Archive - Dec 29, 2014

Recall that just over two weeks ago, none other than Greek currency swap expert Goldman (alongside Jean-Claude Juncker who quite explicitly warned Greeks not "to vote wrong") came out with a Fire and Brimstone worst-case scenario which was nothing but an attempt at fearmongering designed to scare Greek MPs into doing Samaras' bidding, in which it said not electing the designated presidential candidate may lead to a worst-case scenario which involves a "Cyprus-style prolonged bank holiday." Basically what Goldman said is that unless Greece quickly folds back in line and does as the unelected Brussels eurocrats demand, there will be a Cyprus-style bank closure coupled with preemptied bank runs. Well.... oops. Because if that was the doubled-down bluff, then Greece just called it, and the "downside scenario" is now in play.

As Greek headlines start to sink in, and hot on the heels of Japan recently issuing 2Y bonds at a negative yield for the first time ever, German 2Y yields have crashed to new record lows at -10bps... So what exactly will ECB QE do?

Greek stocks are down over 8% (and were worse) back to more than 2-year lows (as banking stocks are massacred) and 3Y bond yields are back over 12% (post-bailout highs) following Samaras' 3rd failed attempt to avoid a snap-election and all the GREXIT possibilities that brings. So, what happens next?

Can Snap elections in Greece and Libyan strife derail rally?

One would have thought that more than half a year after the mysterious disappearance of Malaysia flight MH-370 airlines would have taken precautions to keep track of airplanes at any given moment. One would be wrong, and as the latest mystery surrounding AirAsia's missing jet deepens, it has become clear that like with its Malaysian predecessor, nobody has any clue where the plane may be, so the speculation begins. Cue Reuters, which reports that the plane "could be at the bottom of the sea after it was presumed to have crashed off the Indonesian coast, an official said on Monday, as countries around Asia sent ships and planes to help in the search effort."

• European Stocks Drop as Greece’s ASE Tumbles After Vote Results (BBG)
• AirAsia Stock Drops Most Since 2011 After Flight Vanishes (BBG)
• Libya's NOC says firefighters had managed to extinguish the blaze at three of 6 burning oil tanks (BBG)
• Bomber kills 11 Shi'ite pilgrims north of Baghdad (Reuters)
• Hillary Clinton Faces Uphill Fight for White, Rural Vote (WSJ)
• Yen’s Slump Seen Longest Since Gold Standard Ended (BBG)
• The 94% Plunge That Shows Abenomics Losing Global Investors (BBG)
• Sony's 'The Interview' makes $18 million in opening weekend (Reuters)

As noted earlier, following the failed vote Greek banks are cratering, with many entering a bear market as of the last price update, such as Eurobank Ergasias -23%, Piraeus Bank -21%, National Bank of Greece down  18%, Alpha Bank 17% lower. While in the past this would have been enough to send European shares limit down and peripheral bonds bidless, algos have forgotten their programmed kneejerk reaction since Greece has been off the front page for so long. As a result, Europe is down but not nearly where it would have been had today's vote taken place a couple of years ago. Then again, with the USDJPY far more important than what Greece may or may not do, all that will take for the Santa rally to resume, if only in the US, is for "someone" to buy a few yards of Dollar-Yen, push the pair to 121, and all shall be well once more.

And just like that Grexit is back.

It appears that with a few short days left in the year, the Santa rally is finally over, if only in Greece where both bonds and stock are tumbling after the third vote for PM Samaras' appointed presidential appointee Stavros Dimas concluded as many had expected: in failure, with 168 Greek lawmakers voting in favor of Dimas, well short of the 180-vote threshold needed. 132 voted against Mr. Dimas. This means that the "worst case" scenario - at least as described by Goldman - is now on deck: a snap general election that could bring the anti-bailout Syriza party to power. And speaking of Syriza, and its triumphant leader Samaras, moments ago he announced that the now inevitable Greek elections will take place on January 25: pencil that date in for even more turmoil.

As 2014 wheezes and coughs to its termination, I wanted to share some of what I consider to be the best posts of the year.