European Union leaders announced a write down of Greek bonds by 50%
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Re: European Union leaders announced a write down of Greek bonds by 50%
#2I believe the bond market was discounting them at a much higher rate than that. But at least it's a good start, recognising the actuality of the situation rather than the fantasy.
Re: European Union leaders announced a write down of Greek bonds by 50%
#3It'd be interesting to see what happens next: will investors flee from Europe? Will the banks have enough to resist the loss? Must the ECB and the stability fund support banks holding greek debt? Will fear about default spread to Italy or Spain?
Re: European Union leaders announced a write down of Greek bonds by 50%
#4It'd be interesting to see what happens next: will investors flee from Europe? Will the banks have enough to resist the loss? Must the ECB and the stability fund support banks holding greek debt? Will fear about default spread to Italy or Spain?
Basically everyone is waiting for Spain, Italy, Greece, Portugal, Ireland and Iceland to crash. None of them have, despite all the screaming and all of them will have to implode in their own sad ways, eventually.
Thus, despite all the media talk about fear, drama and emotion people in the investment community are actually very unemotional and pragmatic and unfearful (I can not say they are courageuous now can I?)
The problem is that all of the above countries are still stuck in economic bubbles, yes the bubbles are not as rosy but they are in bubbles still — partly to keep American, British and French banks safe (who are the largest other party to all the debt that these countries have taken), partly because the populations there love to delude themselves.
Investors will get back into Europe after the crash to buy on the cheap — almost everybody is as cunning as a fox these days, nobody buys when the price is percieved to be too high, because of the abudance of information.
These types of investors are small guys like you & me, sovereign wealth funds.
However, there is an another type of investors who look for even a bigger score. Obviously, the counterweight to buying on the cheap in Europe is that a lot of banks in the U.S., British and France will be up for grabs as well.
To give you an example of how these other type of investors operate — you might not have noticed but there was a lot of noise during this late summer from the controlled alternative media, such as Zerohedge and even your trusty old charlatan Alex Jones and from rumours on the trading floor about Societe Generale being on the verge of a collapse — these rumours were magnified until the moment that S.G. turned to the Rothschilds in France for help and guardianship — then suddenly everything stopped. Heheee.... somebody is beginning to take control of the banks on the cheap.
The funny part is that the Rothschilds are not as rich as people claim or think they are — there have been a lot of people in the U.S. who are richer than them in terms of net worth, however they just manage affairs by spreading rumours and perception better than you or I can or that glamorous, over-the-top big, soverign wealth fund ever can — connections, connections.
I mention this as an example to conclude that there are two types of investors, the ones who are waiting for the big crash and the ones who are trying to manipulate through the anxiety and rumours prior to the big crash.
But nobody is particularly scared of anything as far as things go. Everybody is preparing themselves, like F1 cars for the start of the race. A game of nerves, perhaps but not of emotions if you know what I mean.
References, before you judge me:
[1] http://online.wsj.com/article/BT-CO-20110823-709045.html [2] http://www.latribune.fr/entreprises-finance/banques-finance/...
Re: European Union leaders announced a write down of Greek bonds by 50%
#5As someone not wholly familiar with government bonds, let me ask- does this mean that private creditors, aka individuals like you or I, are taking a 50% loss on investments? Or is this at a corporate or governmental level?
Re: European Union leaders announced a write down of Greek bonds by 50%
#6As someone not wholly familiar with government bonds, let me ask- does this mean that private creditors, aka individuals like you or I, are taking a 50% loss on investments? Or is this at a corporate or governmental level?
Both. Pension funds and the like often invest in government bonds; traditionally they're a safe investment used to hedge against riskier ones like stocks. With the latter you know there's no guarantee of performance, but you expect a risk premium in the firm of a dividend or accelerated growth. 'Bond' is another word for 'promise' so you should be able to rely on it. Saying that 'people knew the risks' of investing in bonds misses the point: they're supposed to be risk-free, so bond default is a very big deal.
Re: European Union leaders announced a write down of Greek bonds by 50%
#7As someone not wholly familiar with government bonds, let me ask- does this mean that private creditors, aka individuals like you or I, are taking a 50% loss on investments? Or is this at a corporate or governmental level?
Both. Pension funds and the like often invest in government bonds; traditionally they're a safe investment used to hedge against riskier ones like stocks. With the latter you know there's no guarantee of performance, but you expect a risk premium in the firm of a dividend or accelerated growth. 'Bond' is another word for 'promise' so you should be able to rely on it. Saying that 'people knew the risks' of investing i…
'Bond' is another word for 'promise' so you should be able to rely on it... they're supposed to be risk-free
Agreed. I'd be livid right about now if I held Greek bonds. Although I suppose anyone looking for shelter in the form of government bonds could have taken the next step and diversified across nations, further reducing their exposure.
Re: European Union leaders announced a write down of Greek bonds by 50%
#8As someone not wholly familiar with government bonds, let me ask- does this mean that private creditors, aka individuals like you or I, are taking a 50% loss on investments? Or is this at a corporate or governmental level?
Both. Pension funds and the like often invest in government bonds; traditionally they're a safe investment used to hedge against riskier ones like stocks. With the latter you know there's no guarantee of performance, but you expect a risk premium in the firm of a dividend or accelerated growth. 'Bond' is another word for 'promise' so you should be able to rely on it. Saying that 'people knew the risks' of investing i…
Sovereign Debt is most certainly not "Risk Free." I'm not sure that the Greek Bond Default is particularly meaningful - and is certainly not a very big deal. The market had anticipated (and priced in) this default almost six months ago. It was a big deal _then_ but it's been a foregone conclusion for most of the year. If anything - the deal negotiated here is probably showing some upside to what was expected, so this form of default is actually positive news - akin to a company showing a drop in profits, but less of a drop than what wall street expected.
Re: European Union leaders announced a write down of Greek bonds by 50%
#9As someone not wholly familiar with government bonds, let me ask- does this mean that private creditors, aka individuals like you or I, are taking a 50% loss on investments? Or is this at a corporate or governmental level?
Both. Pension funds and the like often invest in government bonds; traditionally they're a safe investment used to hedge against riskier ones like stocks. With the latter you know there's no guarantee of performance, but you expect a risk premium in the firm of a dividend or accelerated growth. 'Bond' is another word for 'promise' so you should be able to rely on it. Saying that 'people knew the risks' of investing i…
> Saying that 'people knew the risks' of investing in bonds misses the point: they're supposed to be risk-free
Given the fact that bonds regularly default, I'm not sure how any sane investor could consider them risk-free. If they were, every bond would trade at identical yields, equal to the risk-free rate of return.
Re: European Union leaders announced a write down of Greek bonds by 50%
#10Earlier quoted context omitted.
Both. Pension funds and the like often invest in government bonds; traditionally they're a safe investment used to hedge against riskier ones like stocks. With the latter you know there's no guarantee of performance, but you expect a risk premium in the firm of a dividend or accelerated growth. 'Bond' is another word for 'promise' so you should be able to rely on it. Saying that 'people knew the risks' of investing i…
'Bond' is another word for 'promise' so you should be able to rely on it... they're supposed to be risk-free Agreed. I'd be livid right about now if I held Greek bonds. Although I suppose anyone looking for shelter in the form of government bonds could have taken the next step and diversified across nations, further reducing their exposure.
A large number of the holders (especially the foreign holders) bought the Greek bonds precisely because of the higher risk, which resulted in them having higher interest rates than, say, American or German bonds. They made a bet and lost.