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Forget Greece it’s Portugal that’ll destroy euro

Commentary: One default is an accident two is a systemic crisis

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27-Jan-2012 15:49

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already factored in! lol

Forget Greece it’s Portugal that’ll destroy euro

Commentary: One default is an accident two is a systemic crisis

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27-Jan-2012 15:48

Straits Times Index / STI to cross 3000 boosted by long-term investors

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At first, these credit rating, hurt invester sentiment, but since then, invester have tired of these rating agencies, thus stock not reaction.

so it is with PIGS, now ppl are focusing on the US 60%, euro now take a second seat, so i wonder have the mkt px in this euro, i think so.

mkt have been sold down even before pigs have default.So far,non have default, but mkt have been beaten in defaulted mode.and IMF planned 1T war cheat, with ECB. more than enough to

keep pigs in check. Invester is coming back to risk asset.

I think only a default can sink the current rally, but i think that will be in 2nd half.

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27-Jan-2012 15:28

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I think someone just wants to remind ppl of the bad news that is already stale..
All these cut - and - paste job do not really need to be done here .. as it chokes up the forum space.
Just provide the hyper link and put your title .. e.g. something like " Euro Red red here to come --> Hyper link "

LOL (" ,)

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27-Jan-2012 15:22

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Forget Greece it’s Portugal that’ll destroy euro

Commentary: One default is an accident two is a systemic crisis

ONDON (MarketWatch) — It is a long-time since Portugal played a decisive role in world history. The Treaty of Tordesillas, which divided the non-European world up between Spain and Portugal in 1494, was probably its last major contribution, and even that did not end very happily.

But 2012 could be the year Portugal explodes onto the world stage again. How? By blowing up the euro EURUSD -0.05% .

Greece is already bust — and its default is already priced into the market. But Portugal is in precisely the same position, just on a longer fuse. It too is sliding toward an inevitable default on its debts — and when it does so, it will deliver a terminal political blow to the single currency, and inflict damage on the European banking system that may well prove catastrophic.

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We have known for some time of course that Portugal was in trouble. Back in May last year it became the third euro-zone country that had to be rescued. After bond yields soared up past the crucial 7% level it was forced to ask for a bailout package worth 79 billion euros. The International Monetary Fund and the European Union moved in with the formula they had honed to such perfection in Greece — big tax raises, spending cuts, wage cuts, and a little bit of structural reform. The country — one of the poorest members of the European Union, with a gross domestic product per capita of only $21,000, significantly less than Greece‘s $26,000 — was set a target of reducing its deficit to 4.5% in 2012 and 3% in 2013.

So how’s it going? About as well as it did in Greece — which is to say, not very well at all. The Greek economy is forecast to shrink by 6% this year, and Portugal is not very far behind — Citigroup is predicting the economy will contract by 5.7% in 2012 and another 3% in 2013.

Rising taxes are pushing more and more of the economy off the books. A study for Porto University found that the shadow economy, which doesn’t pay any tax, grew by 2.5% last year, and now accounts for a quarter of Portuguese economic activity. There is no point in expecting that to change any time soon. Portuguese companies simply can’t survive paying the tax rates now imposed on them.

The result? Deficit reduction targets are being missed. Earlier this month, the government revised the deficit forecast up from 4.5% to 5.9% of GDP for this year. If the Greek experience is anything to go by, the target will continually be revised upwards. The economy shrinks, taxes fall, more and more people switch into the black economy simply to survive, and the deficit keeps on growing.

In response, the European Union demands more and more austerity — which simply means the economy shrinks even faster. It is a vicious circle. If anyone knows how to get out of it then they are keeping it to themselves.

Standard & Poor’s has already downgraded Portuguese debt to below investment grade, and more downgrades are on the way. Bond yields are spiking up. Last week, yields went up past 14%. They are set to go a lot higher. Greek 10-year bonds now yield 33%. Is there any reason why Portuguese yields shouldn’t reach those levels? None at all.

That matters. The Greek crisis could be spun as a special case. Not Portugal. There was no fiddling of the figures. It didn’t run massive deficits — indeed in the run up to the crisis of 2008, Portugal was running deficits of less than 3% of GDP, well within the euro-zone rules. It wasn’t irresponsible. The problem was simply that it couldn’t compete within a single currency with much stronger economies. Now the country is being plunged into a full-scale depression — as bad as anything witnessed in the 1930s — by monetary union.

It will be every bit as serious as Greece. And perhaps more so.

While the Greek government borrowed a lot of money, and mostly wasted it, Greek consumers and companies were relatively restrained. Not the Portuguese. According to figures from the Bank of International Settlements, total Portuguese debt amounts to 479% of GDP (compared with 296% for Greece). That comes to 783 billion euros, compared with 703 billion euros for Greece.

Europe’s banks are even more exposed to Portugal than they are to Greece. In total, the banks have $244 billion exposure to Portugal, compared to just $204 billion to Greece, again according to BIS data.

So how is this going to play out? Greece looks certain to default in the first half of this year. The pressure will then move straight on to Portugal. It has precisely the same problems, only worse. If one country can’t pay its debts then neither can the other.

That will have two big effects.

First, there will be a huge hit to the euro-zone banking system. The bulk of Portuguese debt is owed to Germany and France. But those are the official figures. It seems likely a lot of the private debt, which is far more substantial than government debt, will be owed to Spanish banks. They are already fragile. Can they take the losses? Perhaps, but you wouldn’t want to bet your last bottle of port on it.

Next, it will deal a huge blow to the currency. For one country to default within a monetary union can be written off as an unfortunate accident. Every family has a black sheep. When the second one goes down, it looks a lot more serious. The line that this is all the fault of a few irresponsible governments will be unsustainable. The alternative explanation — that the euro is a dysfunctional currency, wreaking havoc across the continent — will gain a lot more traction.

A Portuguese default will trigger a whole-scale retreat from the euro-zone — and right now looks like the trigger for the collapse of the system. It’s been a five-century wait. But Portugal could be about to play a key role in the global economy again.

Matthew Lynn is a financial journalist based in London.

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27-Jan-2012 15:16

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market can't be bothered. lol

Sgshares ( Date: 27-Jan-2012 14:59) Posted:

BNP Paribas, Credit Agricole cut at J.P. Morgan

MADRID (MarketWatch) -- French banks BNP Paribas SA FR:BNP +0.04% and Credit Agricole SA FR:ACA +1.74% were both downgraded on Friday at J.P. Morgan Cazenove, which said long-term structural issues remain for the country's banks. " French banks are still over-leveraged, and there is still 100 billion euros ($131 billion) of further deleveraging required on top of the announced plans," analysts said. BNP was cut to neutral from overweight. J.P. Morgan analysts said the stock is better positioned in terms of capital and funding, but that's already reflected in share prices. Credit Agricole was cut to underweight from neutral, as analysts said valuation looks relatively unattractive versus its peers, given the bank's high exposure to Greece. Societe Generale SA FR:GLE +0.05% remains overweight.

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27-Jan-2012 14:59

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BNP Paribas, Credit Agricole cut at J.P. Morgan

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27-Jan-2012 14:32

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Tonight GDP is of all im[portant hope it surprise on the upside.

if not dow will drop big.

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27-Jan-2012 14:29

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I believe base on what i heard of my friend, at least 7 out of 10 did not participate in this rally, because they skeptical,

or their fund are stuck since the last selldown till now., thus got no money to punt.

never put all in one short, for me anytime just 60 to 70%, of investible fund.

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27-Jan-2012 14:24

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there is a chance mkt may drop big on Greece default, then we should sell out fast,

dont wait like last Aug, then side line and wait again.

mkt never disappear, invester does, they go bankrupt or stuck for a long time and become a long time invester.

so wait patiently, withdraw , at least, you dont disappear overnite.

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27-Jan-2012 14:10

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Who is Granville???

WB have been buying. Warren Buffet, we all know, right? Who the hell is Granville.

OK, Victor said rally for 1 half, 2nd half faces headwind...Who is Victor??

Fat, Fat, short short the guy, he is a botak, he guess only, either he is right or wrong?

just donrt bother what the hell anyone said, even LKY, just have a stop loss for all your vestment.

that is more important than who say what?

SGG_SGG ( Date: 27-Jan-2012 13:23) Posted:

take everything these analysts say with a bucket of salt. they are oon cahoots with the institutions banks and countries funds

eg. US it will be the Fed. it is this way possibly in every country that has a stock exchange.

Sgshares ( Date: 27-Jan-2012 13:09) Posted:

DJIA to Fall 4,000 Points in 2012, Granville Says

Jan. 23 (Bloomberg) -- Joseph Granville, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri, for more than 40 years, talks about the outlook for the U.S. stock market. He speaks with Adam Johnson on Bloomberg Television's " Street Smart." (Source: Bloomberg)

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27-Jan-2012 13:23

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Sgshares ( Date: 27-Jan-2012 13:09) Posted:

DJIA to Fall 4,000 Points in 2012, Granville Says

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27-Jan-2012 13:09

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DJIA to Fall 4,000 Points in 2012, Granville Says

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27-Jan-2012 12:30

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Market Bounced backed form this level & again would be touch 2900 & More - More Updates - goo.gl/q2oYj

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27-Jan-2012 11:36

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down town to Chinatown!!

HANG SENG INDEX

(HKSE: ^HSI )

Index Value:	20,510.67
Trade Time:	11:21 SGT
Change:	71.53 (0.35%)

Prev Close:	20,439.14
Open:	20,443.46
Day's Range:	20,432.62 - 20,590.80
52wk Range:	16,170.30 - 24,468.60

ozone2002 ( Date: 27-Jan-2012 09:14) Posted:

Still advocating shorts...

markets are overbought..

would recommend HSI Puts..

gd luck ! DYODD..

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