Global Macro Trading Journal

To haircut deposits bellow €100,000 is crazy. Their 'guarantees' or promises will be worthless if they do that as people won't trust these promises anymore. If Spain, Greece or Italy starts to have a bank run (If stocks drop another 5-10% that is certainly a possibility) then it will be hard to stop

Retail depositors don't understand how Cyprus is 'different', they will just take their money out first and ask questions later. I don't blame them, I would do the same thing
 
With the recent wobbles in Cyprus, I'm wondering if Greek stocks might be offering a buying opportunity soon. If we look at prior meltdowns and bear market bottoms like Asia & Russia 1998, Brazil 2002, Argentina 2001, or the west in late 2008/early 2009, once the macro picture has a solid government backstop and the market has responded vigorously with a huge rally, subsequent corrections seemed to be almost always a great buying opportunity to get on board a multi-year bull market.

The one real macro risk (I assume a Euro exit is off the cards after last year's ECB backstop) would be a bank run off the back of the Cyprus news. But Greece defaulted a year ago and the banks have survived since then, are they robust enough to stay solvent? Also, consider that bank runs occurred through the 1930s in the USA, but 1933 onwards was an ongoing bull market where every dip was to be bought despite this stream of bad news.

Any thoughts about the risk/reward here? This is the first serious correction in the Greek bull market that began last year, so I think it deserves closer scrutiny.
 
Quote from Ghost of Cutten:

With the recent wobbles in Cyprus, I'm wondering if Greek stocks might be offering a buying opportunity soon. If we look at prior meltdowns and bear market bottoms like Asia & Russia 1998, Brazil 2002, Argentina 2001, or the west in late 2008/early 2009, once the macro picture has a solid government backstop and the market has responded vigorously with a huge rally, subsequent corrections seemed to be almost always a great buying opportunity to get on board a multi-year bull market.

The one real macro risk (I assume a Euro exit is off the cards after last year's ECB backstop) would be a bank run off the back of the Cyprus news. But Greece defaulted a year ago and the banks have survived since then, are they robust enough to stay solvent? Also, consider that bank runs occurred through the 1930s in the USA, but 1933 onwards was an ongoing bull market where every dip was to be bought despite this stream of bad news.

Any thoughts about the risk/reward here? This is the first serious correction in the Greek bull market that began last year, so I think it deserves closer scrutiny.
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After the Cyprus deposit haircut I believe the risks of a blow up in Greece have increased, anyone with any financial sense is taking their deposits out of Greece and putting in Germany. This should weaken their banks even more, I'm not following their economy lately but I wouldn't be surprised if GDP is coming in lower than the projections. They will probably need another bailout as their debt to GDP is likely to be high even if things go ok

As I understand they have those types of governments that can be dissolved and dissapear overnight. Risk of social unrest leading to a new goverment that won't tolerate austerity is higher than the market thinks. People will only take so much pain before they revolt, yes they have been patient so far but the more they are the less likely they are to continue that way, without austerity there is no bailout, they have to default and exit EUR
 
The 'we might haircut insured deposits bellow €100K' thing was a disaster, they created the fear and put in people's head this possibility but never got the any benefit out of there (namely a more solvent banking system in Cyprus)

Stocks are not down much so people are not afraid, if EU stocks keep dropping I bet a lot of people will be moving around their deposits even if insured
 
Quote from Daal:

After the Cyprus deposit haircut I believe the risks of a blow up in Greece have increased, anyone with any financial sense is taking their deposits out of Greece and putting in Germany. This should weaken their banks even more, I'm not following their economy lately but I wouldn't be surprised if GDP is coming in lower than the projections. They will probably need another bailout as their debt to GDP is likely to be high even if things go ok

As I understand they have those types of governments that can be dissolved and dissapear overnight. Risk of social unrest leading to a new goverment that won't tolerate austerity is higher than the market thinks. People will only take so much pain before they revolt, yes they have been patient so far but the more they are the less likely they are to continue that way, without austerity there is no bailout, they have to default and exit EUR
More...

True but all this is normal for the first few months/years of a post-debacle bull market. Look at the 'bad news' from Brazil and Argentina after their markets bottomed 10 years ago, or Russia after their default, or the 1933-37 period. Normal bad news wobbles and scares are not enough to derail a bull market after a prior 90% secular bear market collapse lasting 5 years - they are only enough to cause a few weeks/months of fear and correction, before the bull returns in force.

As for the 100k issue...the EU did a U-turn pretty fast. If even Cyprus gets their 100k guarantee honoured, then that would seem to be a precedent and template for the future. You can still have runs from larger depositors though. Question is, are Greek banks balance sheet insolvent here? Or have they already written down their losses on Greek bonds etc.
 
Quote from Ghost of Cutten:

True but all this is normal for the first few months/years of a post-debacle bull market. Look at the 'bad news' from Brazil and Argentina after their markets bottomed 10 years ago, or Russia after their default, or the 1933-37 period. Normal bad news wobbles and scares are not enough to derail a bull market after a prior 90% secular bear market collapse lasting 5 years - they are only enough to cause a few weeks/months of fear and correction, before the bull returns in force.
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I believe the main difference between these types of bad news and Greek bad news is that if the Greek risk pans out (EUR exit) its a guaranteed loss of 40-70% on drachma re-denomination, in the case of Brazil or Argentina its just an economic number or something else that can be safely ignored by the markets. I want to buy Greece but I'm scared of this possibility
 
http://www.reuters.com/article/2013/03/30/us-cyprus-parliament-idUSBRE92G03I20130330 ,the gist seems to be that the euro was a badly planned experiment and it is not worth saving,scrap it and go back to the drawing board, printing euros and dollars seems to be adding gasoline to the fire,not being an economist,i don't know how they plan to unwind it ,but they must be planning this as a possible and more likely by the day scenario,corporations seem to be flush with cash ,so the possibility of a depression are muted,taking down the overloaded banks as they are doing in cyprus seems like a solution ,i don't know how they are 5 yrs later with their commercial and residential R E debt but eating the residentail loans they used for an excuse for the meltdown would have been and probably still is a much cheaper solution than the way they have approached it so far,the other reasons for the meltdown have been quietly guarded,i suspect thier is a lot of fraud and corruption in there that goes all the way to the top, hence no one is going to step up and point fingers,and now they are going after mom and pop deposits, next it will be ira's and 401k's,i think they have already depleted any pension backstops...just making some observations
 
Quote from Daal:

To haircut deposits bellow �100,000 is crazy. Their 'guarantees' or promises will be worthless if they do that as people won't trust these promises anymore. If Spain, Greece or Italy starts to have a bank run (If stocks drop another 5-10% that is certainly a possibility) then it will be hard to stop

Retail depositors don't understand how Cyprus is 'different', they will just take their money out first and ask questions later. I don't blame them, I would do the same thing
More...


"cyprus is different." all women are different. at the core they are all the same. spain, greece , italy they are all different. sure. you are making a joke without knowing it.

http://www.nytimes.com/reuters/2013/03/30/business/30reuters-eurozone-cyprus.html?src=busln
 
Quote from Daal:

After the Cyprus deposit haircut I believe the risks of a blow up in Greece have increased, anyone with any financial sense is taking their deposits out of Greece and putting in Germany. This should weaken their banks even more, I'm not following their economy lately but I wouldn't be surprised if GDP is coming in lower than the projections. They will probably need another bailout as their debt to GDP is likely to be high even if things go ok

As I understand they have those types of governments that can be dissolved and dissapear overnight. Risk of social unrest leading to a new goverment that won't tolerate austerity is higher than the market thinks. People will only take so much pain before they revolt, yes they have been patient so far but the more they are the less likely they are to continue that way, without austerity there is no bailout, they have to default and exit EUR
More...

First, deposit flight isn't a problem so long as the ECB backstops the banks with ELA. It's hard to imagine a scenario, short of Greek domestic politics descending into utter chaos (a military coup or something similar) where the ECB backstop would be removed.

Second, when I've glanced at this over the past few months it's seemed to me that Greek macro data is improving (current account deficit, industrial production, etc.) - slowly but surely. It actually seems like time to review these figures again, however.

Third and finally, essentially anything that can happen from here, again short of an extremely low-odds military coup, Communist or Nazi takeover of the government, etc. ought to be bullish for Greek equities. Debt restructuring or additional bailouts (which will surely involve haircuts or de facto grants as no more liabilities can reasonably be loaded onto the Greek state) purge bad debts and/or reduce the burden of debt service. A default and Euro exit might cause short-term chaos, but now Greece would be relieved of its debts and free to devalue. That would really be a once-in-a-lifetime buying opportunity.
 
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