Grease Fire Spreading

We have said so much about Greece that there’s barely a point left to make. In spite of all the talking, however, I still have to ask how can you let it get to this? The question is intended at everyone from the Greek government and public, the European Union and pretty much anyone who bought a shred of Greek bonds.

After eurozone leaders finally passed the 100 billion Euro loan/50% debt write-off, the thing still might derail. This time it is the Socialists of Greek Prime Minister Papandreou and the generally unhappy Greek public, who are holding up the deal.

The interesting caveat is not the Greeks reluctance to accept this “deal” which essentially puts them in the poor house (where they belong), but the referendum approach to the final decision.

Make all the jokes you want about the Greeks but they are the original practitioners of Democracy and I think the referendum is a pretty cool gesture.

Yes, I know it is all posturing and bullshit and that the public doesn’t have a pot to piss in. The Greeks have no room to negotiate and no one to negotiate with. They are essentially in the position of choosing between consenting to getting fucked or crying rape while the rest of the world says told you about that mini skirt and those fuck me pumps, bitch!

EU leaders will certainly underline the reality that there are no other options.
Greek citizenry on the other hand will demand more options.
We all know who the losers will be in the end, though it is really tough to find a winner in this whole mess. Except for China, of course…but no need to go there today.

Curious what you guys think of this “public forum” approach to governance?

Is Papandreou just hoping to quell violence by making the public think they have an actual say?

More importantly, will the global protesting public be satiated by being given “the voice” they have sought?

My view is that a cluster fuck remains a cluster fuck unless you blow it up and clear out the shit stains.

The absolute only way I can see Greece getting out from under their fiscal woe is by sticking For Sale signs on all of their minor outlying islands.
The problem with doing that, however, is that it kills their only viable and sustainable industry.

Anyone have a better alternative?

Hard times are afoot whatever call the mob makes…

Maybe a map makeover may be in everyone’s best interests.

Just remember, throwing water on a grease fire makes it spread faster.

 

I think it is just party politics, Papandreou doesn't want to seal his and his party's fate, which he would do if he agreed. By putting it to a referendum he absolves himself of responsibility and by extension blame for what almost inevitably is going to be very unpopular within Greece. I don't think he cares too much about violence, he is just being an adept politician giving his party the best chance of being re-elected.

 

The thing is, referenda don't really carry that much meaning. The modus operandi, especially where the EU is involved, is to keep asking the same question until you get the answer you want. If people say no the first time, ask "You sure about that?" until they say yes.

They don't really have a choice.

Metal. Music. Life. www.headofmetal.com
 

Asking for a referendum is no problem at all, that is democracy. However, he should have stated his intent BEFORE the deal last week and not just sprung it out of the blue. Greece is fucked however they vote, but it would be nice to let the countries and governments trying to bail them out know that you're going to jeopardise everything on a national vote.

 
IlliniProgrammer:
Ok, so the Greek government defaults and Greece turns into Argentina. How is this the end of the world?

I'm not sure that all the "to big to fail" banks of the world were connected to each other by this web of CDSs and god knows what else when Argentina defaulted. I think the real problem is that none of the banks really know what their exposure or anybody else's exposure is if Greece were to default. One bank that thinks they were protected will suddenly be fucked when they are left holding the bag because whoever they bought insurance from went down.....and they likely went down for the same reason. Suddenly it is 2008 all over again which will exasperate the problems with Italy and will follow the same path as Greece all over again. The icing on the cake is that the problem is now with insolvent countries so how will there be a bailout?

I agree with your whole reshuffling idea and big crash, I think it is coming soon. Can't kick the can down the road forever.

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 

The EMF will step in to bail out savings accounts worst comes to worst and life will move on. I'm surprised everyone is so nervous about this. We just went through a crash that involved 40% of the US housing market a few years ago. To get worked up about a handful of European countries that make up perhaps 5% of global GDP though? This will be smaller than the market crash we saw three years ago.

Probably a good time to pick up cheap European exporters, but probably a bad time to own the Euro.

 
IlliniProgrammer:
The EMF will step in to bail out savings accounts worst comes to worst .
Not talking about savings accounts. Talking about the Dow falling to 6000, etc Jim Cramer recently put together a worst-case scenario for investors to consider.
  1. Greece defaults.

  2. A large number of foreign banks are wiped out.

  3. Mass layoffs begin occurring once again as Europe is thrown into a second Great Recession.

  4. The United States will be pulled down by the European recession.

  5. Mass layoffs begin taking place in the U.S.

  6. Investors begin shifting money to high yield dividend stocks.

  7. Defensive stocks like Coca-Cola and Pepsi emerge as market leaders.

  8. China loosens their monetary policy.

  9. Stocks begin trading near their cash values.

  10. Unemployment rate skyrockets to over 10%

  11. Investors flee the stock market.

 
Best Response

In 1987, we thought we were heading into the Great Depression and came out with one bank BK and otherwise a boom.

In 2008, we thought we were heading into the 1990 recession, and came out with a crash.

Regardless, 2008 wasn't that bad. You lost a year of bonus and banks laid off about 15% of their staff. This stuff happens every few years.

The fact that everyone is so worried right now and the market is so discounted and there's so much fear in the market tells me that a Greek default will not be anywhere near as bad as 2008- certainly for the US and European exporters.

I think folks are overreacting. A repeat of 1998 doesn't mean the civil unrest in Greece will spread around the world let alone to the rest of Europe.

We're only three years out of a 70-year crash. Investors in the stock market these days have their money there knowing they can lose 60% of it in six months. And with P/Es around 11 and dividend payers yielding north of 4%, it's just a lot tougher to have a market panic in this environment. Just because a cold front approaches New York in the middle of July and folks up in the arctic circle are saying they're getting some snow doesn't mean we'll get a 30 inch blizzard. I mean it's possible, but given current market sentiment already being so negative, there's not a whole lot more gloom and doom to be priced in.

Regardless, if we do get a 60% market drop and P/Es on the S&P really do hit 4.5, IlliniProgrammer will have a stock-buying bonanza.

 
IlliniProgrammer:
In 1987, we thought we were heading into the Great Depression and came out with one bank BK and otherwise a boom.

In 2008, we thought we were heading into the 1990 recession, and came out with a crash.

Regardless, 2008 wasn't that bad. You lost a year of bonus and banks laid off about 15% of their staff. This stuff happens every few years.

The fact that everyone is so worried right now and the market is so discounted and there's so much fear in the market tells me that a Greek default will not be anywhere near as bad as 2008- certainly for the US and European exporters.

I think folks are overreacting. A repeat of 1998 doesn't mean the civil unrest in Greece will spread around the world let alone to the rest of Europe.

Then where is this major reshuffling of society and the economy that you predicted?
 

Oh absolutely, but it would be precipitous to say that this is the event, it is worse than 2008, and everyone should panic. Even during the great depression, valuations bottomed at 7x earnings, and the price drop to get us there is much less than the 55% price drop seen in 2008.

That said, history rhymes but doesn't repeat itself and it's getting difficult for me to reconcile the political economics with the valuation economics on a historical basis. We've got two really strong forces- limitations on GINIs and historical bottoms on PEs- that are going to be colliding. The historical bottom for P/Es is around 7 times earnings, and the S&P 500 is at 11. This bottom wasn't crossed in the 1970s, 1930s, 1900s, or any other time in US history. So 100 years of market history tells us that a 40% drop- much less than what we saw in 2008- is probably our bottom.

On the other hand, there also seems to be a historical limit to GINIs over the past 100 years that we're approaching. So somehow the rich are going to have to get poorer while the poor become investors. Maybe Uncle Ben will start printing money and throwing it out to poor people on the street. Or maybe we will elect a Levitican to be president who believes in the Jubilee and redistributing the resources (not the wealth) every 49 years.

I don't know how this plays out. I just know that there's hard limits to valuations in both directions. Even if we have a nuclear war with China, the mining companies will still own mineshafts and the S&P 500 won't go to zero. We'll just have a new class of residential REITs. :D

 

Illini, as much as I want to agree with you, I don't know if I can place that kind of faith that investors will react so rationally. We all know that panics can be contrived and completely forced; even though it may not be as bad as people think, all it takes is the perception that the sky is falling. And with the screaming hysterical 24/7 news blitz, it only makes it worse.

Metal. Music. Life. www.headofmetal.com
 
Illini, as much as I want to agree with you, I don't know if I can place that kind of faith that investors will react so rationally. We all know that panics can be contrived and completely forced; even though it may not be as bad as people think, all it takes is the perception that the sky is falling. And with the screaming hysterical 24/7 news blitz, it only makes it worse.

Then that's great! Pick stuff up that's paying 20% dividends and trading at 3.5 PEs. There's a limit to how bad the fundamentals get relative to the US Dollar.

 
waterloomonkey:
if it is something totally irrational could it last

It can last longer than you can stay solvent

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 

At veritatis dolores et veniam vero. Neque optio qui quam provident aut. Voluptate non earum ut delectus vero.

Ut incidunt eos quia est possimus eos. Tenetur suscipit quaerat explicabo culpa esse. Ut iste deserunt alias dignissimos quisquam eveniet veritatis. Amet voluptatum aut asperiores sapiente sit aut non.

Ducimus illo labore nemo. Sint debitis tempore provident accusamus deserunt molestiae animi.

 

Aut et explicabo itaque labore illo eum. Et est ut at rerum. Nostrum inventore voluptatem eveniet dolor iure autem modi. Sit nulla ab ut voluptatem dolore est nihil.

Et ducimus distinctio aspernatur labore delectus doloribus optio nesciunt. Et numquam voluptate minima voluptas consequatur error. Aut consequuntur vitae aspernatur ducimus quo odit consectetur. Tenetur sapiente placeat id aut. Dolores laborum maiores dicta officiis distinctio harum. Consequatur quia explicabo qui quibusdam culpa nihil.

Ducimus consequatur iste est corporis optio. Ducimus ex quia error. Qui dolores deserunt repellat voluptas magnam est aut. Sint molestiae assumenda rerum magnam et.

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”