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Hungary says economy in grave state

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June 04, 2010 – Comments (26)

Here is a good short article that discusses the Hungary debt crisis.

There are two other articles worth reading. This one: Sovereign Credit-Default Swaps Surge on Hungarian Debt Crisis - http://www.businessweek.com/news/2010-06-04/sovereign-credit-default-swaps-surge-on-hungarian-debt-crisis.html and this one: Hungary Vows to Avert Greece-Like Crisis - http://online.wsj.com/article/SB10001424052748704764404575286283092092988.html?mod=WSJ_hpp_MIDDLETopStories

The second one is amusing due to this line:

In credit markets, the cost of insuring Hungarian sovereign debt against default rose to its highest level since July 2009. Hungary's five-year credit-swap spreads—a key measure of credit risk—stood at 0.43 percentage point. That is over one percentage point wider on the day and 1.8 points on the week.

"You simply cannot talk like this in these markets," said Timothy Ash, head of emerging market research at Royal Bank of Scotland.

Economists were also left confused by apparent conflicting signals from the new center-right Fidesz government, which has said it plans to give a state-of-the-budget statement over the weekend.


What is amusing is that we are nearing the crux of a major sovereign debt crisis. And all of the problems that were simply papered over with debt are showing how weak those 'solutions' were. The whole sovereign debt situation is based solely on confidence. That is not a good way for any economic or monetary system to be run. Massive credit and leverage expansion is what got us into this mess, and it sure as he** is not going to get us out of it. Only a return to a production based economy and a move away from top-heavy consumer spending based on credit will. And one way or another, that is exactly what is going to happen eventually.

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Hungary says economy in grave state
Reuters
June 04, 2010

http://www.bnn.ca/news/18071.html

[excerpt]

Hungary's markets and forint currency fell sharply on Friday after the prime minister's spokesman appeared to back the view that his country had a slim chance of avoiding a Greek-style debt crisis.

Earlier on Friday the new government said it would soon announce an action plan to tackle the economy's problems, after it publishes the figures about the "true" state of the 2010 budget this coming weekend or early next week.
   
Nervous markets and investors were deeply confused by the government's plans and comments and urged clarity on plans.
   
Ruling Fidesz party vice chairman Lajos Kosa was cited as saying by news website napi.hu on Thursday that the new government had found public finances in a much worse shape than previously expected and there was a slim chance of avoiding a Greek-style scenario.
   
When asked about those comments, Prime Minister Viktor Orban's spokesman Peter Szijjarto told a news conference:
   
"It was (former Socialist) Prime Minister Ferenc Gyurcsany who spoke about a default. Moreover, he proudly said that Hungary was close to default, he said that a year and a half ago...and then he was proud that he could only save Hungary from default by taking the IMF loan."
   
"From this aspect I do not think this (Kosa's comments) are exaggerated at all."
   
Szijjarto also told the news conference that the previous
Socialist government falsified economic data.
 
"In Hungary the previous government falsified data. In Greece, they also falsified data. In Greece the moment of truth has arrived. Hungary is still before that," Szijjarto added.
 
"This is exactly what we want to avoid, and this government is ready to avoid the path that Greece took. After realizing what reality is, we will not hesitate to act," he said.
   
Szijjarto said the austerity measures and tax hikes complicating the tax system which the Socialist administration tried in the past had failed.
   
He said tax cuts would not be delayed even in the face of a higher budget deficit.
   
It was not clear how that could square with bringing the deficit under control.

26 Comments – Post Your Own

#1) On June 04, 2010 at 11:20 AM, outoffocus (23.49) wrote:

Maybe Hungary needs a bailout from Turkey (ba doomp TISH!).  You knew it was coming.

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#2) On June 04, 2010 at 11:21 AM, binve (< 20) wrote:

outoffocus,

yeouch.

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#3) On June 04, 2010 at 11:24 AM, JGus (28.93) wrote:

Binve - I'm beginning to think that we bears might finally be right this time :) The fundamentals, technicals, sovereign debt crisis, political unrest, possible wars, GoM oil spill, etc., etc. all seem to be pointing in the same direction - DOWN!!!

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#4) On June 04, 2010 at 11:31 AM, binve (< 20) wrote:

JGus,

Hey JGus! I completely agree. In fact I wrote a comment on my other blog about 2 weeks ago that says very much what you say above: http://marketthoughtsandanalysis.blogspot.com/2010/05/not-boring-title-2.html#comment-51075567

Thanks man!..

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#5) On June 04, 2010 at 11:34 AM, Griffin416 (99.98) wrote:

JGus n da bears - I'm nearly a permabull. But I have been strangely bearish the last week and a half, but only due to technicals...sitting below the 200 day convincingly.

That being said, I think todays action is bullish. Oil is down big, but the oversold oil stocks are bouncing, The main reason is with all of this "new" bad news, the market is simply repealing yesterdays and half of Wed's fantasy move.

The news is somewhat even or getting worse, with JGus's apt comment and the market is still sitting in a range (S&P 1060 to 1100).

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#6) On June 04, 2010 at 11:37 AM, kstarich (30.67) wrote:

Binve

have you done research on Australia?  I have been looking at their chart (astrology) and they don't seem to be effected by the global mess to the degree others are.

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#7) On June 04, 2010 at 11:55 AM, EPS100Momentum (72.66) wrote:

66% in WSJ POLL say Hungary will follow Greece.

 

http://online.wsj.com/community/groups/europes-question-day-695/topics/hungary-likely-follow-greeces-footsteps

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#8) On June 04, 2010 at 11:56 AM, binve (< 20) wrote:

Griffin416 ,

I still see the technicals as quite bearish for the medium term. We have not once closed above the 200 day MA since breaking below it and have closed below for now nearly 2 weeks. This will be making institutional investors *very* nervous. On top of that the 20 day MA has now come down is is serving as resistance (just like it did with the 50 day MA a few weeks ago) and another important trendline which was support is now resistance. Plus we have a 50 day MA which is now definitely trending down. In Europe, we have death crosses on a number of smaller indices, but most recently the CAC40 (which is definitely no small index). The bearish case is getting stronger as time goes on, not weaker. The last few days feels like a reaction up IMO.




ENLARGE

kstarich ,

I haven't looked at the ORD in some time, but I will try to look at it again. Thanks!..

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#9) On June 04, 2010 at 12:06 PM, mtf00l (49.87) wrote:

My prognostication for June 4th, 2010.

The banks (plural) loaned lot's of money to all countries regardless of any fundamentals or risks. The banks (plural) then bought insurance on each and every loan.  In some cases multiple policies.  No matter who wins, the banks (plural) win, not matter who loses, the banks (plural) win.  My only question is how do I buy "default" insurance on all of these bankrupt nations so I can cash in with the banks?

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#10) On June 04, 2010 at 12:10 PM, binve (< 20) wrote:

mtf00l ,

I think that's the most solid prediction I have heard today :)

>>My only question is how do I buy "default" insurance on all of these bankrupt nations so I can cash in with the banks?

Become a bank, get unlimited backing by the US goverment, put yourself into a postion to over bad advice / cook the books for an indebted nation, and then by massive CDS on that nation's debt.

Sound's easy enough. Want to start a bank?..

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#11) On June 04, 2010 at 12:50 PM, mtf00l (49.87) wrote:

binve,

I'd love to! How do we get the government regulators to approve our new bank? 

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#12) On June 04, 2010 at 12:58 PM, mtf00l (49.87) wrote:

Remember this?...

http://www.fool.com/investing/general/2009/11/20/an-open-letter-to-the-federal-reserve.aspx?source=isesitlnk0000001 

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#13) On June 04, 2010 at 1:00 PM, binve (< 20) wrote:

mtf00l,

>>I'd love to! How do we get the government regulators to approve our new bank?

I think you have to know a guy who knows a guy :(

>>Remember this?...

LOL! Yep, that was a good one :).. 

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#14) On June 04, 2010 at 1:45 PM, hhasia (63.24) wrote:

HI There

 

Been a while. I have a favor. An update count for HSI. Seems like we are at a turning point, but I'm no good at counting the ABC's.

 

Hope BBvette is well.

HHASIA

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#15) On June 04, 2010 at 2:01 PM, binve (< 20) wrote:

hhasia,

Hey! How are you! binvette is great :) Thanks for asking!

Here is my take on the HSI, and it looks pretty grim:



ENLARGE
..

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#16) On June 04, 2010 at 2:18 PM, Griffin416 (99.98) wrote:

Binve,

Agreed, as I said, I am short term bearish because of those Moving average factors you mentioned above, which is a first for me in a Long time.

But I am grasping at straws here for the bulls. We have not violated the Feb low and we appear to be in a range depite the wretched news. That's all.

You do produce some great charts, I wish they could end up bigger on my screen so I could see them more clearly.

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#17) On June 04, 2010 at 2:24 PM, binve (< 20) wrote:

Griffin416 ,

>>Agreed, as I said, I am short term bearish because of those Moving average factors you mentioned above, which is a first for me in a Long time.

Gotcha, understood.

>>But I am grasping at straws here for the bulls. We have not violated the Feb low and we appear to be in a range depite the wretched news. That's all.

That's true. But what I think this move the last 8 days did was to burn off the generally oversold condtion in many of the issues, to give it room to take another stab at the low. I think it's going to happen, but I have been very wrong about a lot of things before :)

>>You do produce some great charts, I wish they could end up bigger on my screen so I could see them more clearly.

Thanks! When you click on the ENLARGE link, they don't work? Some browsers also shink the image, so click on the ENLARGE link and then click on the image and it should enlarge it (works in Firefox).. Thanks!..

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#18) On June 04, 2010 at 2:34 PM, Superdrol (97.38) wrote:

nice charts.  Extremely well detailed.  Overall the market is still bearish in the short-term.  Sometimes ppl get caught up in a few green up days that they dive in, only to realize that it was just a day among an entire trend.

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#19) On June 04, 2010 at 2:35 PM, Superdrol (97.38) wrote:

we don't have a chance at putting the rally back on till we can break resistance at the 200 day moving average, which it has hit 2 times already and failed to break thru.

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#20) On June 04, 2010 at 2:58 PM, binve (< 20) wrote:

Superdrol ,

Thanks man!

>>Overall the market is still bearish in the short-term.  Sometimes ppl get caught up in a few green up days that they dive in, only to realize that it was just a day among an entire trend.

I totally agree.

>>we don't have a chance at putting the rally back on till we can break resistance at the 200 day moving average, which it has hit 2 times already and failed to break thru.

Again, I totally agree..

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#21) On June 04, 2010 at 3:50 PM, hhasia (63.24) wrote:

Great Chart for HSI

Thanks.  It gives me room to recover on the next 2, and place shorts. Rearranging the portfolio. This helps I appreciate the effort.

HHASIA

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#22) On June 04, 2010 at 4:23 PM, binve (< 20) wrote:

hhasia ,

No problem! Glad it was useful!..

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#23) On June 04, 2010 at 4:25 PM, binve (< 20) wrote:

hhasia ,

But keep in mind, the next 2 might not be a big one (maybe only a 38% retrace). If this is a large wave 3 down next (which I think) then the corrections up within that 3 will be smaller than normal. Just my $0.02..

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#24) On June 04, 2010 at 10:17 PM, ralphmachio (28.60) wrote:

PHIIGS?

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#25) On June 04, 2010 at 10:25 PM, limlim88 (< 20) wrote:

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#26) On June 05, 2010 at 4:19 PM, binve (< 20) wrote:

ralphmachio ,

nice :)..

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