Market Crash 2011 : Greece is at the edge.

Judging by the risk waterfall today, and the liquidations in gold, virtually nobody believes anything coming out of any European or US institution. There is a report that a very large German Bank (D) is considering accepting a 50% haircut on Greek debt they are holding. If this plays our over the weekend or in to next week and some kind of orderly default takes place, the big French banks (BNP for sure) will be technically insolvent, and runs on European banks by the public could start. Institutions have been running for a while now, but if the general public wake up and stop watching American Idol, then they would be wise to move their cash to banks in Germany, because Germany is the only large county in the EU to be able to afford a bank bailout. Better still send it to somewhere like Singapore

And let’s not forget the Americans. Morgan Stanley alone has $39 billion in total exposure against French banks at the end of 2010, up $30 billion from the year prior, and enough to wipe out its entire market cap and then some should French banks be pulled under.

Lucky they changed the rules over mark to market, otherwise a good number of Western banks would already be knocking on Lehman’s door.

Hoonthai thinks something very bad is going to happen soon, so bad that even the target for the pullback on the SET we gave a while ago (880) may be a tad optimistic and may need to be lowered – to nearer 800.  If things really blow up and other EU countries default, then we need to consider a major retracement for the SET Index to as low at 720-740 – in Q4 this year. Next year we’ll have QE3, QE4 and maybe 5, or will ATM’s stop working a real depressions ensue?


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