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And the nightmare continues...


Alekbaylee
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It is interesting and perhaps profitable to discuss just what  happens if countries like Greece, Ireland etc. just say screw it we ain't paying. And the grand experiment which is the European Union blows up. Certainly China appears to want the Euro to survive and I think the US does as well. Certain parties long precious metals prolly would like nothing more than to see it blow up as it increases the value of their positions.

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This is where the long view counts.

 

Lots of sovereigns have defaulted in the last 50 yrs or so, & almost all had the same experience. It took a while, but the market started lending them money again, & those original bond holders ended up with what were really equity sweeteners (zero-coupon future dated PIK, etc).

 

Worst case. Greece gets ejected from EuroLand, takes back the Drachma, & tells you that they'll repay 40% of the principal of your Euro Backed bond in Drachma -10 yrs from its maturity date. The trader will take the deal, dump the Drachma bond, & be thankful they're out. The value investor would buy the Drachma bond at 30-50% off its intrinsic value, & buy a greek villa at 20-40% off the market value - financed with a Drachma denominated mortgage equal to the FV of the drachma bond.

 

You get your villa today & a interest only 'rent' cost for 10yrs - that is getting cheaper each month (drachma devaluing). End of yr 10 you pay off the morgage with the proceeeds from your drachma bond.

 

The riviera life style year round for maybe 1/2 the cost of a California condo ?

 

SD 

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