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24-Jul-11 World View — Mauldin: Greece's Bond 'Haircuts' Are At 75-80%


This morning’s key headlines from

High-speed bullet train falls off bridge in China, killing 22

Wreckage of train after two carriages fell off a bridge (AP)
Wreckage of train after two carriages fell off a bridge (AP)

At least 22 people were confirmed dead, and more than 100 people have been sent to hospital, after two coaches of a bullet train fell off a bridge in east China’s Zhejiang Province late Saturday. The accident comes a day after China announced an investigation into a third senior railways ministry official. Officials at the Ministry of Transportation and Railways have been accused of corruption in the building of the train infrastructure, siphoning off millions of dollars while taking shortcuts and using low-quality materials in construction. Xinhua and Reuters

Bank of Ireland defaults on bond payments

The Bank of Ireland has suffered a “credit event,” after refusing to buy back €2.6 billion of subordinated debt earlier this month, according to the International Swaps and Derivatives Association (ISDA). The ISDA has set July 28 for an auction to settle credit default swaps (CDSs) that insured the defaulting bonds. Reuters

Mauldin: Greece’s bond ‘haircuts’ are at 75-80%

EU officials and bankers plan to conduct their “voluntary” swap of privately-held Greek bonds for AAA rated longer maturity bonds at the end of August. The strategy will be to do the swap across Europe all at once, so that Greece will be in “selective default” or “restricted default” only for a few days. The private sector investors, mostly banks, will take a 21% “haircut,” thus contributing €37 billion to the bailout. (What could possibly go wrong with a clever strategy like that?) Reuters

The official statement from European officials on the most recent bailout of Greece requires the banks to “voluntarily” take a relatively benign 21% loss of their principal in Greek bonds. But the 21% computation is based on faulty assumptions, and if you do the math with realistic assumptions, then the “haircut” will be more like 75-80%. This is the sixth time in 18 months that European leaders have announced a definitive solution to the euro crisis, and this is the sixth time that the claims are fraudulent. And it won’t be just Greece — the same haircuts will be demanded by Ireland and Portugal, causing Greece’s problems to spread throughout Europe. John Mauldin

Soros Fund has moved to a 75% cash position

With the euro zone facing an extremely serious crisis, reports are surfacing that the Soros Fund Management’s $25.5 billion Quantum Endowment Fund has “pulled back” and moved to a 75% cash position. The fund has already lost over 6% this year. Barrons

Syria blames sabotage for train derailement

Wreckage of derailed train (Reuters)
Wreckage of derailed train (Reuters)

Syrian authorities blamed sabotage by opposition protesters for the derailment of a train on Saturday, The train was carrying 480 passengers and five crew members, and was traveling to Damascus. The driver was killed instantly. Officials said the saboteurs ripped up a section of the tracks, causing the train to derail and the front carriage to catch fire in the crash. Gulf News

Clashes in central Cairo injure more than 231

Thousands of pro-reform protesters calling for the “downfall” of the country’s ruling military council were marching toward the military headquarters on Saturday, when they were attacked with knives and sticks and petrol bombs by groups of pro-army protesters. 213 people were injured. Al-Jazeera

Venezuela’s Hugo Chavez receiving chemo therapy in Cuba

Venezuela’s president Hugo Chávez will receive his second round of chemotherapy in Cuba, after receiving two operations last month, one for a pelvic abscess and another to remove a cancerous tumor. Reuters

As Ramadan approaches, hoarders are pushing up food prices

Ramadan this year will run from August 1 to August 30. For the last two months, speculators have been hoarding food items that consumer more during Ramadan, including sugar and cooking oil, pushing prices up. The News (Karachi)


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