Archive - Jun 22, 2015 - Story

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.

Following last month's disappointing drop in Existing Home Sales (ignored by most since other housing data provided just enough smoke and mirrors to confirm any inherent biases), May saw Home Sales surged 5.1% (handily beating expectations for a 4.4% rise after the 3.3% drop in April). At 5.35m SAAR, this is the highest rate of sales since Nov 2009 at the end of the government's last housing bailout plan spiked sales. For the 39th consecutive month, home prices rose (by 7.9% YoY) but NAR's chief economist proclaimed this as sustainable (despite stagnant incomes and home prices about to take out the previous peak) but with 67% of investors paying cash for homes in May, the demand is clearly foreign as Chinese buyers surpass Canadian snowbirds as QE floods out into every asset.

"The net effect of all that will be the disappearance of nominal wealth — it crosses an event horizon into a black hole never to be seen again. The continent discovers it is a lot poorer than it thought. Fifty years of financial engineering comes to the grief it deserves for promoting the idea that it’s possible to get something for nothing."

"A commercial banker said about €400m had been withdrawn via ATMs over the weekend, bringing total outflows to €2bn between Friday and Sunday, a number confirmed by a central bank official. Greek banks have imposed an unofficial ceiling of €3,000 on walk-in withdrawals, the commercial banker added."

Senior Russian officials said Kremlin lawyers are studying France and Belgium’s seizure of Russian government assets in the two countries as part of a court settlement to compensate shareholders of Yukos, the privately owned oil company that was shut down by Moscow.

Speculation is rife as the Eurogroup announces a much earlier than expected press conference. The exuberant expectations "priced in" to markets are fading fast as traders fear the short nature of the meeting combined with dysphoria from Schaeuble suggest no deal is close and new Greek proposals remain far from adequate for its European "partners." Local reports suggest this brings into doubt whether this evening's EU leaders' meeting will go ahead.

Today will go down in history as one of the worst times in history to be invested in the stock market. Virtually no one believes this statement. That is why it will prove to be true. Every valuation method known to mankind is flashing red. A crash is baked in the cake. Will the trigger be Greek default, a Chinese market crash, a Fed rate increase, a derivative bet going boom, a Middle East event, someone doing something stupid in the South China Sea, a Ukrainian eruption, or a butterfly flapping its wings? When greed turns to fear, for whatever reason, the house of cards will collapse for the 3rd time in 15 years. Thank the “brilliant” bankers at the Federal Reserve.

While the politicians do what politicians will do (i.e. lie when it "becomes serious"), those who have a predisposition towards pragmatism are indicating that Monday's 'emergency' Greek summit is nothing but a media spectacle that will produce nothing in the way of concrete results and is likely only good for giving the algos a few headlines to chase.

• Mood brightens after latest Greek offer to creditors (Reuters)
• ECB's Nowotny - Greek banks have funding extension for today (Reuters)
• Any Greece deal must match party manifesto, minister says (Reuters)
• Greece says now up to lenders to move on an agreement (Reuters)
• Greece sends wrong documents to monitors... Again (FT)
• U.S. won't let Russia 'drag us back to the past': Pentagon chief (Reuters)
• Belgium unblocks part of Russian diplomatic missions’ frozen accounts (Tass)
• Fed Scoop Heralded Era of Closed Doors for $100,000 Newsletters (BBG)

The market has shaken off Friday’s Greece jitters and has convinced itself a deal remains the base case, or indeed the only case. Even with capital controls as an interim step, the argument goes, such a harsh reality will bring compromise. This argument is proffered by those who think Greece is being “difficult” Another argument says the EU and IMF know that a Greece default is a bad thing, perhaps a really bad thing (despite all the protesting to the contrary) and will see their way to a deal. If only Greece would give them a face-saving way to pull it off

today is Friday taken to the n^th degree, with the markets having already declared if not victory then the death of all Greek "contagion" leverage, following news that a new Greek proposal was sent yesterday (which as we summarized does not include any of the demanded by the Troika pension cuts), ignoring news that Greece had again sent Belgium the wrong proposal which the market has taken as a sign of capitulation by Tsipras, and as a result futures are surging higher by nearly 1%, the German DAX is up a whopping 3.1%, on track for the biggest one day gain in three years, Greek stocks up over 8%, German and US Treasurys sliding while Greek and peripheral bonds are surging.

“Systemic risk is in the system [and] we are in uncharted territory. Think about holding other assets. That could mean precious metals, it could mean physical currencies.”