Archive - Feb 2015

Those wondering if Draghi would be so bold as to precipitate a Greek bank run and funding crisis by yanking the country's Emergency Liquidity Assistance program, which as of two weeks ago was boosted to €65 billion, now have an answer. According to Dow Jones, the ECB just boosted the Greek cash allottment to €68.3 billion, an increase of €3.3 billion:

• ECB SAID TO OK CONT. EMERGENCY LIQUIDITY FOR GREEK BANKS:
• ECB SAID TO OK ELA FOR GREEK BANKS OF EUR68.3B FOR 2 WKS: WSJ

Which means that the cat and mouse game between Greece and Europe will continue for at least one more week, because that's when, according to Kathimerini's Greek sources, the nation runs out of state cash which will have the same impact on the Greek negotiating leverage as a full-blown bank run.

Not that it was really a conspiracy 'theory' but with General Wesley Clark (ret.) now openly admitting "ISIS got started through funding from our friends and allies... to fight to the death against Hezbollah" it appears the 'angel investors' cat is out of the bag. Adding that "they recruited the zealots and religious fundamentalists" Clark says 'we' create "Frankenstein." He is careful not to name names, but we ask (rhetorically of course), which of our (oil-bearing) allies has the biggest bone to pick with Hezbollah (apart from Israel of course)?

It's not been a good week for oil safety in America. Following the derailment earlier in the week, CBS now reports an explosion at Exxon Mobil's Torrance, California refinery (processes an average of 155,000 barrels of crude oil per day) occured at 850amPT...

*EXXON SAYS EMERGENCY PROCEDURES ACTIVATED AT TORRANCE REFINERY
*EXXON TORRANCE SAID TO HAVE EXPLOSION IN FCC

While dismissed as 'normal flaring' to begin with, Exxon has confirmed it is not and "shelter in place" has been ordered as ash is falling up to 3 miles away.

According to IMF researcher Brad Jones, who wrote "Asset Bubbles: Re-thinking Policy for the Age of Asset Management", the "business risk of asset managers acts as strong motivation for institutional herding and "rational bubble-riding." This is a critical observation, and one which suggests that the mere groupthink of massive asset managers is what leads to not only herding, lack of originality and the "hedge fund hotel" phenomenon, but also to recurring and ever greater asset bubbles. As Jones further writes, "subdued leverage is not a sufficient condition for financial stability—if systemic risk, and activity in the wider economy, is shaped importantly by large shifts in risk premia owing to the "rational herding" motivations of asset managers."

Their evil knows no bounds...

The fact that there is a debate about a quarter-point rate hike tells us that extraordinarily low interest rates have mostly failed to deliver a robust recovery. That people opposed to even the tiniest increase in rates are resorting to hyperbole tells us that they too know this. The thinking seems to be that six years into near-zero policy, the only reason it hasn’t worked is because it hasn’t been tried long enough. Meanwhile, the dangerous side effects of year after year of artificially low rates continue to grow.

Is the SNB buying Euros to keep the mirage alive that Grexit is "managable"? EURCHF is up dramatically in the last 2 days, retracing 60% of the Swiss Franc's valuation surge against the USD...

Karl-Georg Wellmann, a lawmaker in Angela Merkel’s Christian Democratic Union has warned that, despite its efforts to avoid arms being provided to Ukraine, Germany "will no longer be able to stop weapons deliveries from from the U.S. and Canada." Almost too coincidental to these comments, CNN reports, the U.S. Air Force is sending its A-10 "tankbusters" back to Europe in order to "increase rotational presence in Europe to reassure our allies and partner nations that our commitment to European security is a priority." As Wellmann ominously concludes, seemingly confirming Putin's warning yesterday that if Kiev aims at a military solution, war will never end, "a large-scale war could develop out of that."

We've seen this kind of algorithmically-controlled oscillation before... What Happens Next?

"February 24 is expected to be the first crucial day for state finances, as projections of cash flows see state coffers starting to run dry on that date.  The state of cash reserves – not robust before – has deteriorated further in recent days due to a shortfall in revenues, as a 1-billion-euro hole in January revenues is putting the execution of the state budget in jeopardy and hampering the management of cash reserves. Given these figures, the Finance Ministry estimates that cash reserves will run out next Tuesday.

Who could have seen that coming... as we explained minutes after the Greek headlines hit yesterday, the Greek 'loan' extension was not news at all... and neither was Schaeuble's response...

Things on the West Coast Ports are going from bad to worse (for those who missed it read "Catastrophic Shutdown Of America's Supply Chain" Begins: Stunning Photos Of West Coast Port Congestion), and with no resolution in sight, it is now beginning to cripple the US economy. Here is not only a brief summary of how the near-strike is impacting various businesses across the US,  but also a map to track the congestion at Long Beach harbor in real time.

Germany's government has been "overtaken by arrogance" in its approach to debt negotiations, a Greek government source reportedly told Sky News. The senior Syriza politician likened Germany's current tactics to those of the Nazis, exclaiming "It's like being back in the 1940s, being asked to surrender." We are sure that will make negotiations run a lot smoother (but comes on the heels of various jibes at The Greeks by Wolfgang Schaeuble).

EU leaders were proposing capital controls, border controls, and even limiting the amount of money that could be removed from ATMs throughout Europe back in 2012.  They'll do it again.