Archive - Jun 2015

Nobody can deny that the chances of war are increasing in the world.

Stock markets in the US and Europe are in for a correction, while the euro is set to rise, according to Saxo Bank’s Chief Economist Steen Jakobsen, nomatter what happens between Greece and its creditors. Steen also looks at the impact a rate hike from the US Federal Reserve would have on USD and what currencies could gain once the Fed decides to move on rates, noting that "the consensus has it wrong on the timing of US rate hike," as the credit cycle topped in June 2014. He believes that commodities and metals in particular offer opportunities for investors.

"... the immediate aftermath of such a non-payment will be to push bond yields up across the periphery. This rise in the fiscal risk premium (Exhibit 3) will of course be limited, because the ECB will likely accelerate QE, including via the Bundesbank. That will push rate differentials, especially longer-dated ones, against EUR/$. We estimate that the initial fiscal risk premium effect could be three big figures, while the subsequent QE effect could be worth around seven big figures"

Net of the latest ELA increase, when adding some €38 billion in collateralized EFSF bonds and other collateral usage, we find that we have not only reached parity but crossed it: as of this moment Greek deposits, which are generously estimated at €120 billion but in reality are lower, are less than the total ECB claims on Greek banks and the Bank of Greece, amounting to €126 billion. And with that the possibility of a Greek bail-in which could amount to up to 100% of total Greek deposits, becomes all too real.

The phenomenon of homeowners objecting to new development is called NIMBYism, which stands for "Not In My Back Yard." The premise behind this is that homeowners don't want to risk any changes that could adversely affect their living space or the value of their property. However, it's easy to see another motive behind NIMBYism: greed. As an investor of a highly leveraged asset, the average homeowner has every reason to inflate the price of their home as much as they can. NIMBYism also contributes to inequality... and perpetuates the two-class society that we see today.

Guess what?  You were never meant to get the job!

While the latest European FinMin summit desperately tried to put on a united facade when responding to the latest and greatest Greek proposal, which incidentally is so weak that the IMF will throw up all over it as shown below, the reality behind the scenes was anything but. In fact, Greece was this close to having capital controls forced on it earlier today, and would have, if the demand of not just its old "BFF", Germany's finmin Schauble, but Ireland's Noonan, had materialized.  As the FT reported moments ago, "Germany’s Wolfgang Schäuble and Michael Noonan, his Irish counterpart, pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed, one of the officials said.

All eyes on Greece...

"The estimated earnings decline for Q2 2015 is -4.7%. If this is the final earnings decline for the quarter, it will mark the first year-over-year decrease in earnings since Q3 2012 (-1.0%), and the largest year-overyear decline in earnings since Q3 2009 (-15.5%)."

When systems are broke and broken, collapse is the only way forward.

The wife of Israeli Interior Minister Silvan Shalom apologized on Sunday for tweeting a racist joke about President Obama.

"I was appalled to hear of Treasury Secretary Jack Lew's decision last week to demote Alexander Hamilton from his featured position on the ten dollar bill... a better solution is available: Replace Andrew Jackson, a man of many unattractive qualities and a poor president, on the twenty dollar bill. Given his views on central banking, Jackson would probably be fine with having his image dropped from a Federal Reserve note."

It would appear, whether by plan or unintended consequence, Obama's dream of a single-payer socialized healthcare is getting closer by the day, and as WSJ reports, drastically increasing the risk that ObamaCare is creating oligopolies, with the predictable results of higher costs, lower quality and less innovation. The five largest commercial health insurers in the U.S. have contracted merger fever, and if the logic of ObamaCare prevails, this exercise will conclude with all five fusing into one monster conglomerate.

Early hope began to fade as nothing appeared to be settled... and then The BBC unleahed the ultimate "Greece is rescued" quote from an EU Minister. Bond risk is now collapsing (PORTUG -55bps!) as Bunds & TSYs are dumped, Greek stocks are up 9%, and all European Bourses are surging as even EURUSD is rallying (breaking its earlier correlation)...

While we have seen countless such reports in recent weeks and months, and take each and every one with a mine of salt, the reason ES algos just took out overnight highs was due to a BBC interview - which will be broadcast "shortly" - in which BBC economic editor Robert Peston was told by the Greek economic minister George Stathakis that "he believes Greece's new proposals to balance the government's books have broken the deadlock with its creditors." He said he expects eurozone government heads to issue a communique later today that will say there is now a basis for a formal agreement with Athens to complete the current bailout programme and release €7.2bn of vital funds.