Greek Soap Opera
Research for Online Investors

by John Dalt

11/2/11

Greece was at the center of traders and investor’s minds yesterday.  Now I understand why mother and grandmother liked soap operas.  They keep you riveted with the daily twists and turns.  The drama.  I never did, and still don’t enjoy watching contrived stories designed to suck in my interest and bleed away the time I have to spend on productive activities.

We don’t know if watching the Greek Tragedy is a waste of time, but it is entertaining…and profitable.  We have been trading the ups and downs, the ying and yang, in SwingTrader to Papandreou’s intimation of “McDreamy.”

After finishing the weekend drama of eurozone leaders to gain approval of an enhanced EFSF fund to extend rescue funds to Greece for as far as the eye can see, Papandreou announced the Greek citizens would vote on the bailout agreement in a referendum.  He wanted the vote in January.

This sent his finance secretary to the hospital with stomach pains, and raised blood pressures for most eurozone politicians.  After a long meeting last night, Papandreou received unanimous support from his cabinet to hold the referendum.

Papandreou faces a "no confidence" vote in the Greek parliament on Friday that may not go as well.

Where does a eurozone finance professional call for reassuring words when everything seems to be going wrong?  They don’t have a “ground control” to announce “Houston, we have a problem.”

The EFSF Chief Executive Klaus Regling just got back from China and was preparing a $4.2 billion dollar 10-year bond offering when news of Papandreou’s announcement hit his desk.  Can’t you just see the coffee hitting the wall?

The EFSF cancelled the bond sale, citing “volatile market conditions.”  Yeah, and a country that is going broke this month, but wants to vote on it in January.  Does anyone else see a timing problem here?

One of the “volatile market conditions” affecting the sale of EFSF bonds was a spike in French interest rates this week.  French bonds were quoted at 128 basis points (1.28%) over German bunds this morning.

The G-20 has meetings starting tomorrow on the French Riviera.  This could have been a nice typical bureaucratic vacation…watch the topless babes on the beach, drink some fine wine on an expense account.  Now Greece has to ruin it all.

French President Nicolas Sarkozy and German Prime Minister Angela Merkel have asked Papandreou to come over to Cannes early…like tonight…to explain what the heck he is doing.  Sarkozy wants the referendum moved up to December, but what about the money Greece needs this month?

What if Greece voters vote down the rescue agreement, does that mean Greece is out of the eurozone?  France’s Finance Minister Francois Fallon told parliament “Europe cannot be kept waiting for weeks for the outcome of the referendum.  The Greeks must say quickly and without ambiguity whether they choose to keep their place in the eurozone or not.”

Merkel and Sarkozy started their meetings with other European Union policymakers today at 10:30 eastern time.  They have scheduled a meeting with Papandreou at 2:30 eastern.

Opinion polls in Greece show displeasure with the terms of the financial rescue.  The uncertainty over the next sixty days should keep the market in a defensive mood.  One other point that hasn’t been assessed properly, who is going to buy $1 trillion dollars in EFSF bonds?  Without the successful sale of these securities, the EFSF is overwhelmed with present commitments.  Even with these additional funds, Italy or Spain are still too large for any rescue if interest rates spiral.

The Benanke is going to hold a press conference this afternoon.  The market will move based on his statements.  Don’t you miss Greenspan?  Even after listening to him, nobody knew what he said.

Quote:
We are experiencing very demanding times.--- Outgoing ECB President Jean-Claude Trichet

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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