Archive - Feb 10, 2015 - Story

When we reported about the latest trial balloon floated by the European commission, namely that Greece may be granted a 6 month extension, we said very clearly, because we knew precisely what was coming, that this report "has to be validated by other members of the European Commission as well as Merkel and the other Germans (and may well be refuted, considering this is Europe)" and "this is after all Europe, which means Eurozone ministers always float trial balloons headlines ahead of major meetings like the one tomorrow, gauge the market reaction, then quickly retract them. Well, the market test has been conducted."

Case in point: SCHAEUBLE: REPORT COMMISSION TO GRANT GREECE 6 MONTHS `WRONG'

No Europe, they are not laughing with you. Laughter aside, this of course, means that Greece now once again has full liberty to engage Russia and China as sources of funding right?

As reported yesterday in his Q4 letter to investors, Third Point's Dan Loeb took down his net leverage going into 2015 for one simple reason: a "haunted house market" as he described it, where "a new scary event lurks around each corner", and no event is scarier than a worst-case outcome to the Greek situation. So how does Loeb see the latest Greek crisis ending? Read on for this thoughts.

Oil prices tumbling 'was' great news for Americans - all those juicy tax cuts to spend on stuff that is not gas (in an entirely zero-sum game of economic value added).. but then prices started to rise. A new meme was created... rising oil prices are great news for Americans - they get to keep their high-paying drilling jobs and gas prices are cheap-ish... Following yesterday's misunderstood statement from the Saudis (that demand for their oil will rise - because US Shale is hosed), the IEA warned this morning that another big build in inventory is likely due to a "dramatic" gain in US stockpiles. That has sent WTI back into the $50 handle range and creates a rather ominous double-top in the crude complex... Perhaps it's time for Energy stocks to fall back from hope-ville heights of 28x multiples.

There goes GDP... Inventory growth stalled notably to just 0.1% MoM in December (missing the 0.2% rise expectations) from 0.8% growth in November to its lowest since May 2013. The other side of the spectrum was even worse with Wholesale Sales sliding a worse-than-expected 0.4% leaving the December inventories/sales ratio at 1.22 (up from 1.16 in December) to the worst level since Lehman. If we build it... based on artificial price signals and mal-investment - they didn't come...

Update: EUROPEAN COMMISSION SAYS THERE IS NO FORMAL PROPOSAL FOR GREECE BUT TALKS ARE INTENSIVE

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Did Europe just fold? Moments ago Bloomberg blasted a headline which has to be validated (and may well be refuted considering this is Europe), which said that:

COMMISSION TO PROPOSE 6 MONTH EXTENSION FOR GREECE - SOURCES.

So did Greece just win the first round of its stand off with Brussels, and why? What emerged as the biggest point of leverage overnight was the following threat reported hours ago by Reuters, citing the Greek defense minister Kammenos, who essentially threatened to go to Russia and/or China if Europe decline to cooperate.

Since central banks are there 24/7 and on site to intervene and "eliminate" Greek leverage at any flashing red headline, it is up to Greece to create a narrative that the European leverage in turn is also weaker, which means to project, whether based on truth or otherwise, that Greek bank deposit outflows are slowing. That is precisely what Reuters reported moments ago when it reported, citing Greek bankers, that deposit outflows have slowed so far in February after a sharp increase estimated for a month earlier, but savers are still uneasy over the new leftist government's standoff with its official lenders.

0945ET - BATS OPTIONS HAS REVOKED SELF-HELP VS NASDAQ OPTIONS MARKET

Having achieved only modest gains in risk assets from the 'rumored' six-month-extension trial balloon for Greece, it appears European leaders are standing in line to refute the fact that they "folded" and talk back the non-bailout bailout. First, Italy's FinMin Padoan denying he has seen any plan; then the European Commission stating unequivocally that "there is no formal proposal," and finally none other than Jeroen Dijsselbloem bleets that "discussions with Greece have yet to start." But apart from that, everything is fixed...

But the shadow of crisis has passed... it appears the engine of job growth in America is sputtering as NFIB Small Business optimism dropped from 100.4 to 97.9 (against an extrapolated 101.0 expectation - the biggest miss since Nov 2012). Across the board the data was disappointing with the percentage of firms expecting a better economy falling to 0%, and the number of employers anticipating job creation drops to just 14%.

While "sources" have yet to confirm anything about an extension for Greece (and some have actually denied it - Italy's Padoan "hasn't seen any plan yet"), US Treasury yields are rising (10Y back above 2.00%), and risk assets rallying in Europe and US. Greek stocks are up over 7% today (taking them up 2% on the week) but Greek bank bonds remain lower on the week (despite today's rally). US equities are sceptically rallying on the back of USDJPY momo ignition, auctioned up to pre-payrolls stops.

It appears, while Washington continues to proclaim they have single-handedly 'isolated' Russia and crushed its economy, nations around the world continue to want to do business with Putin and his nation...

*SISI: RUSSIA, EGYPT AGREE ON FREE TRADE ZONE W/ EURASIAN UNION
*SISI STRESSES IMPORTANCE OF MILITARY COOPERATION W/ RUSSIA

Judging by the images of welcome on the streets of Cairo, the people of Egypt are anything but looking to 'isolate' Russia... even after the US "bailed them out" and they still have US-taxpayer-backed guaranteed bonds.

A week after the release of a clip with sported professionally produced, near Hollywood-level editing and effects, showing the brutal burning of a Jordanian pilot hostage, Jordan announced it has deployed "thousands" of ground troops to its border with Iraq as it ramps up a campaign against ISIS militants, two Jordanian government officials told NBC News on Tuesday.  As NBC reports, the troops were sent to prevent the infiltration of ISIS fighters into Jordan and as a show of force, according to the sources who spoke on condition of anonymity. In other words, what would formerly have been seen as an overt act of territorial incursion, or as it is also known, a sovereign invasion, is now interpreted as a defensive act, one seeking to "prevent" infiltration by the same ISIS, that only exists due to US intervention in Syria in 2013.

While PRexit is yet to hit the headlines, Puerto Rico bonds joined an illustrious club of ne'er-do-wells today with its 10Y yield spiking above 10%...