Poll Question: Bull Market or Bear Trap?

[Jahbulon]

Wow! Thanks!

[TSPNole]

Sigh.... It is obvious (to at least myself now) that it is regrettable to think anyone can out-think this market. Especially since no one can anticipate the next bit of good or bad news. Good intentions and the best analysis can only go so far. We have a classic case why it is good to spread the bets in a volatile market... which is what I am about to do by going to L2050 in very short order. The crazy factor, is if Israel goes ahead and takes out the Iranian reactors, The bond bets may turn out to be prophetically pretty good, especially if Iran shuts Hormuz in retaliation. The market is ready to recover... but bad news remains in the wings.

[flight23]

There are still a few options before Greece actually defaults... one is that the ECB will agree to take a haircut on the debt owed to them, reducing the amount of a private haircut needed. This of course means countries like Germany & France will effectively be subsidizing Greek debt, but they will do that before letting Greece go down. That will buy some more time, at least until Portugal, Spain, and Italy have a similar need... and until Greece gets back to a 180% debt to GDP in short order since their economy is doing anything but recovering right now.

Even if Greece does default it seems that wont be enough to rattle US markets for now... it will require at least one or two other countries joining the 'forgive my debt' party. We are due for a pullback after this major run up though.

[Reese99]

Hi Flight,

Haven't Germany and France been very reluctant to take any haircuts on Greek debt? Also, doesn't accepting that haircut make it harder to justify denying that same kind of debt forgiveness to Italy et. al. when their time comes?

Honestly, it seems to me that the healthiest thing Germany and France could do is let Greece default, rather than try to subsidize their debt (since that will only be yet another 'kick the can' solution, and a costly one at that).

Thoughts?

[flight23]

Germany & France are very reluctant to let Greece default, but they are scared out of their boots about what will happen if Greece does actually default. A true default will cause a larger haircut to both private and public creditors along with triggering CDS which will likely result in numerous bank failures. That could potentially lead to bank runs and a cycle similar to the great depression. On top of that the cost both to Greece and the Eurozone of members leaving is enormous, it is not a simple process.

Greek default may be inevitable, Im not sure... because Greece is just on a downward spiral with economic contraction worsened by austerity measures being put in place, but for now my bet is the ECB will end up taking a hit on the debt they are owed just to prevent imminent Greek default. Its just a game of chicken between Germany/France and the private hedge funds.

[flight23]

Here come the calls for ECB to take a loss on Greek debt:
http://www.openeurope.org.uk/Article?id=8444

Jürgen Trittin, chairman of the Greens’ faction in the Bundestag called for the ECB to take losses on its holdings of Greek debt, while a poll conducted for Bild am Sonntag found that 53% of respondents wanted to see Greece leave the eurozone.

[MLKMAN]

Germany & France are very reluctant to let Greece default, but they are scared out of their boots about what will happen if Greece does actually default. A true default will cause a larger haircut to both private and public creditors along with triggering CDS which will likely result in numerous bank failures. That could potentially lead to bank runs and a cycle similar to the great depression. On top of that the cost both to Greece and the Eurozone of members leaving is enormous, it is not a simple process.

Greek default may be inevitable, Im not sure... because Greece is just on a downward spiral with economic contraction worsened by austerity measures being put in place, but for now my bet is the ECB will end up taking a hit on the debt they are owed just to prevent imminent Greek default. Its just a game of chicken between Germany/France and the private hedge funds.

So if the world is going to go into another scenario like the Great Depression, I should just buy and hold through it and keep buying shares and in another 10 years I'll be ahead of the game right?

[flight23]

Versus your system, probably.

[Reese99]

Thanks for the response. I get that the Eurozone would have a period of serious pain if Greece defaults, but in terms of longer-term stability, if a bailout today simply means another risk of default tomorrow, the Eurozone providing more money to Greece is just throwing away money, and adding zeroes to their own debt, which further destabilizes the region to a much greater extent than losing Greece would. Imagine if Germany puts itself in a position where it has monetized all the debt of the PIIGS and ends up with a debt/equities ratio similar to Greece's (or ours). I realize that Germany actually produces stuff and has growth, so it's never going to be as dire as the PIIGS, but Japan proved that having too high a debt:GDP is bad, even in a productive country.

As I see it, unless the Eurozone can retool the economies of all members, such that the producers (Germany and France) have absolute say on how the non-producers* spend their (other peoples') money, the EU can't survive this. As things stand, the PIIGS have a blank check to give their citizenry their own little utopias at the expense of a perpetual series of bailouts from Germany and France. I can't see Germany and France tolerating that indefinitely. The only solutions are: kick out the freeloaders or take away the freeloaders' economic freedoms.

And Greece, faced with an ultimatum of 'we'll bail you out again, but only if you cede your economic sovereignty' will most probably say 'piss off'.

But maybe I'm just too pessimistic. Maybe another massive bailout will get the job done. I mean, Greece will probably become responsible with that other-peoples'-money any day now, right?

* (No offense intended to the PIIGS countries and my calling them 'non-producers'. I realize this is an oversimplification/generalization, and no bigotry is intended. That said, Greece's social programs do appear to me to be absurdly over-generous, to the detriment of Germany's account balance sheets.)

[TSPKip]

To avoid offending the PIIGS countries, you could use the spelling GIPSI.

Or SPIIG. ETC.

I believe that the politicians will get elected again if they remain indignant and Nationalistic, but, not if they do the austerity behaviors necessary.

Interestingly, The TEA Party politicians here in the USA will now have to decide if they are fiscal hawks or defense hawks, as the Pentagon is considering which bases to close and which defense systems to cut to meet our own austerity budgeting.

[MakeMe$$$$]

snip...Interestingly, The TEA Party politicians here in the USA will now have to decide if they are fiscal hawks or defense hawks, as the Pentagon is considering which bases to close and which defense systems to cut to meet our own austerity budgeting.

An interesting dilemma. Yet, I do wonder the implications of defense cuts on the overall economy. Do you see that being a balancing act on jobs? I would suppose that if such cuts were done with a timeline that avoids sudden shocks to the job market it might work out as long as the economy continues to make gains and the rate of gains increases from the slow crawl we are seeing.

[TSPKip]

Make: I agree. Unfortunately, many state jobs gave little notice and the individual states' economies will be injured, excepting Virginia, that is [the bedroom for Washington D.C.]

[Jahbulon]

They have to be willing to put defense cuts on the table. They have to!

[MLKMAN]

Versus your system, probably.

I guess the mods will continue to allow you to attack the premium services, so I for one will give back what I get. Be prepared. Great comeback by the way. You still didn't answer my question though. Guess you have to go "google" it.....................

[sludg]

See the problem is you didn't ask a question that warranted an answer. The question you asked...

So if the world is going to go into another scenario like the Great Depression, I should just buy and hold through it and keep buying shares and in another 10 years I'll be ahead of the game right?

This is more of a question not looking for an answer due to the sarcastic nature that it was presented. Flight attacked your service in a different thread and you 2 are still at eachothers throats. If your service is what you say it is let the results speak for itself rather than starting a war on a forum

Back to the original topic of this poll i'm voting for a bull market due to it being election year and the market trend over the last 3 months.