Jamie Olliver's Food Revolution Episode 1

http://www.youtube.com/watch?v=vXaeKL87CcY

Folks, watch this. This is exactly how I feel. I tried so hard to make things right, to protect the folks. But they cannot understand certain issues.

Very Disappointing Fear Indicator

I was hoping for this fear indicator to come down. But I was wrong. It rose to the highest level since Aug 2010. So far, stock markets haven't fallen by 20 - 25% like it did in May 2010 so I'm expecting another sell down after this week of rebound.

I was hoping that a rebound would come after 6 consecutive weeks of sell down. After all, the Greek situation is almost going to be resolved via a bailout. Lehman's meltdown is still fresh on the minds of regulators. It's either a rollover of the same debt to prevent banks from being hit in their capital, or a wholesale bailout by ECB. ECB has to accept Greek debt as collaterals even if the debts are rolled over otherwise the country will grind to a standstill. Anything less than that will result in French and German banks taking a hit in their capital and becoming insolvent. In the end, ECB will have to bail out the German and French banks otherwise it will be a systemic failure of the banking system again, only this time it is of a much larger magnitude.

For the Greek government, agreeing to a harsh austerity plan will mean more riots on the streets and a deeper recession. There seem to be no light at the end of the tunnel. A bailout will mean kicking the can further down the road. If they decide to default, it will mean no more borrowing from the bond markets. It will mean bankruptcy like Russia in 1998 and Argentina in 2002. They won't be able to borrow again until all debts are settled, or IMF - ECB agree to forgiveness. But forgiveness doesn't come cheap. Greece will have to privatise a lot of national assets to become foreign owned. So remaining in the EU and defaulting on their debt is not palatable either. Damn if they accept the austerity measure, damn if they choose bankruptcy.

Let's explore Greece breaking away from the EU. It will almost certainly mean the meltdown of French - German banks. It will start a contagion that will affect American, Swiss and British banks too. It will be Lehman crisis all over again. It means the Greeks will have to turn back to Drachmas, which will almost certainly crash after reversion. It will mean a default of their current bonds. Nobody will buy Greek bonds in Drachmas. It will mean hyper-inflation and perhaps a Zimbabwe-like hyper-inflation. ECB will count the massive costs because Euro confidence will be hit. Euro will crash.

So the third option will not only kill Greece, but the EU too. It is unpalatable to both.

The best option is to accept a watered-down austerity measure and allow for voluntary roll-over of the same debt. Greece can take a longer time to balance its fiscal books. The world will calm down again. It will happen because collateral damage is far too big to stomach.

But what's causing the fear indicator to rise? I am worried that there are unknown factors. Perhaps the debt ceiling in the US will not be raised, although I am quite sure this won't happen. Perhaps QE2's end will push the US economy over a cliff. This is possible although I find it strange that QE should be such an issue when it didn't even flow into the money supply of the US in the first place. With the end of QE2, interest rates could rise and UST plummets. Unless the bears think a recession will occur and buy up those USTs. Investors should be putting money in equities and commodities because no other sector, not in the least cash will give them higher than inflation returns. The earnings yield gap is still super wide, with PE at 12x, or 8% yield, and 5y UST at around 2.5%, the gap is around 5.5%. It makes far more sense to invest in equities than Treasuries or USTs.

Another possibility is China's bubble has burst and the news hasn't reached us yet. The property bubble could be far worse than expected. I am staying clear for now. This rebound doesn't look sustainable.

I think we could see a sell down soon before we see a strong rebound. I don't think this is the peak but next year could be it.

2.536%

VALUE: 283.000 USD

JACI composite Blended Spread (JACICOBS:IND)

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Snapshot

Summary			One-Year Chart INTERACTIVE CHART
Value	283.00
Change	7.000 (2.536%)
Open	283.00
High	283.00
Low	283.00

Greek Default May Be Inevitable

It seems inevitable that Greece will encounter some form of soft restructuring. I have highlighted some important issues to take note. Frankly, I think the debt issues will be contained and the correction of stocks is overdone. But I'm waiting for that one indicator to normalise before I pile on my investments into risky assets.   Published June 17, 2011

Greek default may be inevitable A default verdict from rating agencies looks likely, but this may be temporary and not too damaging By NEIL UNMACK AND GEORGE HAY WHEN is a country in default? In Greece's case, the answer depends on who you ask. Eurozone politicians want holders of the country's bonds to help contribute to another bailout. However, they also want to avoid the wider market fallout that a default would bring. Getting accountants, rating agencies, derivative traders and the European Central Bank (ECB) to agree will be hard. But not all opinions have equal weight. Lenders' take: For banks, the question is whether an exchange or extension forces them to recognise a loss on their bonds. That would have severe ramifications for Greek banks and would also hurt French and German lenders A debt restructuring could take several forms. One option is to ask creditors to exchange Greek government paper into new, longer-dated bonds. The alternative is to persuade holders of maturing Greek debt to voluntarily roll over their holdings into new bonds. Different groups are likely to have differing opinions on whether this counts as a default. Banks For banks, the question is whether an exchange or extension forces lenders to recognise a loss on their bonds. That would have severe ramifications for Greek banks, which hold 48 billion euros (S$84 billion) of the country's debt, and would also hurt French and German lenders. But banks may be able to avoid taking a hit. Accounting rules are strict on obvious defaults. If the issuer of a bond cuts the coupon or refuses to pay back all of the principal amount then the bank must register a loss. But there is more leeway on milder 'reprofilings'. If the issuer keeps up interest payments, pledges to repay the principal in full, and only extends the maturity, banks do not have to class the bond as impaired. Of all the opinions, the banks and the ECB are most important. So long as a rollover or extension doesn't undermine the solvency of the banking system, and as long as the ECB continues to fund peripheral lenders, a systemic crisis should be averted. True, the market value of the bond is lower, as the repayment date has been pushed out. But this only applies to bonds that are held in banks' trading books, which are marked to market. Most banks now hold sovereign debt in their banking books, where accounting valuations rule. Exchanging existing bonds for new ones could be harder to get past the auditors, because accounting rules technically deem this to be a sale - which would crystallise losses - rather than just an extension. But there are no explicit rules on the accounting treatment of such manoeuvres. It should therefore be possible for bank chief financial officers to argue that a bond exchange and a maturity extension should have the same treatment, as long as no change has been made to the coupon or principal. ISDA Eurozone politicians also need to worry about the International Swaps and Derivatives Association, the derivatives industry body, which will decide whether or not an exchange or rollover triggers the country's credit default swaps (CDS). If it does, that would trigger losses for institutions that have sold protection against a Greece default - which have a net exposure of about US$5 billion - and a pay day for speculators. And it would be a public verdict of default. To dodge this bullet, the rollover or extension cannot be legally binding on all creditors, and will also have to avoid giving any creditors contractual seniority over other classes of debt. ECB The ECB is less worried about legal or accounting niceties. However, the central bank has so far objected to anything that changes the terms on existing bonds, because it fears this could spread panic throughout the euro zone. Politicians are understandably wary of overruling the central bank that provides the region's lenders with liquidity and protects the single currency. However, there may be some middle ground: The ECB has recently given its blessing to a voluntary rollover of Greek debt. The ECB's support is critical if Greek banks are to continue pledging government bonds as collateral with the central bank - particularly if rating agencies take a hard line. Rating agencies Even a voluntary rollover of Greek debt will be closely scrutinised by Moody's, Standard & Poor's and Fitch. Whether they classify a restructuring as a default will depend on the terms offered to investors. On paper, a voluntary exchange need not trigger a default. But any proposal that penalises investors who do not participate - for example by threatening a hard default if the offer isn't accepted, or by changing the residual bonds' tax or legal status - could prompt the ratings agencies to temporarily downgrade Greece to a selective or restricted default. Even a voluntary rollover of debt may be viewed as akin to a default. Rolling over bonds at current market rates - meaning a yield of about 15 per cent on five-year bonds - might be OK, as it would suggest that investors were entering into a commercial transaction rather than having their arms twisted. But Greece cannot afford to do that. An alternative is for Greece to sweeten the deal by offering collateral with the new bonds. But even then ratings agencies would frown on such an arrangement if they didn't believe the deal was done on commercial terms. So a default verdict from the rating agencies looks likely. But this may be temporary, and not too damaging, as investors who are forced to pay attention to ratings sold their Greek holdings when the country was downgraded to junk status. As long as the ECB is willing to keep on funding Greek banks, the fallout may be manageable. However, a Greek downgrade to default - even if temporary - could prompt downgrades of other peripheral government debt. Rating agencies might expect holders of Portuguese or Irish bonds to receive similar treatment in future. That could lead to downgrades for the eurozone periphery, and the risk of contagion. Who matters most? Of all the opinions, the banks and the ECB are most important. So long as a rollover or extension doesn't undermine the solvency of the banking system, and as long as the ECB continues to fund peripheral lenders, a systemic crisis should be averted. A rating agency default, or credit event on CDS, would have some knock-on effects, but these should be manageable. The longer-lasting impact would be the stigma that Greece was deemed to have defaulted on its debt. But that would only confirm something that most investors and analysts already believe is inevitable.