To haircut or not to haircut?

Yesterday we saw why Greek Debt is unbearable and could bring even USA to its knees.  Everyone in the news talks about haircut and the percentage which will be forced. Of course we will see at least a 60% haircut in bonds but is this policy fair for everyone?

In the last months, I was in favor of haircut (although the last weeks not so much). I believe that when you make an investment there are always possible risks and the same thing applies for bonds as well. There is nothing safe in investing; it’s all about having more or less risk, that’s all. So investors misjudged the situation in Greece and they have to pay the price now. The same thing applies for everyone. If I buy Ford stocks and problems appear in the car industry, it is my fault for not taking all parameters under consideration not Ford’s. So in my eyes I only see crying babies who only want profits and can’t bare losses.

Another reason why haircut is fair is because of speculation. Greek politicians did everything possible to ruin the image of their country; both to markets and the whole world. Accordingly other European countries acted, for their reasons of course.  Greek politicians just wanted a good excuse to cover their incapability and Europeans needed to hide their problematic economies for as much time as they could.  Of course this behavior leads to an economic suffocation for a whole country and allow me to say a suffocation lot worse that it deserves.  When a whole country is going to collapse, excuse me but I don’t give a damn about the lost money! You prefer 11 million billion starving to death or 500 empty pockets? Well I prefer the second option and every reasonable person does as well.

Third, making money out of thin air. Right now there are bonds sold in the market which perform 700% until 20th of March. Their holders sell them at discount because they believe Greece is going to have an uncontrolled bankruptcy and they prefer to take some of their money back than loose it all.  So why should Greek people pay this difference? If we talked about stocks performing so well in such a short amount of time I would say ok, buy as much as you can no questions asked, but now we talk about people so the comparison can’t be matched.

In my eyes haircut is not something that bad. It may not be the best thing for the credibility of the lender and for Greece particularly may not be the best option to relieve her debt (we will discuss next week about this) but nevertheless it is much better to have a bankrupt investor than a 11 million bankrupt people…