I mentioned several times recently my doubt that the Greek bond holders could possibly agree to a voluntary reduction in the value of their bonds. I feel there is no way they would ever get the 100% agreement that one would think would be necessary to avoid a default on the bonds. Well laugh out loud I read this morning that the European Central Bank holds 55 billion face value of the bonds and it expects to hold to majority and get paid in full rather agree to the reduction. This is ludicrous. Why would any other bond holder agree to the reduction? In fact many other investors hold a type of insurance on these bonds that pays off in the event of default. The theory is that they will agree to a voluntary reduction so that the insurance (credit default swaps) will not pay off. This is preposterous. It is like asking you and I to have some one drive a large truck into our car causing damage equal to half the value of the car and then agreeing not to calim the insurance we paid for. Get real. How could any pension fund for example agree to this? It would be against their duty to pensioners. Even for the good of the world economy, they cannot and I suspect will not ultimate do this.
P.S. With the market up today, it might be wise to shave a few positions. The difficulty though is always what to sell… (update, sorry when I wrote this this morning I thought the market was up, I must have been looking at the gain from yesterday)