially for you reborn conservative moralist/Calvinists.


    Shakespeare has an instructive etymology of the word 'bankrupt' in his 'Love's Labour's Lost': bankrupt, bancrout, banerout, bankerout, the final translating as either/both 'Banker Rout" or/and 'Banker Out'.


    Let the banks go under; and start over again.
    11 Mar 2012, 11:01 AM Reply Like
  • Back to the focus on Portugal, the following articles and graph point to some significant differences between Greece and Portugal; Essentially that Portugal has more internationally competitive companies, a smaller sovereign debt overhang, greater social and political cohesion and a greater reservoir of good will amongst its EU sister States than has Greece. This is not to say that a milder version of the haircut and restructuring of sovereign debt along the lines just negotiated for Greece might not be in the best interests of all concerned (i.e. the template now exists in light of the Greek experience, Portugal needs the relief and is clearly better able to benefit if such relief were extended, Portugal would very likely be able to honour the newly negotiated bonds and the effective cuts in the value of outstanding Portuguese bonds would be quite modest in comparison to those just negotiated for Greece).


    An argument can now be seriously made that the EU fiscal and monetary authorities, with the aid of the IMF, are close to having security in depth against a general sovereign debt crisis. Plan A sees the debt of Greece and Portugal (and possibly Ireland) restructured in a manner that, while implicitly constituting partial defaults, is controlled and contained. Plan B applies if one or more of Greece or Portugal falls into unplanned crisis and sees such a crisis addressed in ways that don’t destabilize the EU or the Euro. Whether Plan A or B ultimately unfolds, destabilizing sovereign debt crises in Italy, Spain and the other EU countries are avoided.


    Now if only policies for growth and reform are added we might get somewhere.


    Here are the articles and graph mentioned earlier.




    11 Mar 2012, 03:53 PM Reply Like
  • Maybe the title of the quick blurb should read: "Next in line to spur bears to write negative articles and comments instead of investing in the market and making money - Portugal."


    Seriously though - I do believe we might enter a small correction anywhere from the next few days to few weeks but I seriously doubt the ECB is going to backstop European banks with around 1.5 trillion dollars only to see their money go to waste sometime in the future.


    The actions of the ECB the past few months go to the idea they will use any means necessary to contain the crisis in Europe.


    Now of course - there are those people who wish the ECB would not use any means necessary to save Europe because it would mean their "crash predictions" might come true, and they would feel better about not being part of and/or not joining the multi-month rally.


    Unfortunately, those wishes/hopes do not change the facts: the ECB is committed to a course to use any means necessary to save Europe.
    11 Mar 2012, 09:00 PM Reply Like
  • Short Portugal themed trade ideas?
    12 Mar 2012, 01:12 AM Reply Like
  • The bailout of Greece has literally opened a Pandora's Box for the EU. We should see Portugal and Spain lining up in short order despite the proclamations that Greece is a special situation.


    Portugal is better off but one has to wonder how much longer the population is willing to wait for austerity programs to wind their way through the economy and economic growth to return.


    Spain needs job creation in the absolute worst way.


    Then we have the black swans, Hungary and Austria.


    Hungary recently responded to the EU's lawsuit over their anti-EU laws with a 100 page rebuttal. Both sides are not being friendly.


    Austria has bailed out two banks so far and look ready to add a third.


    In terms of a pullback, I do not think we will see a crash but a 10-15% pullback is not out of the question through the end of June. After that I think we rattle around like last year.
    12 Mar 2012, 03:54 PM Reply Like
DJIA (DIA) S&P 500 (SPY)