Wednesday, June 15, 2011

Greece is the Word Part Three Rev. 1 or Go long on Popcorn as this is going to get very interesting.

Update: June 15th 2011

First a correction to yesterday’s post. The story reported by a small Greek television station about a tunnel leading from the Parliament building to a nearby port has been exposed as a hoax. There does exist however a tunnel to a local hotel that is only some 250 yards away.

There are at least two other potential elements to this ongoing story that remain unspoken. The first is the Greek Army, which has so far remained in their barracks. There should be little doubt that the government is trying to keep one on the demonstrations outside and another eye on the Army, which already has an established record of playing the coup de tat card when things get out of hand. If they do it will be interesting to watch to see if they become the ultimate enforcer for the bankers or the defenders of Greek sovereignty against both the bankers and the communists. The second is will a default in Greece spread to Portugal, Ireland and Spain and bring down the Euro in short order with the UD dollar shortly to follow? Oh never mind, Irish Finance Minister Noonan stated today that his government may not (read will not) redeem Anglo-Irish Bank senior bonds at par and that the institution is in such bad shape it should no longer be even considered a bank! My my but isn’t the IMF having a wonderful day?!? In military terms it looks like a pincer movement with the Germans caught in the middle once again. At this rate they may withdraw from the Euro zone even before the Greeks!

If anyone happens to drive past the Eccles Building this evening look for the midnight oil being burned as helicopter Ben and the boys will be watching those films of “Baghdad Bob” for some quick lessons on how to spin the disaster. It worked so well for Saddam and company didn’t it? Look for some sort of bogus pronouncement that the $1.20 jump in the ratio price of the dollar and the $4.30 drop in the price of oil is “evidence” of a strong dollar and the market's confidence in it. I don’t know whether to puke or laugh as the reality is that it’s simply the result of panic out of the Euro and the Pound Sterling. Any statement will read more like the FED grasping at straws than honest analysis.

Trying to follow and make sense of todays staccato of events was akin to trying to take stop-action photographs of a bullet train with an old tintype camera.

The failure of the Parliament to vote today on the bailout may prove to be a moot point as it looks like the financial contagion risk is already spreading, in spite of all the efforts of the bankers and politicians to keep it in check. Funny isn’t it how reality has a way of overwhelming “the best laid plans”? The European financial agencies and ratings groups had already started to react preemptively before dawn even broke over the Aegean. S&P had already downgraded the four largest Greek banks to CCC from B. (This is below junk bond status.) Meanwhile Moody’s warned that it may downgrade at least three French banks due to their exposure to Greek debt. Additionally Barclays Bank in London has announced today that it has “serious problems” in its European unit. There was no mention if they were related to the Greek situation but there can be little doubt that it is. Small wonder then that as markets opened Greek three year bonds were priced at 40.5 cents on Dollar and the yields hit 28.6%.  The Greek stock exchange opened down 3.5%. I can just see the investors flocking to gobble this stuff up! Yeah right. I’d bet that the bid to cover ratio is one very ugly number.

It has to be remembered that the chaos in Athens is something that in many ways the Greeks have brought upon themselves by having elected the same crooked political families for generations simply because they promised them a never ending stream of government largess. Now that the lie has been revealed, they public wants to lay all the blame on the politicians and ignore their own responsibilities in having electing them in the first place. As always the small independent businessman and his employees will be the ones caught in the middle.

None the less today’s chaos has all of Europe focused on Athens. As the crowds grew this morning in Syntagma Square outside the Parliament building the riot police broke out the tear gas early, but so far only against overt trouble makers on the fringes of the demonstration. The Prime Minister’s convoy came under a bombardment of eggs, oranges and water bottles.

Yesterday the PM announced that he will be conducting a Cabinet “shake up.” Speculation was that the Finance Minister, a “former” Goldman Sacks employee, who has been a focus of the demonstrator’s anger, may be the first to go. If there was any doubt that such a cosmetic move will not placate the crowds it was soon dissolved by the government coming apart at the seams. With the other political parties refusing to negotiate with the ruling PASOK party PM Papandreou offered to step down in a last ditch attempt to form a new government. That failing, he later reneged on the offer and said he will stay on, from a new government and seek a vote of confidence. With this much chaos, the chances of a vote on, never mind passage of the so-called “intermediate package” are less than zero. Can you spell power vacuum or worst-case scenario? As the sun went down over the Adriatic the crowds grew larger. At the time of this posting the crowd seems to be remaining calm if not basking it something of a victory over the government. The air temperature may be cooling but it remains to be seen if the gathering gets heated up by the ongoing speech making. All this will of course be accompanied by about 30 seconds of coverage on your nightly news broadcast.

If it’s not on FOX or NBC it simply didn’t happen. So folks just belly up to the useless distraction bar. What is it “American Idol” or “So You Think You Can Dance” that’s on tonight?

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