Resilience
“Be sure you put your feet in the right place, then stand firm.”
- Abraham Lincoln
Ancient History We entered 2012 with continued uncertainty over Greece and its possible negative consequence for European economies and possibly the world’s. Fortunately, Greece finally defaulted. Huh? Yes, they finally completed their debt restructuring handing investors a nifty 50%+ loss on the original face value on the bonds. But, importantly, they did so only after the European Central Bank established a bank safety net on December 8, 2011. The plan allowed banks to extend maturing short term debt by 36 months. Although Greece’s and the Euro Economic Union’s challenges are not over, the restructuring buys them time to reform. Now comes the hard and politically difficult follow through but at least the near term systemic risk has declined. Consequently, Italian and Spanish bond yields declined to more reasonable levels.