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  • EU debt levels surge to records [View news story]
    Fair enough but the distinction is meaningful in that the two types of events lead to significantly different endings.

    Had Greece indeed defaulted in 2012 it is arguable that it would have exited said default with a significantly better debt-gdp ratio than it ended up with when it exited the restructuring. Official sector holders of Greek debt took no losses on their actual principal since they were the ones providing the new financing and they could dictate terms.

    Greece would be in a completely different place today had a real default occurred, although I have no idea if that would be a better place or worse considering I am a big proponent of regulatory environment reform in Greece.
    Apr 21, 2015. 06:12 PM | 3 Likes Like |Link to Comment
  • EU debt levels surge to records [View news story]
    "a unilateral default would only be feasible if Greece first introduces an alternate currency."

    I agree in a unilateral default that would be the case.

    There have been, however, multiple suggestions as to how Greece would survive an "accidental", say, default, including the pharma IOUs of 2009 or other similar IOU type products.

    Further, it is conceivable that Greece could 'soft default' by starting with capital controls and go from there.

    It is however rather unlikely as it is far more likely that Greece can survive to June 20 as described in this Bloomberg article

    and subsequently make it all the way through 2015. That article is in interesting take.
    Apr 21, 2015. 05:52 PM | Likes Like |Link to Comment
  • EU debt levels surge to records [View news story]
    ""effectively," they have already "defaulted" and "negotiated" new arrangements, more than once... Money sent to Greece is "foreign aid," not loans, no matter what they call it."

    How do you reconcile that with the fact that the reforms have been dictated by its lenders? Or the fact that the official sector ignored its own advisors and didn't participate in the debt restructuring?

    Also, Greece didn't default. In Greece's 2012 credit event what occurred was Greece enforcing a retroactively inserted collective action clause in order to restructure its debt:

    "The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7 of the ISDA 2003 Credit
    Derivatives Definitions (as amended by the July 2009 Supplement) (the 2003 Definitions) following the exercise by
    The Hellenic Republic of collective action clauses to amend the terms of Greek law governed bonds issued by The
    Hellenic Republic (the Affected Bonds) such that the right of all holders of the Affected Bonds to receive payments
    has been reduced."
    Apr 21, 2015. 05:45 PM | 2 Likes Like |Link to Comment
  • JPMorgan: Worst is over for oil [View news story]
    Oh wow. The run-up has been on pure speculative buying. There's huge momentum pumping oil up and it can hold it up for a while - and probably will. There's some increase in fundamental demand but the slack on the supply side is still growing.

    Someone's setting up some T-Ball.
    Apr 21, 2015. 12:46 PM | 3 Likes Like |Link to Comment
  • Iran looks to OPEC to clear way for more production [View news story]
    A lot of Iranian crude hasn't been all that steeply discounted - S. Korea, India, and China among others had all received waivers that allowed them to continue purchasing Iranian crude throughout the sanctions.

    But Iran is pumping at a rate of about 1m barrels when it could do easily more than twice that. Also, a lot of the refineries that were purchasing Iranian crude were doing so in addition to sourcing crude from other areas, not exclusively. And many had even reduced imports over time since sanctions began. Not to mention that the amount of ships available to transport the cargo was limited.

    When sanctions are lifted many countries that previous to sanctions purchased Iranian crude may choose to import it - especially if it's priced right. Greece is one country that imported most of its crude from Iran pre sanctions that currently sources it instead from Libya and Russia for example, which would absolutely be looking to restart imports if a good price is offered.

    My opinion being, Iranian crude will absolutely have a market impact. And Iran can easily ramp up production should it so choose. Iran is also interesting because more sales and more volume is just awesome for them even at these prices considering how long they've been crimped by the sanctions.

    Meanwhile both Kuwaiti and Canadian oil industry people have been on the record last couple of days reiterating commitments to continue producing at these levels or greater....
    Apr 21, 2015. 11:22 AM | Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    To be more fair to your comment because you aren't wrong, Greece's restructuring could have gone a completely different way because of its peculiar situation in that most of its debt was written under its own law. But because of the amount of its external debt acquired / controlled by the official sector participants who were also funding the restructuring, it could not reduce its actual obligations meaningfully (or default) and was forced to primarily push out duration and reduce yields.

    The point I was making when I said 'not a true default' was that Greece didn't miss any payments and exited the restructuring owing a lot more money than it should have because of the way the restructuring was handled and because of the participants in it.

    Greece has had that burden repeatedly. The reforms imposed from the fundings starting in 2010 although effective to some degree in reforming its regulatory environment have consistently been of the 'austerity' type which reduced the size of the economy necessitating further bailouts. Over and over. And Greeks get blamed for not performing while the austerity packages are dictated by its lenders and the official sector doesn't participate in debt writedowns to enable Greece to perform.

    The difference now is that Syriza has decided that austerity doesn't work and that future reforms should be pro-growth in order for the debt/gdp ratio to improve and not necessitate further 'bailouts'.

    And if indeed the creditors were to now bail, as you say, the problem Greece primarily faces is that the restructuring of 2012 altered its debt to bonds written under its own law to English law. So it wouldn't be able to pay its creditors, and it would hard default. It is -highly- unlikely that Greece could merely walk away from that burden, although it could presumably let it sit for some time.

    Btw--Greek business interests are already and have been for some time experiencing default-type issues such as complete lack of currency insurance. So a default would definitely hurt domestic business interests but it wouldn't be as bad as one would expect since this is such a slow motion catastrophe.
    Apr 21, 2015. 08:09 AM | 1 Like Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    The 'bailout' losses by creditors were -mostly- in duration extensions, not losses in actual principal. And, if I remember correctly, some very very small percentage chose to cash out rather than have their their duration extended and a bunch of foreign-law bondholders were paid full face so that Greece wouldn't have a Argentina style holdout situation.
    Apr 20, 2015. 07:48 AM | Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    The 'reforms' to date haven't fixed its fundamental problems. They've been stop-gap solutions primarily imposed or proposed by Greece's lenders (things like thinning out the public sector or reducing the minimum wage). Greece needs a competitive economy if it is to be a part of the EU, an economy where its highly educated workforce and favorable climate encourage foreign direct investment. Even Greeks prefer to initiate business outside the country in places like Bulgaria because the regulatory burden is so onerous for business owners.

    The thing about Syriza is that it gets it - Varoufakis is highly informed and the idea about growth linked debt is fantastic - and wants to address it. Making it easier for large firms to perform mass layoffs or reduce labor in any way, streamlining regulatory approval system by improving its efficiency and reducing redundancy: these are things that have not been addressed at all. The 'reform' programs to date have been mostly shaking the tree and seeing how much money falls out.
    Apr 20, 2015. 07:25 AM | 1 Like Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    Once again everything in your comment is wrong.

    Greece's 'future economic outlook' would be in great shape post default, actually. It's biggest issue right now is that it cannot compete with its neighbors in the north and therefore all it does is exist in a perpetual state of effectively running a negative balance of trade inside a currency union which means it is exporting capital, non-stop. For as long as it stays in the union, unless it undergoes significant reforms, that will continue, but an exit would allow it to break those chains.

    Further, the short term repercussions usually associated with default - Greece is already enduring them, and has been, since 2010.

    Greece, by the way, has the largest merchant fleet in the world, accounting for 15% of it. I get that may be of 'little basic economic interest to you' but I guarantee you it isn't to, well, anyone else. Your understanding of the Greek economy is severely lacking.

    Also your understanding of the bond markets in a world of 10 year negatively yielding sovereign debt.... I mean... do you really not get that? Sure, no one is going to lend to a country with shaky finances and a 200% debt to gdp, but figure 10% yields in a country running a primary budget surplus with half that is damn tasty. You need to grasp that debt is based on risk, and owning Greek debt after a default will be orders of magnitude less risky than it is right now.

    You are also badly misreading Syriza. Syriza is the first government in that country in 60 years which is not beholden to the interests of the country's financial elite. With the mandate and the legislative authority and capability to enact real reform (which it is already doing).

    The one thing I find most frustrating about comments on Greece is how many strong opinions there are that are completely uninformed by the realities of the actual situation there.
    Apr 19, 2015. 10:03 PM | 2 Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    How, precisely, would you expect the EU could 'make it painful'? Greece leaving the Euro is so far-fetched so as I won't even address that but I'll point out that even its lenders have gone to great lengths to point out the fact that Greece's debts and fiscal obligations are not a political matter or EU matter but a fiscal matter to be considered primarily by the ECB, IMF and Europe's fiscal authorities. And because the political union requires unanimity of voting in the political sphere, Greece could actually cause no end of mischief by voting against every initiative. It doesn't take a genius to guess how that would end.
    Apr 19, 2015. 08:23 PM | Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    "Of course Greece can default ..they did that in 2012 "

    I'd hesitate to call what happened in Greece a true default. True defaults are usually accompanied by debt haircuts. In Greece's situation it restructured its debt - which ratings companies determined was an effective default - and it exited the restructuring with far more liabilities than when it entered it. Which, again, is not typical of default.
    Apr 19, 2015. 08:18 PM | 2 Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    The bets on Greece defaulting or exiting have been wrong for as long as the hyper-inflationistas and Fed rate hike promoters have been.
    Apr 19, 2015. 08:08 PM | 2 Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    Wow. You clearly haven't paid any attention to how sovereign defaults work. Not to mention the one example you cite you don't understand. Argentina is a unique situation that has nothing to do with every single other default in history. In fact, holdout creditors - which are the origin of Argentina's most recent default and all its problems - to Greece have already been made whole (circa the first funding deal for that matter) so Greece cannot by a longshot experience anything remotely similar to Argentina.

    Further, a default would enable Greece to haircut a significant amount of debt (guess who gets hurt in that situation?). Meanwhile, Greece is already at the point of a primary budget balance and could arguably sustain itself without access to debt markets for some time, but it wouldn't have to, since post-default its debt to GDP would make it a very attractive candidate for lending, period.

    The truth is the opposite of what you assume. The truth is a default vastly favors Greece, and would immediately collapse earnings at virtually every meaningful European conglomerate which would see writedowns on their assets, including such entities as Vodaphone, IKEA and Carrefour.

    Your comment is just horribly uninformed.
    Apr 19, 2015. 08:06 PM | 2 Likes Like |Link to Comment
  • Draghi: Euro is irrevocable despite Greek problems [View news story]
    I'd suggest a Greek default is more like Puerto Rico's potential default which was/is a big deal because as a commonwealth and not a state the default would be uncharted territory. Some guidance for the Greece/EU scenario would be derived from the Cyprus capital controls episode but a lot would be shot from the hip.
    Apr 19, 2015. 11:13 AM | Likes Like |Link to Comment
  • Crude futures chalk up sixth straight gain [View news story]
    Oil is again badly out of wack on a btu basis with its alternatives and the longer term trend will continue to be source diversification away from it.

    Any sustained divergence of this type simply hurts oil long term as demand growth and demand in general gets crimped. Al-Naimi knows this, and I suspect that Saudis will continue to pump at these levels or greater until there is some real capitulation in the market.

    It didn't take long for US production to decline, it won't take long for it to come back online either. Almost no players have really been shaken out.
    Apr 18, 2015. 10:53 AM | Likes Like |Link to Comment