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Stocks Stumble On Chatter Of 'Contingency Planning For Dirty Greek Exit'

The S&P 500 and Dow futures are now trading back below the pre-Greek Talks Fail levels from Monday on desk chatter from a New York think-tank claiming contingency planning for a "dirty exit" are being made...



NY think tank report on Greece said to say Greece and the Eurogroup may still strike a short-term deal tomorrow but contigency plans for a "dirty exit" are being made, as reported by Ran Squawk.

Reports also says that the stand-off has gone beyond an argument over wording, and that creditors are losing trust they had in the Greek government and are doing contingency planning for a "dirty exit" from the program.

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As Goldman recently warned,

That said, there are aspects that leave us more worried than we have been since the start of the Euro area crisis. The confrontation between Greece and its European creditors is taking place against different political constraints than on previous occasions. The new Greek government has to be able to claim at home that the program agreed on by its predecessors is all but defunct. While the European partners can agree to modify the content of the program, as we have seen occur in other program countries, they cannot abandon previous arrangements. In our view, the risk of a miscalculation in the negotiations remains high and will peak between now and month-end, when the current program ends.




To mitigate the risk of a failure of the two sides reaching an agreement by the end of the month, investors could consider buying deep out-of-money put options spanning this horizon on liquid equity indices. Given the systemic nature of the ‘shock’, we doubt that even the major markets would be unaffected.