The crisis is upon on us and the theory of the EU officials that the hole is too small to sink the ship has been put to test. The financial markets are like a tornado today, all they want is to punish every single person who believed that “Greece doesn’t matter”. It was the most difficult weekend for investors since the Lehman crisis and every element of worry is picking up more speed and more destruction today.
It seems like nothing can stop this panic now and the kind of sell off that we are experiencing today is something which we have not seen in a very long time. Margin ratios were increased going into the weekend due to the higher volatility and the over all margin levels in the market are also sky high. All this spells nothing but a bloodbath and only someone sitting on a large sum of cash can only rub his both hands together and can say yes, I like this kind of sell off unlike some one who was betting every thing that they had.
Greek officials have called on referendum and playing another political game by saying that the fate of Greek people should be decided by them and want the public to decide what they want and if they still have a strong desire to stay in the Eurozone. In a real fact, this is an utter failure for the government which has pushed the country on the brink of default just because they promised way too much in order to win the election and now the only way out is perhaps play the same card and try to shift the blame on creditors and let public be aware of this.
The reality is tough and it is not about blaming each other but come together and find a solution but for the time being both sides are far apart and still as stubborn as they can be.
The biggest fear right now in the market is about the contagion effect and we are seeing the colours of this in the bond market which spells nothing better than the word anxiety. The yield on Spanish, Italian are soaring and the question is being asked who is the next victim?
Any currency is only good enough as long as the public has its trust in it but the opposite is taking place under the current circumstances and traders are showing their doubts if the euro will ever be considered as the reserve currency. No one else is to blame for this but the EU officials. Will they repeat the same typical mistake as the U.S. Federal Reserve bank did ie let one bank go bust and then wake up to see how big the impact is. Will the EU officials adopt the same path and letting Greece to suffer all the pain and be the victim of this misery and rest of the member after this gets debt negotiations easily. These are just some of the questions which have occupied the trading desks around the world.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam