Archive - Jul 6, 2015

"After the Greeks voted against accepting the latest demands from its creditors, Merkel is facing her worst nightmare: a possible Greek exit from the euro, a possible exit from the EU completely and loss of confidence in the currency itself.  Half of her was Merkel — the pragmatic economist, the other was Merkel — the great European. She has now discovered, in her vacillation, she has not shown the leadership expected of the most powerful woman in the European Union."

• Greece Bailout Referendum: They Voted ‘No’. Now What? (BBG)
• Varoufakis Quits as Greece Enters New Showdown With Europe (BBG)
• Merkel to Meet Hollande as Greece Told to Make Next Move (BBG)
• German line hardens after Greek referendum 'No' (Reuters)
• BOJ keeps rosy view of regional Japan, watching markets after Greek upset (Reuters)
• Oil falls on Greece vote, China stock market turmoil (Reuters)
• China Urges U.S.-Iran Compromise 36 Hours to Nuclear Deadline (BBG)
• U.S. and Iran: the unbearable awkwardness of defending your enemy (Reuters)

With the only thing that matters in the hours ahead, at least until China reopens and the Pandamonium repeats, is the sheer chaos out of Greece which now literally changes the narrative by the minute, here is a convenient timeline of everything that has happened so far this morning starting with Varoufakis' unexpected resignation and going from there.

More than even the unfolding "chaos theory" pandemonium in Greece, market watchers were even more focused on whether or not China and the PBOC will succeed in rescuing its market from what is now a crash that threatens social stability in the world's most populous nation. And, at the open it did. The problem is that as the trading session progressed, the initial 8% surge in stocks faded as every bout of buying was roundly sold into until every other index but the benchmark Shanghai Composite turned sharply red.

Once the reality of debt write-offs and who lent how much and what that means at home, the real fireworks could start. Can Italy, Spain or Austria afford to write-off 1/3 or 1/2 or more of what they lent to Greece? How about the EFSF or ECB? How will depositors feel if they get a quick 30% off the top? That is the biggest issue. The math as they say. And it is what we should be watching for.

The Greek referendum landslide "No" vote came and went and just hours after its passage claimed its first head, which was - perhaps somewhat surprisingly - that of the Greek finance minister himself, Yanis Varoufakis, who many say orchestrated the referendum seen as a loud endorsement of the government's actions. As of this morning he is no more. Here is why in his own words.

The Greek default is a forcible contraction of credit, and bound to be negative for the prices of ordinary assets. But something extraordinary happened to silver this week.