1. We will have 2 votes by the Greece parliament the first late Tuesday and the second on Thursday since the Greece carry around 80 bil. of their own debt they would be fools to default right away as the Greece economy would drop into a deeper depression right away. From their point of view it would make more sense to suck in more credits first and to give the banks a chance to sell off some of their bonds in a stabilized scenario before they throw the towel sometime later. The population will not think in such a structured way and just see that more cuts are hurting them and go wild on strikes and protests. In any case they will not standby for another 3 years of austerity unless the full crises of a default hits them. My take is it will pass with some trouble and drama and set a short term low respectively trigger a brief rally. It could become as dramatic as the TARP vote though with delays and send markets into a very volatile 1-2 weeks though ( which is what the stars do say).
Submitted by Tyler Durden on 06/27/2011 09:12 -0400
We have long been warning that by fat the biggest risk to the Greek banking system is not whether or not its retains its access to the ECB funding window (it will, probably even in the case of a Greek bankruptcy through covert pathways), but domestic confidence in the financial institutions as expressed by deposits, or rather, the lack thereof. Today, as part of its Weekly Credit Outlook, Moody’s issued for the first time a very stark warning that should the rate of attrition in domestic deposits (and to see where these are going merely look at the daily EURCHF chart) persist, or accelerate, the results would be disastrous. To wit: “a sustained decline of deposits by more than 35% (roughly equal to the consolidated banking system’s liquid assets and ECB funding availability) within a short period of time, would cause a severe shortage of cash among banks.”
2 Soros might be again a contrarian indicator as last time he made the same claims was close to the bottom in 2009. In principal his claim is correct but that is not a new fact at all – just his timing is interesting. My current take is we see another test to the downside with new lows for SPX and DOW 1-2 % below current levels before we have a short term bottom and a bit steeper counter rally.