Archive - Feb 12, 2015

With talk that Greek banks have hit their emergency lending limit with the ECB (which has prompted a teleconference this morning among ECB polcy-makers), it seems the newly-found position of negotiating strength for Greece (perhaps encouraged by China or Russia behind the scenes) has prompted more demands:

• GREECE'S SYRIZA CHIEF ECONOMIST JOHN MILIOS PROPOSES OVERALL EURO ZONE DEBT OVERHANG REDUCTION BY ECB
  
• ECB COULD BUY ALL EURO ZONE DEBT MATURING IN 2016-2020 AND ALL INTEREST PAYMENTS-SYRIZA'S MILIOS
• ECB WOULD FOOT THE BILL NOW, BUT BY 2040 IT WOULD BE ABLE TO ERASE ALL LOSSES THROUGH PROFIT RETENTION-MILIOS

Roughly translated - "Get back to work, Mr.Draghi" and monetize all of Europe's debt. With negative net issuance (i.e. central banks already monetizing over 100% of 2015's expected issuance) already here, this demand merely pushes the 'independent' monetary policymakers to enable more fiscal profligacy.

Confused by the whirlwind of conflicting facts, not to mention outright lies, leaks and rumors, surrounding the negotiations of what will either be the third Greek bailout of its first, and final, Greek exit from the Eurozone? The following summary should answer most questions.

We are living in an era where a single statement of truth will drive a pin into the global bubble of phantom assets and debts, and the lies spewed to justify those bubbles.

"Our downgrade is about more than execution risk; we note: (1) The profound drop in fuel prices harms the competitiveness relative to internal combustion engine vehicles of TSLA’s planned Model 3 mass-market car, the potential for which we believe accounts for the majority of today’s equity value; and (2) Competition is mounting – automakers at the recent Detroit Auto Show debuted a number of electrified vehicles, some of which appear directly aimed at the Tesla Model S (e.g., Mercedes C-Class Plug-in Hybrid), the X (e.g., Audi Q7 e-Tron Plug-in Diesel Hybrid), and the 3 (e.g., Chevrolet Bolt) – see takeaways from our walking tour of the show. We reduce our estimates on flow-through of 4Q’s softer sales and margin trends, and guidance for higher operating costs: 1Q15 goes to -$0.31 from +$0.93 and FY15 to $1.89 from $4.12. Our December 2015 price targetd-declines to $175 from $180." -JPM

• 'Glimmer of hope' for Ukraine after deal at Minsk peace summit (Reuters)
• Ruble Rebounds, Russian Stocks Surge on Ukraine Cease-Fire Deal (BBG)
• Greek PM Tsipras in Brussels as clock ticks on EU bailout (Reuters)
• Emerging-Market Currencies Rout Not Over for Traders (BBG)
• Little noticed, new Saudi king shapes contours of power (Reuters)
• In Wake of Financial Crisis, Goldman Goes It Alone (WSJ)
• AmEx Is Losing Its Millionaires (BBG)
• Thousands to Lose Health Insurance Over Residency Questions (WSJ)

So far it has been an overnight session which clearly forgot to take its lithium, with futures first tumbling after CNBC's "leak" that a Greek deal had been reached was refuted, only to surge subsequently on both the Riskbank's foray into NIRP and QE which crushed the Swedish currency and sent its stocks to recorder highs, and more importantly, on the latest ceasefire out of Minsk which has pushed Russian and European assets substantially higher. While only the most naive believe that any palpable end to Ukraine hostilities will emerge as a result of today's delay, expect for Greek headlines to return with a vengeance as today it is Tsipras' turn to speak at a summit of the 28 European Union leaders set to begin momentarily.

"There are signs that underlying inflation has bottomed out, but the situation abroad is now more uncertain and this increases the risk that inflation will not rise sufficiently fast. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points, to -0.10 per cent, and to adjust the repo-rate path down somewhat. At the same time, the interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy are being restored to the repo rate +/- 0.10 percentage point. Moreover, the Riksbank will buy government bonds for the sum of SEK 10 billion. These measures and the readiness to do more at short notice underline that the Riksbank' is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation."

It would have simply been too much to handle for Europe and the risk off algos if hours after the embarrassing failure of the emergency Eurogroup meeting in Brussels failed to reach any deal involving Greece, the Ukraine ceasefire negotiations in Minsk were also to fall apart. Again. Which is probably why after a marathon session lasting 17 hours, and following repeated trial balloons that a deal had and/or had not been reached, a short while ago all major media outlets were delighted to finally blast some Risk On news namely that leaders of France and Germany brokered a renewed deal to end Ukraine’s 10-month civil war in the separatist eastern region, which means that we have a Minsk-signed Ukraine ceasefire. Again.