Greece

[marko]

Dow down 275.

Somewhere a 60 year old's 401K in this country just dropped.
Now he can't RE because someone in Greece still wants to collect SS at 50.

 

[NW-Bound]

Everybody can RE. You just cannot insist on eating and consuming as much as if you do OMY.

I keep sayin' I have that small RV just in case. One tank of gas, and I am under the open sky of NM, camping for cheap on state land. Heh heh heh...

 

[marko]

Everybody can RE. You just cannot insist on eating and consuming as much as if you do OMY.

I should have said "someone in Greece wants to collect SS at 50"....

 

[robnplunder]

Look at how much the markets went down today, especially the EU markets.

Then look at what happens if Greece defaults on its debts to EU creditors. Talking about hundreds of billions there.

Then what kind of measures will they have to take to reassure the markets that it won't spread to other countries like Spain, Italy and Portugal? If they have to give more generous assistance to those countries.

All this may add up to way more than it would have cost them to give Greece better terms.

You have good points but I am not convinced of the bold above. Market overreacts to news like this but will recover over time once things are played out.

Greeks need to get themselves out of the situation. When Korea was in IMF/financial trouble in late 90s, it was the people who were united to fight the crisis together. They didn't look for continuing handouts. Instead, they tightened their belts and cooperated fully with government policies/measures to recover from the brink of disaster. People sacrificed for the good of the nation's recovery. Looking at Greek's attitude/behavior (continuing tax evasion, trying to stop austerity measures), they don't have the will or desire or unity to pull themselves out of the crisis. It's my humble opinion from afar and I hope Greeks all the best.

 

[MichaelB]

They should be allowed to default and go their own way. If they do it right, they could follow Iceland's path.

+1

Do you know of any country in the post-WW2 era that defaulted or successfully renegotiated without a major currency devaluation.

 

[brewer12345]

+1

Do you know of any country in the post-WW2 era that defaulted or successfully renegotiated without a major currency devaluation.

None come to mind. I imagine they would have to revert to the drachma and deal with a plunging currency for a while.

 

[Texas Proud]

Oh Greece certainly deserves its share of the blame.

But the medicine imposed on Greece has caused a depression in the country and they were imposing things like higher taxes on tourist services -- tourism is the #1 industry in Greece -- and taxes on food and medicine.

How does that help the country regain it's economic footing?

There are accounts of families seeing their incomes drop by over 50% over the past 5 years, not to mention all the job losses as the unemployment rates indicate. It's no wonder they're unwilling to continue with the same terms.

If there are sound economic reasons for imposing more austerity, the creditors would be more defensible. But a lot of it looks punitive as well as greedy. The loans Greece gets go straight to German and French banks, to pay off interest. So the country is continually stuck with paying interest on growing debt and then on top of that, they want to increase taxes on its number one industry, making Greece as a tourist destination less competitive.

But Greece has not done much to fix their problem...

Their pension system is still better than a number of small EU countries whom Greece wants money from.... They do not collect taxes that are already on the books...

If they just write down the debt without Greece doing anything about their problems it is like giving drugs to a drug addict...

The problem is not with austerity... but with Greece wanting to continue with their spending ways and have someone else pay for it...

If this were a family issue, and Greece was a person who was spending more money than they should... and came to one of us to help them out... the major response on this board would be not to help them.... I just do not see why it being gvmts make any difference...

BTW, they already wrote off over $100 billion of Greek debt... but since Greece did nothing to really fix the problem it has reared it's ugly head again... writing off the current debt without them fixing the problem will mean it will come back again....

 

[marko]

Well, at 10:50 EDT the Dow is down 135. Just a typical 'down day' IMO. Futures were down 300 last night so I was expecting Armageddon today...but it's still early.

3:30. Dow down 290.

I stand corrected!

 

[fosterscik]

A good day to own bonds


Sent from my iPhone using Early Retirement Forum

 

[Texas Proud]

Look at how much the markets went down today, especially the EU markets.

Then look at what happens if Greece defaults on its debts to EU creditors. Talking about hundreds of billions there.

Then what kind of measures will they have to take to reassure the markets that it won't spread to other countries like Spain, Italy and Portugal? If they have to give more generous assistance to those countries.

All this may add up to way more than it would have cost them to give Greece better terms.

Well, the creditors say they will not forgive the debt even if Greece drops the Euro...

But, there is already hundreds of billions of euros that Greece owes... and I would assume that the markets are repricing them to a lower level... hundreds of billions will be lost...

So, what is the difference if they forgave the debt and kept Greece in the euro Greece would not change and the problem would occur again..

But if they do not forgive the debt and Greece just does not pay it... they are out of the euro and Greece will have to make the tough changes to their systems that is being recommended by their creditors...

Why would the creditors want to continue to pay for Greece not doing what they need to do

 

[ERD50]

A good day to own bonds


Sent from my iPhone using Early Retirement Forum

Maybe not if they were bonds held by Greece or Puerto Rico!

-ERD50

 

[NW-Bound]

DJ closed down 350. Whoo Wee! For being a self-proclaimed market timer, I did not sell everything out at market open today. Well, I did not wake up until almost 1 hour into market open and the market already sank, but could still have saved meself a 4-figure sum.

Oh well! Hanging on for the ride. Have not had a big one-day drop like this for a while. Still got some cash. Will buy when it feels right.

 

[aja8888]

DJ closed down 350. Whoo Wee! For being a self-proclaimed market timer, I did not sell everything out at market open today. Well, I did not wake up until almost 1 hour into market open and the market already sank, but could still have saved meself a 4-figure sum.

Oh well! Hanging on for the ride. Have not had a big one-day drop like this for a while. Still got some cash. Will buy when it feels right.

Definitely a coming buying opportunity in the making.

 

[Lsbcal]

I tend to look at market differentials on this.
US market - Europe market = SPY - VGK = -2.07% - (-3.50%) = +1.47%

So the US market outperformed Europe today. Now don't you feel better?

But also the Euro rose today by 2.5% as I write this. Curious. Maybe the currency market knows something the equity market does not? Or maybe the currency market had priced in a German capitulation to Greece and this didn't happen? or ... ?

 

[Walt34]

Definitely a coming buying opportunity in the making.

I suspect the opportunity is going to get better. I don't think they "get it" yet. But they're going to.

Defiant Greeks rally behind rejection of creditor terms

Many banners declared simply "No!" Others said, "Our lives do not belong to the lenders" and "Don't back down".

"I left Greece two years ago because I couldn't get a job," said Thanos Tsapelis, 37 and newly married on Sunday to Eleni, a teacher at a Greek school in Britain. "We want austerity to end so we can return to Greece and find a job."

 

[NW-Bound]

Definitely a coming buying opportunity in the making.

As I still have some cash (25.295% as of this writing, and increasing ), yes I will have opportunities to buy.

However, as greedy as I am, I will still say "Look what more I could buy if I sold high to raise even more cash".

Defiant Greeks rally behind rejection of creditor terms

Many banners declared simply "No!" Others said, "Our lives do not belong to the lenders" and "Don't back down".

"I left Greece two years ago because I couldn't get a job," said Thanos Tsapelis, 37 and newly married on Sunday to Eleni, a teacher at a Greek school in Britain. "We want austerity to end so we can return to Greece and find a job."

So, they reject the terms for more money. Fine. Go pick more money off trees, or beg another country, if they can.

What is interesting is that it seems people think that jobs can only be created by their gummint letting loose the faucet. Aren't there jobs in the private sector? Do the Greeks already have everything they need and do not have to grow, raise, or build anything?

It's amazing how once people become so reliant on the government, they no longer think anything is possible without public assistance.

PS. In the market downturn of 2008-2009, there was a poster who included a with every post of his. He has not been posting for the last few years (but I do not think it was because of financial hardship).

 

[MichaelB]

None come to mind. I imagine they would have to revert to the drachma and deal with a plunging currency for a while.

Greece leaving the Euro certainly would help ensure some of the needed reforms are carried out or the value of labor falls accordingly.

As I still have some cash (25.295% as of this writing, and increasing ), yes I will have opportunities to buy.

European equities may start to look good again. The question is, hedged or unhedged? If Greece stays with the Euro it will continue to weaken. If Greece leaves, the Euro should strengthen. Which will it be?

No matter what the outcome, the Greek people have already lost, and they will suffer badly.

 

[NW-Bound]

I have not followed European stocks in the last month or so, but they had not been doing too bad. The problem is although the stocks rose, the price increase was cancelled out by the Euro drop when converted into US$.

Anyway, I may not be necessarily buying European stocks. I am hoping for stock sales world-wide.

 

[LitGal]

Actually it is the PIIGS(Portugal, Italy, Ireland, Greece and Spain). Ireland has already taken its medicine and is well on the way to recovery so I doubt they will be too sympathetic towards Greece.


Ireland eyes lower deficit, quashes EU bank debt deal | Reuters

Great article on how Ireland lowered their deficit. Maybe Greece and the PIIGS could look to them for some insights?

I look forward to contributing to the Irish economy during a 10-day visit in August. How nice to enjoy a country that has tried to take responsibility for its own welfare. Sounds like my group will need to spend some extra time in the pubs and buy a few more souvenirs!

 

[MooreBonds]

Great article on how Ireland lowered their deficit. Maybe Greece and the PIIGS could look to them for some insights?

I look forward to contributing to the Irish economy during a 10-day visit in August. How nice to enjoy a country that has tried to take responsibility for its own welfare. Sounds like my group will need to spend some extra time in the pubs and buy a few more souvenirs!

But isn't a good part of the Irish success story that they had a favorable corporate income tax rate, and as such, have a fairly large amount of corporate headquarters there? Can't really duplicate that benefit with PIGS...

 

[LitGal]

Well, my limited knowledge on the subject is showing........

Are you saying that favorable corporate income taxes could not happen with the PIIGS because..... a) the governments refuse to provide them; b) these nations have so few profitable corporations to tax; or c) both?

Or, what might be option "d"?

 

[Meadbh]

Ireland has had low corporate taxes for over 30 years. They were key to building the economy, including attracting the large number of multinational companies that have European headquarters there. Of course, recently this has come under fire because companies like Apple (legally) avoid a lot of taxes by being based in Ireland.

https://en.m.wikipedia.org/wiki/Corporation_tax_in_the_Republic_of_Ireland

"This period from c.1956 to c.1975, is probably the most influential on the evolution of the Irish corporate taxation system, and marked the development of an 'Irish' system, rather than continuing with a British model.

This period saw the creation of Corporation Tax, which combined the Capital Gains, Income and Corporation Profits Tax that firms previously had to pay. Future changes to the corporate tax system, such as the measures implemented by various governments over the last twenty years can be seen as a continuation of the policies of this period. The introduction in 1981 of the 10% tax on manufacturing was simply the easiest way to adjust to the demands of the EEC to abolish the export relief, which the EEC viewed as discriminatory. With the accession to the EEC, the advantages of this policy became increasingly obvious to both the Irish government and to foreign multi-nationals; by 1982 over 80% of companies who located in Ireland cited the taxation policy as the primary reason they did so.

Corporation tax was reduced to 12.5% on trading income,[citation needed]. This is generally believed to have been an important stimulus for the Celtic Tiger."​

 

[springnr]

Definitely a coming buying opportunity in the making.

... add the possibility of Iran's restrictions being lifted, might be a double whammy.

 

[aja8888]

... add the possibility of Iran's restrictions being lifted, might be a double whammy.

Yes, but that extra crude on the open market (less than 1 MM BBL/Day) won't make much of a dent in the futures price and only affect Brent I believe. There may be an over reaction though.

 

[brewer12345]

Yes, but that extra crude on the open market (less than 1 MM BBL/Day) won't make much of a dent in the futures price and only affect Brent I believe. There may be an over reaction though.

IF it happens, that is.