June 13th the day of default for Greece

I will take the risk of looking utterly silly come June 14th, but there is better than 50/50 chance Greece will default before June is over - the favourite day being  June 13th!

At least that's the rumor in the market this morning - Rumors are just rumors, but this time I will call them credible rumors due to the nature of where it comes from.

What will happen IF - Greece did default?

• EURUSD will hit 1.1000 and then start to climb (we are very focused on the dramatic slow-down in US growth which means the cyclical help to stronger US Dollar is about to disappear)

• A controlled default - like Argentinas with hair-cut of 25-50%(Argentina default link) will hurt the major european banks and send the banking sector into tail-spin, but.........the new Euro SPV could probably be used in US/UK style to gloss over the biggest risk. Do not forget the European banks are now quasi-government owned- hence they will be bailed-out AGAIN.

• The spread contagion will continue - maybe it's just me but has people started to notice the big blow-out in Belgium and Italy? This is receipe for more trouble, especially in Belgium post this Sunday's election:

• But it would change the 'dynamics' as it is the RIGHT THING TO DO - so the market should down the line after readjustment find a better level from which Europe and risk will be trading better. My biggest macro theme remains: The SERIOUS SLOW-DOWN of US growth happening right now and into Q3 and Q4. I see US growth back to ZERO in Q4 - which is way below the consensus of 2-4% by the Ivory Tower economist' in the investment banks.

Strategy:

• Watch Belgium as the Canary in the coal-mine. Contagion and as friend of us pointed out: Every political change (UK, Hungary, Greece) has had MASSIVE IMPACT post on debt levels and reality checks. Watch Belgium and Holland next few weeks. Belgium election link
• Our Beta model is making money.....

Conclusion:

1. Stay out of stocks our ALERT WARNING is still in place. May 20th ALERT blog
2. Beta model is tranding - indicating less and less upmoves
3. Greece has 50/50 chance of default June 13th
4. ECB (and indirectly all of Europe) will move to QE inside next two month
5. EUR$ in 1.1000 / S&P in 1030/1000/Gold in 1300 before summer holiday in August

Be safe,

Winston