Archive - Jul 16, 2015

Despite earlier commenting that Greek debt sustainability is hard without a write off, German FinMin Schaeuble just told German lawmakers bluntly that there will be no Greek debt cut. What is problematic for Merkel and her minions is that Mario Draghi just confirmed what The IMF has been 'secretly' leaking - that it is "uncontroversial that Greek debt relief is necessary." As this confusion reigns, The Eurogroup has issued a statement "welcoming the adoption by the Greek parliament" of the measures imposed upon the Greek people to drive them further into depression.

For the FOMC to reach its mandate of full employment they boost stock prices which then creates employment in bubble jobs. When people feel rich, they spend more money on the low quality bubble jobs, and hence employment reacts accordingly. This is obviously entirely unsustainable as spending paid for by feelings manipulated by the FOMC accounts to nothing more than pure capital consumption, and the money flow will disappear as soon as the FOMC tighten the screw and the good feeling disappears along with the stock market gains.

The biggest unknown in today's ECB Q&A was whether Mario Draghi would agree to raise the Greek ELA, and moments ago we go the answer:

• DRAGHI SAYS ECB RAISED GREEK EMERGENCY BANK AID THURSDAY
• DRAGHI SAYS CONDITIONS TO INCREASE ELA HAVE BEEN RESTORED
• DRAGHI SAYS ECB ACTS ON ASSUMPTION THAT GREECE IS EURO MEMBER

Specifically, Draghi said that "The decision to raise ELA again today is symmetrical to the decision we took a few days ago to freeze ELA."

Following last week's spike in initial jobless claims, this week saw a modest pull back to 281k (slightly better than the 285k expectations) but hovering at the average for the year, notably confirming that post-QE3 we have seen the improving trend in claims cease. The smoother 4-week average rose to 282k - the highest in almost 3 months.

We suggest ECB President Mario Draghi has his work cut out for him today. As the entirely political catalyst for Greece's crescendo-like bailout capitulation, he will - we hope - be questioned long and hard on his actions over the last 2 weeks (and going forward) with regard the increasingly 3rd world nation. As Bloomberg's Richard Breslow notes, Draghi needs to help calm a still tense situation. The only way he can do this is with as much tranquility as he can muster, make sure everyone knows he is still prepared to do whatever it takes. It appears the markets (FX and equities for sure) are anticipating uber-dovishness and as we noted in the preview, he will likely crow of the lack of contagion from Greece, how well his tools have worked, and how Q€ is working... we wonder if the Greek reporters will be blocked from the press conference?

Just as Europe is preparing to implement a bridge loan (one which will be used up in 2 weeks after all the accrued IMF and upcoming ECB payments are made), and is starting debate on just what the Third Greek bailout will look like, Greece is about to commence yet another electoral campaign and the looming question: will anyone assume political ownership for a bailout which even Tsipras said he does not believe in.

A 3rd Greek bailout "Fix", an unchanged ECB with Draghi preparing to reiterate "whatever it takes" - apart from for Greece, and The Fed appearing more hawkishly tilted to a September liftoff (no matter what happens in Greece).... The result - EURUSD is collapsing...

It wasn't just the massive litigation provision that hinted it may not be all smooth sailing for the hedge fund that has spawned more central bankers in recent years than any other: the company (which unlike all other banks on Wall Street has been adding headcount and now has 34,900 employees) took only $3.8 billion in compensation benefit accruals in the quarter, which means that its LTM comp divided by the total number of employees, or average compensation per banker, dropped once again, this time to $373,181 - the lowest number in three years.

ECB LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 0.050%
ECB LEAVES MARGINAL RATE UNCHANGED AT 0.300%
ECB DEPOSIT FACILITY RATE UNCHANGED AT MINUS 0.200%

Mario Draghi should remain "largely on message" in Thursday's ECB presser, with the deal struck in Brussels last weekend having spared him the inconvenience of convening a tense discussion about imminent Grexit. Expect the ECB to reiterate the central bank's commitment to implement PSPP in full and the market will no doubt be looking for any color the ECB cares to add about the event risks surrounding the implementation of a third Greek program and the recent turmoil in Chinese equity markets.

• Greece licks wounds after bailout vote, ECB move expected (Reuters)
• Lose-Lose: Pushing Greece Out of Euro Is Costlier Than Write-Off (BBG)
• EMU brutality in Greece has destroyed the trust of Europe's Left (Telegraph)
• Schaeuble Shrugs Off Greek Vote Saying Euro Exit Is Best (BBG)
• Merkel’s tough tactics prompt criticism in Germany and abroad (FT)
• Investors Get Caught in Oil’s Slippery Wake (WSJ)
• Obama Girds for Battle With Congress on Iran Deal (WSJ)

And so the 2015 season of the Greek drama is coming to a close following last night's vote in Greek parliament to vote the country into even more austerity than was the case before Syriza was voted into power with promises of removing all austerity, even with Europe - which formally admits Greece is unsustainable in its current debt configuration - now terminally split on how to proceed, with Germany's finmin still calling for a "temporary Grexit", the IMF demanding massive debt haircuts, while the rest of Europe (and not so happy if one is Finnish or Dutch) just happy to kick the can for the third time.

Back in February, when the ill-fated Greek attempt to renegotiate its existing bailout (instead culminating with a new, €86 billion bailout program 5 months later) was launched, Eurogroup chief Jeroen Dijsselbloem rejected a request for a short-term financing agreement to keep the country afloat while it renegotiates the terms of its bailout program. "We don’t do bridge loans, Dijsselbloem told reporters in The Hague", when asked about Greece’s request. Turns out "we do" after all.

This must be one of THE most brainless and pernicious perpetrations against humanity!