Friday, May 07, 2010

The bailout of Greece remains on course

I am reaffirming everything that I wrote on April 28, 2010 in my post entitled "Will Greece default on its sovereign debt?", summarized as:

... ultimately, somehow, someway, Greece (and the rest of the PIIGS) will, with absolute certainty, be bailed out in some way, shape, or form by the European financial authorities. The specific details and terms and timing of any bailout may be up in the air, but there is simply too much at stake and too much self-interest in preventing a sovereign default in Europe for the relevant financial authorities to do anything other than do as many bailouts as are needed.

... In short, It is exceedingly unlikely that Greece will default on its sovereign debt...

In other words: No.

There is plenty of gnashing of teeth and wringing of hands and beating of drums by pundits, traders, and short-term speculators who throw temper tantrums when the authorities don't do exactly what they want right when they want it, but the European financial authorities remain on course to bail out Greece and whoever else who may need be bailed out.

Sure, the exact timing, path of that course, and composition of the bailout remains up in the air, but that is as it should be to avoid the moral hazard of people gaming the system based on expectations of the specific form of  the outcome.

True investors need not lose any sleep over Greece and the so-called sovereign debt crisis and should simply continue to ignore the shenanigans of traders, short-term speculators, and economic idealists who seek to manipulate market psychology for their own short-term gain.

-- Jack Krupansky

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