Certainly, however we seem to disagree on the fact that a full collapse of bonds of all PIIGS countries is likely, which it most certainly is not simply because Spain and Italy are at this point not insolvent and in the spirit of "if shit hits the fan we will just change the rules (read: print money)" there is just no way nobody will stick his figurative finger in the dyke before anybody drowns. A haircut of PIG (all together in the worst case) is not enough to make a significant impact on any global market except for a very temporary risk aversion shock possibly. Although even that I just don't find likely. The past weeks have seen so many press releases and rumours about Greece upon a lot of which we saw significant dumping of risk-related assets (in the midst of a correcting/trendless market) so I doubt there is anyone left to hit the sell button once Greece finally does default/is forced to restructure. In fact I think a lot of people are going to hit the buy button at that point just because it means there won't be anymore pressure on the market from Greece going forward. I'll agree that a haircut of Spanish or Italian bonds would be an actual problem, but a default of PIG is not enough to push neither Italy nor Spain into insolvency so this situation would require a further worsening of the underlying economic fundamentals, which would require something unforeseen considering those are still pretty good. Of course I am not privvy to what derivatives banks have on their books and if it turns out that some systemic institutions have been fucking up (again) by being heavily short Greek (and other peripheral) CDS and becomes insolvent, then all bets are off and that would be worse than Lehman possibly. This is a tail risk however (albeit a fat tail) and it's more likely they will not have systemically dangerous excess exposure further than their bond holdings.
Rock-solid gov't finances? Wtf are you smoking? That's like saying the Nasdaq had rock-solid growth prospects in 2000 (valuation and otherwise). It's funny you mention the two countries with the most severe real estate bubbles as well. If an economy is on fire with bubbles and all sorts of other shenanigans "rock-solid" is not the word, but suit yourself.
here's my question, on the bull side, they said interest is very low, so traders are still hopeful. Now my problem is, there are quite a few good stocks that I want to buy, but this greece crisis is like a time bomb, that can go off at any time. Say I buy such and such stock, and the next thing you know, somewhere in June, Greece say they'll print their own currency, so they no longer honor their own bond obligation. Then the Dow will easily drops 700+ pt., what then? I also has an interesting scenario: EU and IMF know they don't have enough $$ to bail out every1. And now w/ Fitch say Greece will default, S&P rating agency said every1 needs to forgive 50% of the debt, if EU & IMF offer whatever deal w/ Greece, they know they'll have to offer the same deal to the other PIIGS nations. As such, I think IMF & EU will do what John Paulson did w/ Lehman, they'll let Greece go belly up, and bail out some of the remaining PIIGS nation, and raise more $$ for Spain if Spain needs the $$
It's funny to make a following calculation : Greece has roughly $270bln outstanding bonds , if we divide it by Greece population (somewhere around 13mln) , it comes everyone in Greece owes about $21,000 . If we multiply this number - for US - by 300mln, it's about $6 trln , far less then even half of what US owes, and assuming they don't have expensive obligations for medicare and military spendings, it's even much much better .. Yes, I know, there is no export industries and mass production in Greece (excluding they huge world-wide 'shipping' industry) - but, US has negative trade balance too.. In short, Greece is doing much better then US, at least according to recent figures.. So, if the difference only is that Greece isn't allowed to print euros - it can be a great solution - let them print it! That will be great - no more risk for Greek lenders, no more news titles, they will stimulate they economy by Greek QE.xx's , until economy's back , extend unemployment benefits to couple of years , which is great for economy too, etc.. What's a total amount they need to print annually? 30-40bln or 3,000-4,000 per capita for couple of years? That's a change comparing what US doing, and definitely nothing for ECB.. Where are all GS and IMF advisors and helpers when Greece really needs them ??
As long as the masses have enough food, water and alcohol, there will be stability. Food and water are the only real necessities to survive. The alcohol is to keep them from rioting. Financial institutions exist on top of the superfluous consumption that is everything else. (Cars, televisions, phones, ipads etc.)