Monday, June 29, 2015

Grexit, now Prexit?

I try to refrain as much as possible from talking about news I read from Zerohedge, but honestly, the mainstream media outlets are so severely lacking and incompetent in highlighting the most pertinent news. I guess as media companies, they push to the front page whatever the crowd wants to read, not what the crowd needs to know.

This looming Puerto Rico default - Prexit - is news to me. For those who don't know what Puerto Rico is famous for, that's okay. Puerto Rico has the 3rd most number of Miss Universe winners, after USA and Venezuela. Pictured below is the perfect example of why. Apparently they are also famous for beaches, but seriously now, who cares about that?

Now, Miss Universes aside, Puerto Rico is facing a debt problem. As succinctly summarized by governor Alejandro García Padilla, "The debt is not payable. There is no other option. I would love to have an easier option. This is not politics, this is math."

I just freaking love that last statement.

This is not politics, this is math.

No amount of politicking is going to suddenly make money appear, send all the problems away and make everything all rainbows and sunshine for everyone. The problem isn't politics, it's f***ing basic mathematics.

On a fundamental level, we understand how this works on individuals like ourselves. More outgoing (expenses) than incoming (revenue) and you're screwed. This can be applied to companies as well, which is why I personally like to avoid debt-riddled and loss-making companies. However, it seems like this train of thought completely stalls when it comes to thinking about countries. Countries with debts are good? Or is this a question that has never even been asked before?

I've mentioned before that all countries are just kicking the can down the road and rolling the problem into a bigger one and handing this ticking nuclear bomb to their successors. So respect to Mr. García Padilla since he has balls to publicly state that any deals "would only postpone Puerto Rico's inevitable reckoning" and to say "I am not kicking the can".

If I was Greek or Puerto Rican, I would not be buying stocks and bonds "on the dip". I would be focusing on protecting my wealth, which could include offshoring wealth and accumulating hard assets.

Unlike some hapless Greeks right now, I rather have a useless barbaric gold bar under my mattress than reading imaginary numbers on my ibanking screen that supposedly exist, but cannot be withdrawn.

What's the point of having money if you can't access it or use it? It's as good as having nothing.

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