Why isnt a Greece default+euro exit already priced in??

Discussion in 'Trading' started by spanish89, May 17, 2012.

  1. I took a 9month holiday from trading from last autumn till yesterday.

    When i left last autumn Italian bonds had just retreated after hitting 7%,
    Greece had just agreed to a new bailout (after some media stunt where the PM backed out of the deal for a few hours),
    all the markets had crashed down 15-20% over about 3months, but was finally settling down and Greece headlines stopped coming out.

    I returned yesterday,
    looked at the news over the past few weeks to try getting a picture of what the current economic news scene is and what the current major deadlines are for Greece.... ect

    But am very confused as to why a Greece default and exit from the euro still is NOT priced into the markets?? :eek: :confused:

    Everytime any headline comes out from Greece about them planning on rejecting the EU imposed austerity and so leaving the euro the markets all get shocked and surprised,
    and then drop a few % in seconds!

    But so why isn't Greece's leaving of the euro priced in yet?

    Whats happened over the last 9months that ive missed thats causing this?
  2. tortoise


  3. It is not priced in fully. Because Hope is still priced into the stock market, Hope of some last minute miracle.

    When Greece defaults, Hope gets priced out of the stock market and then you will see a big drop.

    Hope and a Prayer is still priced in right now.
  4. Well, new information is constantly coming out causing people to revise their forecasts and trade accordingly. It could be the case that this week's drop isn't even about Greece at all, but about Spain, Italy and other weak Euro members. Perhaps the info coming out of Greece is, due to correlations between Greece and those other Euro member states, driving down traders' estimates for what those states' economies will look like in the future.

    If that's the case, your thread headline should be something like "Is it really true that the bad news out of Greece has future implications for Spain's, Italy's and Portugal's Euro membership and likelihood of default?"

    When it comes to fundamentals, you have to think about the "ripple effects" of any specific news items, especially in an interconnected situation like the Eurozone.
  5. Credit Default Swaps trigger this time if greek defaults. Unlike with the haircut.
  6. mokwit


    You realise if that happened US investment banks would lose money. BEN!
  7. S2007S


    Everyone is hoping its priced in, it would have been priced in if the dow was sitting under 8500 not above 12,000
  8. I just want the market to hurry up and crash 10-15% over just a few days,
    so i can then buy JP Morgan and Crude Oil. :p
  9. Have you never heard of market cycles? Sheesh...

  10. you haven't missed a thing.

    trade price and keep the 50 inch box turned off.

    there is one thing........
    the " money honey" isn't a honey anymore.

    new poster girl for krispy kreme.........:)


    #10     May 17, 2012