Now that we know Greece will default, where do things go from here? Before getting to that very tough question (with no concrete answers), I would ask another stinging question. “Was a Greek default really “already in the market”? I have to chuckle just a little as Zerohedge did an article quoting many “talking heads” who as of last Friday were still doing their best Bruce Willis imitations and advising “come out to the coast, we’ll have a BLAST”! How Could The “Greek Experts” Be So Wrong? As I questioned last week, a Greek default and Eurozone exit was in no way already factored into the market …unless you believe today’s carnage is a result of Puerto Rico ‘fessing up to their bankruptcy!
Where exactly does this go from here? First and foremost, Greece is on par with Lehman Bros. of 2008 or may even be worse! For a sovereign government to go down, or I should say “be allowed” to go down is worse than Lehman. Lehman Bros. was “forced down” and put out of business before anyone figured out what the actual ramifications were. Now, everyone knows of the interconnected ramifications yet Greece was still “allowed” to default (yes I know, whether it is classified truly as a default remains to be seen?). My point is this, if the central banks were truly omnipotent, then how could “a Greece” ever happen? For those of you who believed it would be “papered over” as everything else up until now has …something has changed!
But what exactly has changed? Greece, or Detroit, or Puerto Rico or wherever, are all small but they are REPRESENTATIVE of what is wrong with the entire system. In fact, if you truly break the numbers down I believe you will find the U.S. is actually in a deeper hole than Greece. Before you scream at me, please include all of the guarantees and future U.S. obligations, if you do this you will see Greece is actually a fiscal tightwad!
Beginning immediately it is important to understand any institution can seem healthy one day yet announce insolvency the following day. This is NO JOKE and I am not grandstanding. We just do not know who owns or is obligated to “what”. The financial markets and the individual players are so levered in various directions, volatility as we are now seeing can easily bankrupt the underfunded overnight. I believe this has already happened over the last few years but clandestine funding has kept it hidden. The recent volatility may have been too sharp, sudden or violent to keep the evil genie in the bottle, we will soon see.
I cannot stress how important it is now for you to be on guard for anything at any time. A market closure, though likely over a weekend can occur during ANY WEEKDAY! Do not allow yourself to be lulled to sleep by any rallies from here or stories of how “the storm has passed”. It is ONLY BEGINNING! Greece is absolutely nothing compared to what is to come. Even the Chinese market has entered bear market (-20%+) from just a month ago and the leverage in that market is huge with an unwinding due. Ultimately however, this will end up taking out most all of the major money center banks worldwide. To see London, Frankfurt, Washington D.C. and even Basel Switzerland buckle under the coming CDS/derivatives meltdown will not be a shock to me. As this progresses, it may take weeks or months to unfold but be aware 48 hours is truly all that’s needed.
The only thing I can tell you with certainty is this; as the meltdown proceeds I can guarantee physical gold and silver will still be standing. My thought is they will be standing “much taller” than they are today as they truly are “money” and global “monies” are going to come under scrutiny. This is at the core question to be answered of it all …”what is money”? The current belief is that “debt is money”, it is not and never was. Debt may have been perceived as money or even an asset …it has and always will be a liability! THIS IS THE KEY LESSON MANKIND IS ABOUT TO LEARN!
Standing watch for you,
Bill Holter
Holter-Sinclair collaboration
BILL, I’ve been watching the paper gold price on COMEX for last hour or so & in the face of everything that has happened since Friday afternoon, this is pure COMEDY!!!
In fact, COMEX should officially be renamed to COMEDY & get all those software developers who wrote programs to trade paper commodity contracts permanent jobs for Saturday Night Live.
yes.
“Remain Calm. All is well.”
Animal House
courtesy Kevin Bacon.
Another good one, Bill. I think I figured out how to time the collapse. When the first of the rich and powerful heads for their bolt-hole, we will have received our final warning. When news comes out that the rich and powerful have started heading, en masse, to their bolt-holes, its game on.
I’m not particularly looking forward to the aftermath of this thing-I fear for my children. I grew up in an era where earning money required work. My kids have had it somewhat easier.
I grew up in an era where words meant things and an insult resulted in a punch in the snoot. How the hell are we supposed to survive after the monetary collapse and still abide by the mamby-pamby PC laws we now have? I will ignore them, but will my children? How will they fare under those constraints…
thanks BPIU, you can’t even find reruns of Leave it to Beaver anymore!
You asked if the Greek situation was priced in. Most of what is going to happen in Greece will be contained in Greece. And we will wait for the next Greece to show up on the radar (i.e. France, Italy, Spain etc )This is from John Mauldin:
Who Owns Whom?
The entire Greek drama has been an exercise in denial. In hindsight, the best solution would have been to write down all the debt when Greece got its first bailout. Everyone would have taken their lumps and moved on. This was what I advocated back in 2010.
I wrote at the time (but still can’t prove) that the reason no such thing happened is that it would have left some very large European banks insolvent. Europe avoided that possibility by transferring most of Greece’s debt to the “European Financial Stability Facility,” or EFSF. It owns about 45% of Greece’s national debt. That transfer took several years and has essentially been accomplished. Greece can go completely belly-up, and the only groups that lose are essentially state actors. Bank and private debt is now minor.
contained? Didn’t Alan Greenspan and many others use that term?
Again, Contained? If they are booted and their bonds get ickey you don’t think that will spill over to the other PIGS? If they don’t use big words to classify this as “non-default”, what about the trillions due to the betting against Greece crowd? I’m certainly no expert but I don’t see any way this could stay in Greece only.
correct David.
Priced in? The Greek tragicomedy has been front and center for the past number of years! Center stage. The leading role.
Now, off in the wings is Puerto Rico. One little island with a big debt problem that is connected at the hip to the US.
The derivatives that use Puerto Rican munis as the underlying are on very shaky ground, or is that quick sand? The companies that have underwritten these off-balance sheet, opaque financial structures known as “Variable Interest Entities” (VIE’s) are carrying massive counter party risk and are very thinly capitalized.
Whats that old adage? Its the one you don’t see coming that gets you? Greece has been front and center in plain view, but little Puerto Rico? Its the counter-party defaults that will come from nowhere that will wreak financial destruction.
it was NOT Puerto Rico that rocked Europe…
No. I didn’t say it was!
What I,am inferring is ‘expect the unexpected’ when it comes to “Black Swans” seemingly coming from nowhere.
Any number of debt meltdowns, from any number of directions will be the catalyst that tips the derivative mountain over.
Puerto Rico is but one small beat of the butterflies wings, that sets off a hurricane among the infinately inter-connected, global derivatives sector.
yes OLI …AND it was something we sort of forgot about.
Bill, what’s with the huge “yes” rally going on in Greece? Is this gonna be another Scottish/ Swiss gold vote. How can you possibly want more of the same toxic crap for your country? Are they that enslaved? Stockholm syndrome? Would Americans do the same you think? World gone mad!
see my next article, Greece cannot be kicked out. ONLY they can decide if they leave.
There is another aspect than just financial…its the political point of the Eurozone itself. Big boys don’t want their experiment to fall apart. Although I have not a clue how they make it happen
it was doomed at inception.
Bill, I couldn’t see your next article if I put thick glasses on. As for the one you don’t see getting you, like the Jap zero tailgunner thinking he’s headed home after a straifing (sp?) run, only to be knocked out of the fuselage by a tomcat that appeared out of nowhere from above. Back to reality, why is bitcoin up 12% and gold sideways? When will PM supply FINALLY be zero?
don’t understand “thick glasses”?
Lol. I meant I couldn’t read it because it wasn’t posted yet.
10-4.
Great article Bill, thanks.
I agree with you that physical gold and silver will still be standing amidst the rubble. However, I doubt that our vile politicians will allow us to enjoy the fruits of our prudence in stacking PMs, they will accuse us of betting against the state currency, terrorism, lack of patriotism, etc. and punish us for being prudent and far-sighted.
you might be right which is why you need to hold some outside of the U.S..
Bill,
You tell it like it is. D-day could happen almost any second.
I live in the country in Oklahoma and I have been seeing a lot of wild turkeys lately. Hope they are still around at Thanksgiving because I’m not sure what will be available to buy in November!
Of course the MSM says don’t worry as all is fine. But if all was fine then Greece could pay its debt.
It is said that the debt of the USA is like Greece on steroids.
Think I had better go pray now.
thanks Farrell.
Hi Bill,
I have being taking one side of the trade for 5 years. Long physical. Maybe it’s time to stay long physical and short paper. I don’t see any event where paper will be “allowed” to rise until someone (China?) finally forces arbitrage.
Always look forward to your articles.
very dangerous from these levels.
Thanks Bill much appreciate your directness. Because of your good self, we have made ready as best one can. As you have said many times it may be Today, tomorrow next month or even next year, I sleep better at night because IGOFTS! Just a side note to all those who are worried about all the others, “DONT” Prepare yourself and welcome good friends and family to the door when required in the future, and so thus as Bill says “Prepare”
God bless and Prayers to all.
thanks and God bless you.