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Tuesday, November 1, 2011

Greece destabilizing fast, time for European meltdown?

Greece is destabilizing fast.  Greek prime minister George Papandreou replaced the top brass in Army, Navy, and Air Force in a surprise move.   This is following another surprise move by announcing holding a public vote on  EU bailout agreements, as soon as next week.

Government Greek 1 year bonds now pay a return of 205%!!!
If you bought 10,000 euros of Greek government 1 year bonds, in 1 year, the bond will be worth 30,000 Euros!

The current proposed plan is to cut bond debt by 50%.  So if the 10,000 euros turned to 5,000 Euros, in 1 year it would be worth 15,000!  Still a 50% gain for 1 year in bonds.

It should be obvious that this is not risk free.  There is a reason why the rates are so high.
Because the government is destabilizing and you may get ZERO return on your bonds.

And if Greece falls, expect Spain, Portugal, Italy, and Ireland to  be not too far behind.
If Europe enters into a classic deflationary collapse, which is once again it is looking to be, the entire market could get a big flush.

Good luck.  We live in truly historic times.

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