While everyone continues to focus on the next bailout tranche for Greece, which is a spec of dust in terms of the global economy (but very important in terms of precedent on how bailouts will be structured moving forward for the larger countries), the smart money has already moved on to the next crisis in Portugal.
Portuguese debt is the second most expensive to insure in the world (after Greece). The 5 year CDS (Credit Default Swap - a form of insurance protection against default) is now at a record 1425. The risk of default has risen to 75%.
Portugal has already received a 78 billion euro (101 billion in US dollars) package. Its debt has been downgraded below investment grade, meaning many of the pension, insurance, and sovereign wealth funds cannot purchase their bonds due to their ratings restrictions.
As I discussed earlier in the week, the European Central Bank appears to have let Portugal go, which was confirmed this week with the steady upward rise in rates. The 10 year rate on Portugal is far more important right now than the price of the DOW, which is moving toward la la land. Watch closely.