Login

Log In

Enter your username and password below

This Chart Screams, “Dump the Euro Now!”

Per our weekly Friday routine, we’re calling a timeout from our regular commentary-based articles and letting visuals tell the story, instead.

And boy… do we have a powerful one for you today.

As you probably know, the stock market got punched in the gut a few times this week. And while continually underwhelming economic data – like ADP’s announcement that American companies only added 38,000 employees to their payrolls in the past month, compared to expectations of 175,000 – contributed to the decline, there’s a bigger culprit.

Greece.

Default Danger Level: High

Yeah, I know… over the past year, we’ve seen countless stories about Greece defaulting on its debt (a whopping 160% of the country’s GDP), only for those fears to quickly recede.

So the current concerns will pass, too… right?

Not exactly.

This time could prove to be the final act. And that’s because credit default swap (CDS) prices, which represent the cost to insure Greek government debt, reveal that nobody wants to take the risk.

As a result, the danger of default on Greece’s debt just ratcheted higher and led Standard & Poor’s to cut Greece’s sovereign debt to a CCC rating this week – the company’s lowest rating for any country.

Greece’s Problem is the World’s Problem

And if you’re sitting there, thinking, “So what? Why should I care about Greece’s financial woes?” don’t be so quick to dismiss the situation.

Far from being “out of sight, out of mind,” in today’s global economy, the Greek problem is also the world’s problem.

Exhibit A: U.S. banks are on the hook for $41 billion if Greece defaults, according to the latest figures from the Bank for International Settlements.

Exhibit B: French and German banks combined are on the hook for more than $65 billion. Not to mention, a Greek default could spark a much-feared contagion in Spain, Portugal and Italy. The European Central Bank also owns around 50 billion euros worth of Greek bonds.

According to an account of a meeting, leaked to the BBC, European Union officials have a “profound sense of foreboding” about Greece and how the crisis-hit nation will affect the eurozone. Particularly as eurozone policy makers failed on Wednesday to agree on terms of a new Greek bailout.

And remember, the eurozone already bailed Greece out to the tune of 110 billion ($157 billion) euros last year.

Here’s the bottom line, folks: If you own any euros or European bank stocks, take this as your cue to stampede for the exits, stat! The first in a string of costly defaults could be imminent and there’s going to be the proverbial blood in the streets. Don’t let it be yours.

That’s all for this week. Before you go, remember to let us know what you think about this column – or any Wall Street Daily article – by dropping us a line at feedback@wallstreetdaily.com or leaving a comment on our website.

Thanks and enjoy the weekend!

Ahead of the tape,

Louis Basenese