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Strategies & Market Trends : Value Investing
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To: J Mako who wrote (44870)10/7/2011 11:43:01 PM
From: Spekulatius1 Recommendation  Read Replies (1) of 78719
 
Pretty good article, imo. I don't agree with some statements though:

>>The asset class at the heart of this phase of the financial crisis—sovereign debt—is far easier to value than the securitised subprime mortgages that caused the trouble last time.<<

This is not the case. Greeks debt is not easy to value, it is almost entirely depend on political decisions and the willingness of the Greek people to pay up. If they decide they are not going to pay, the debt is worth exactly zero - because what are the creditors to do - invade the country to seize assets?

Since I assume the latter is not feasible, I don't think that anyone can value Greek debt, it could be worth anything from 0-80% of the nominal value.

Europes debt crisis is not easy to solve - it depends on the willingness of prudent members of he EU to pay for the imprudent ones - how can this be easy? If for example, Mexico goes down a cliff, would the US be guaranteeing their debt? Well they have done this in the past to some extend but that help had limits. Many prudent members of the EU feel that they have done already way more than they are obliged to do. Bystanders that don't have to pay like the US and other feel that they should stand by their imprudent members. These again are political decisions that cannot be easily handicapped.
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