The Greek PSI deal is done, deadline passed, the ISDA has called a credit event on bonds that did not voluntary sign up for a 70% plus haircut. However what all the folks in Wall street are doing this weekend are trying to work out how long the queue is outside the door of the ISDA (the folks who trigger CDS deals) Monday morning coming, to see what debts will be forced to be reported on profit and loss statements.UPDATED2

After the forced accounting standards change back in 2009,a loan need not be written down to its true value until it has been proven [via default] to be worthless. This means bailouts of banks and countries allowed loans to maintain full value on banks balance sheets. The Greek default and soon to follow cascade of loan defaults and more ISDA meetings triggering CDS means that more losses will be printed on Profit and loss statements in the near future. How large this is, will determine what happens to the market starting Monday.

Mark J Grant makes this point in The Eight Hundred Pound Greek Gorilla Enters The Room

Extract...

I expect the ratings agencies to place Greece in "Default" and with their banks following. The markets are "Ho-Humming" and the conversations revolves around "Net" CDS exposure and the write-downs that have already taken place at the European banks. Please recall AIG and what happened with Lehman and what do we find this morning; KA Finanz, the Austrian bad bank, faces $1.32 billion in losses due to their exposure to the Greek CDS contracts according to a Bloomberg article. So now we will wait and see who else is on the hook, who may be seriously impaired, because the Gross number of about $79 billion for Greek CDS is about to enter center stage.

I hold up my hand, "One moment please" as I introduce you to the 800 pound Greek Gorilla that is about to enter the room. Allow me to now present to you the "OTHER" Greek debt that is outstanding and will have to be accounted for as the country defaults. Detailed below are some of the "OTHER" sovereign obligations of the Greek government which have now been submitted to the ISDA and I list some of them below. You will note that there are bank bonds, Hellenic Railway bonds, Urban Transportation bonds et al that are guaranteed by Greece. (RTT Etc etc the list grows)

COMMENTS: You can bet that the long list of loans soon to be classified as in default has not been priced into the market. Remember these loans can not be swapped with free cash from the ECB LTRO, so they are not going away. The Gorilla is in the room, and he is waking up. Gorilla is a term to use when you are bearish and the markets become violent to the downside, after all Gorilla can cause considerable damage is a small room.

UPDATE1: More from Mark Grant The Greek €107 Billion Contingent Liability Gorilla Exposed

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Here is $107 billion of OTHER debt; guaranteed debt that does not appear to be included anywhere in the official Greek sovereign debt figures. Contingent liabilities that are not counted any longer perhaps as the accepted manner of doing business now in Europe. Most of these issuances are governed under British law with "Default" clauses and "Negative Covenant" clauses. Greece defaults on €105 billion Euros and adds new debt, the IMF/EU loans, of 130 billion Euros and we are told that Greece is better off today than yesterday. What drivel! With the addition of the new IMF/EU loans of $172 billion and the revelation of the guaranteed debt at $107 billion Greece now has $279 billion of new and hidden debts.

All of the meandering, all of the charades, all of the red nail polish applied will, in the end I forecast, not be able to hide the reality that the barking dog is a greasy Pig.

COMMENTS: Prior to the Greek PSI deal Greece had a $265 bn in GDP and $1.2 trillion of debt. After the PSI deal they have $265 bn in GDP (and falling fast) and $1.3 trillon of debt (and counting). This is three card monty, and the punters that are losing are : Greek taxpayers, world middle class. The winners are French and German banks who have been released from such horrible paper. The great while colar fraud continues against the world middle class [ak the worlds taxpayers who a loaded with house hold debt].

Comments from Peter Pan (under the above link) sums it all up ..."The whole purpose of bailing out Greece was to convert the unsecured debt of banks into secured debt which has now been done. Greece will now either lose her assets by being forced to sell them or will be required to constantly put money in her loan account from other sources in order that the bankers bonuses will continue to flow under the guise of loan servicing\repayments. Once the ugliness of the arrangement is fully revealed does anyone think that Portugal and Spain will allow themselves to follow the same path? Then it will be game, set, match point for the theft and lies foisted on the people and death to the politicians that dared to enslave their people."...

Folks when SPAIN work the above out they will force untold fear upon the world markets.

The fellow on this video says "this is how you can milk your friends and family out of hard earned cash". Isnt that the truth.

Three card monty...

The Gorilla is warming up and he is going to paaaarrrty...

and the version they didnt want you to see

We are in a volatility lull, and the cycle is strong within the VIX/VOX and until proven otherwise we can expect more rock and roll into the US summer months.

CBOE Implied Volatility (VOX) Chart with a powerful cycle that still working..

You know when the White Knight (anti fraud, money printing) is winning when the US Dollar is bullish, and this is so.

UPDATE2: The gold bugs will not believe the US Dollar bullish story. Being bullish on US dollar is bearish on the Euro. However the arguement for US Dollar bears is that the US Fed will print billions by stealth currency swaps to bailout foreign banks who have suffered under the european debt default. This bearish story may be true, after the Euro has gone to par with the US Dollar. Sequence of events is important, Euro down first, then the Fed will fight US Dollar strength, that is our preferred sequence of events.

This is as crazy as this poem...

One fine day in the middle of the night
Two dead men got up to fight,
Back to back they faced each other,
Drew their swords and shot each other

Conclusion: Best way to profit is long volatility.