Still, ridiculous things can go on much longer than most people would ever think possible. And so it is the case with Greek debt now trading back near the same low risk state as German debt. For the record, there really is no difference between them. The only reason Germany has been bailing the PIIGS out is because it does not want to mark to market the bad debt that it already lent to them. So it is loaning them more money with which to make the interest payments. The whole thing is a complete scam and, as mentioned above, would be laughable if so many stuffed shirt bureaucrats didn't keep lying about it to people who have absolutely no understanding of the temporarily concealable yet ultimately immutable laws of economics. I mean, lots of really smart, really well educated people are falling for this crap left and right. Why I seem to be immune from their brainwashing is beyond me. I can't take credit, it's genetic. Thanks Mom.
So, with all that said, how much longer can it go on? Of course, the charts will tell us the truth when everything else is a lie. The charts might try to be tricky but they never, ever lie. So let's go to the charts. First, see below the chart of Greek bonds interest rates from Mauldin's article that I mentioned earlier. Note that I put the wave count on it, not Mauldin. While he provided this chart to show how foolishly complacent the markets have become again, he is clueless about EW. So he knows danger is close but not how close.
Also, wave 2 should have a decidedly a-b-c shape to it. Guess what? It does. Also, I should be able to count 5 waves down on the C wave. Guess what? I can. In fact, John circled exactly the area I want you to look at. That looks like a teeny tiny little set of Owl Ears (tm). I model that to be the bottom of wave 2. That means Greek 10 year debt should begin to climb rapidly real soon now. Anyone who owns that "asset" is a blithering MORON. Yet many do own it or it would not be at such low rates. When they sell it, the rates will go up. QUICKLY. Think currency crisis. Think contagion.
Here is the chart of ticker GREK which is an ETF tracking Greek stock markets. I see a large fish tail forming. That means we are at or very near (1-2 weeks) the end of this massive run up for worthless Greek stocks.
In fact, a case can be made saying the peak is already in for GREK. I believe that one of the two paths shown below will play out in the coming days. This one should collapse with rapid speed and so it is a reasonable candidate for options. Don't get too aggressive in terms of time! In other words, May puts might be cheap but this is still backed by the EU and they might be able to stall the inevitable. Give the wounded dragon time to bleed out. The Sept 20 puts are .75 at the bid and .95 at the ask.
There is really no negative news in the media right now about an impending Greek debt crash. It's all about Putin, Ukraine, Obamacare and Malaysian flight 370. But the elite, they know what is going on. They don't read the headlines. They know that is pretty much a waste of time. They read things like this analysis from February of this year.
I do think that the elite reads the headlines, but when Draghi "assured these idiots that Greek bonds were going to be backed up by the Euro players and so nobody would lose anything", he wasn't speaking to the people, but to his buddies in banks. Indeed, the banks did not lose anything and are now off the hook on Greek debt, after the ECB bought it from them. IOW, it's been offloaded on the peoples of Europe, especially of Greece.
ReplyDelete"the ECB bought it from them".
ReplyDeleteThat's what I thought too but Mauldin says otherwise," While this toxic combination bluntly confirms higher default risk in countries like France, Italy, and Greece relative to Germany, risk premiums over German bunds have collapsed in the quarters since Draghi’s July 2012 statement. The bond market clearly does not see any risk in sovereign debt.
As you can see in the chart below, government borrowing costs across the Eurozone have converged to pre-crisis levels
***without the ECB’s buying a single bond.***
(In fact, the ECB has let its balance sheet shrink dramatically over that time.)
No, I think that pension funds ran in to buy them knowing that as the interest rates came down because of the bazooka supposedly in Dragon's pocket that Greek debt was safe again.
In other words, it's Charles Ponzi the 2nd. On the first big scare about his "business" being a fraud, people lined up to take their money out of his company. But he walked through the crowd that was standing in line to get their money back and he said soothing things while handing out coffee and doughnuts. His bold faced lie calmed the herd down, stopped the run on his Ponzi for the time being, and let him continue running his scam for a while longer.
However, he could not withstand the second major loss of confidence and neither will Wall St. All con games eventually come to an end.