Thursday, April 29, 2010

More on My Indignation About Europe

So today I wake up in a decent mood. I hadn't been feeling well lately because of a dog bite followed by a needed tetanus shot (my body did not like the tetanus shot). Anyway, I wake up feeling better again and get to my office surfing the news when I read this from Euro Intelligence: referring to the bailout package:

The loans will be junior to those of the existing bondholders.

Are you freaking kidding me? 7 billion of American taxpayer money is going over to Greece and now we are going to be junior to all the banks who made ridiculously stupid loans????? Who has ever heard of such a thing? The freaking banks won't take 1 cent of writedown on loans worth probably around 30 to 50 cents on the dollar in a default scenario.

So instead, we are just going to turn a blind eye and let the absurdity build. There is still some probability that the German parliament won't agree to these measures. I am losing hope.

This was quoted on several other blogs. I get David Rosenburgs stuff. I couldn't agree more.

First we have governments bailing out banks (and auto companies and mortgage providers), homeowner debtors, and now we have governments bailing out governments. When does someone finally say — enough is enough!

Look, Greece is not going to “fail”. They are going to default. There will be a debt restructuring. And there will be some recovery. Bondholders will take a haircut — why shouldn’t they? Why should Angela Merkel care if German banks own Greek bonds? Greece has been in default in its recent 200-year history almost half the time. So has most of Latin America come to think of it. What about Russia?

The end is complete collapse. The fate is already sealed. The question is severity and timing. The severity issue just gets worse the more we do these idiotic bailouts coupling the system. Personally, I would rather the collapse come now so I can start moving forward in a few years.

If you see what is going on, it freezes you. I would love to be buying companies but how do you do that knowing that in the next three years (heck even the next five) this whole thing collapses? What are you buying unless you plan on flipping.

The thing is I have never been apocalyptic. That isn't my personality. I am naturally skeptical but always thought collapse was a joke...until 2009 when I saw what the U.S. government was doing. Now I see it as a certainty and whether it come quicker than later so at some point I can move on with my life as an opportunity to progress and build with the knowledge that I will not be building when the floor collapses under me.


Justin said...

I wasn't aware that the loans would be junior to existing debt - that is incredible.

I have no idea how that was allowed - except for the fact that the same banks who their balls to the wall on Greek debt are run by the same close-knit crowd who make the decisions at the very top of the regulatory and legislative tree.

Anonymous said...


I've been reading your stuff for about 2 months now. Always a great (and entertaining) read. Keep up the good work.

- Chris Haberle

Market Seer said...

Ha, hey Haberle. Was actually talking about you a few weeks ago with Arob. Always amazed at who follows this blog. Thanks for the comment. Hope things are still going well in D.C.