The following is an excerpt from my latest issue of Private Wealth Advisory. In it I outline how Greece’s decision to pay the bondholder holdouts 100 cents on the Dollar proves the entire “austerity in exchange for bailouts” deal is a scam. My next issue of Private Wealth Advisory goes out tomorrow… you won’t want to miss it!
I’ve already assessed the significance of the Greek elections in an earlier article. That in of itself is cause for an alarm as the Syriza party (the most popular party in Greece today) has decided to go head to head with Germany in a standoff regarding the potential exit of Greece from the Euro-zone (Greece wants Germany to drop its bailout austerity requirements while Germany is pretty much on the verge of telling Greece to take a hike).
However, there is one final element to Greece’s current predicament that is even more important than any of the above items. That element is the following:
The Second Greek Bailout has proven to be based on a total and complete lie on the part of the ECB and EU politicians.
If you’ll recall, during the Second Greek bailout, private Greek bondholders were told that they HAD to accept the terms of the bailout (a 70% haircut, and new bonds with lower interest rates and longer repayment periods). The alternative to this, as promoted by the ECB and EU politicians, was the total loss of money.
As you may or may not know, only 97% of private bondholders went for the deal. The remaining 3% (representing roughly €6.5 billion in Greek debt) decided they would maintain their bond holdings as they were and see if they got their money back.
On Tuesday before last, Greece was scheduled to make €436 million in principle payments on this €6.5 billion. And it did. Every single penny.
And they didn’t even have to! Indeed, under normal conditions if Greece missed this payment deadline, it would have seven days to make the payment. However, this time around, Greece had 30 days to make the payment before it would be considered to be in default.
And Greece chose to pay bondholders every penny right on time.
Put another way, those Greek bondholders who DIDN’T go for the Second Bailout, just got their money back at 100 cents on the Dollar (compared to those who DID go for the Second Bailout and lost 70% of their money).
This has shown the ECB and EU bureaucrats to be complete and total liars. It also shows the entire bailout/ austerity measures process to be garbage. Private bondholders got screwed. Greece got more debt and an even weaker economy. In fact, the only group that has so far gotten through the Greek mess relatively well has been the ECB, which swapped out ALL of its Greek exposure for bonds that DIDN’T take a haircut.
The significance of this cannot be overstated. The Second Greek bailout has shown the whole of Europe the following:
1) Bailouts don’t work (Greece actually now has more debt than before).
2) Austerity measures worsen the economy.
3) Private bondholders get screwed.
4) The only one who comes out clean is the ECB.
All of this ties in with the rise in Nationalism I’ve noted in previous articles. THIS is why voters in Greece, France, very likely Ireland (whose referendum is on May 31st), and other EU states are voting incumbent Governments out (especially those that have supported the ECB’s moves) and showing increased support for Nationalist parties. The people have read the writing on the wall and the writing makes it clear that they are going to get screwed while the EU bureaucrats stay in power.
This is why yields on Spanish and Italian bonds are rising (as I write Italy’s ten year is close to 6% and Spain’s ten year is at 6.2%): bond investors know that if they continue to maintain their exposure to the PIIGS, that at some point they’re going to have to negotiate with the ECB. And that means losing a lot of money.
On that note I fully believe that the EU will collapse before the end of the summer. So if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!
With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.
And we’re just getting started. Indeed, we just closed our 58th straight winner last week: an 8% gain.
So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 58 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.
Indeed, we’re so concerned about what’s coming that we’ve re-opened the $249 subscription price on Private Wealth Advisory for one final week. We The stakes are simply too high for investors not to get access to information that can help them navigate the coming Crisis.
We are doing this to give as many folks as possible the chance to get access to our reports as well as our investment strategies.
Chief Market Strategist
Phoenix Capital Research