The Sell Side Reacts To Europe's "Lehman Weekend"

Global equities plunged on Monday as both carbon-based traders and HFTs tried in vain to keep their composure which watching in horror as Greece, the birthplace of Western civilization, quickly became Venezuela. With Europe’s “Lehman weekend” now in the books and as the currency union stares into an uncertain future, the sell side tries to make sense of it all.

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

While things have normalized since the open thanks entirely to the SNB's aggressive EUR-buying, CHF-selling intervention (good to see that central banks have read the BIS' report and have learned from their prior intervention mistakes), earlier this morning we got a snapshot of what happens if and when the SNB, and then the ECB itself, finally lose control when as a result of the Greek crisis the contagion promptly spread a few hundred kilometers west to Italy where as the WSJ reported, "several Italian banks failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most."

Frontrunning: June 29

  • China’s Stocks Enter Bear Market as Rate Cut Fails to Stop Rout (BBG)
  • Stocks Tumble Around the World on Greek Crisis (WSJ)
  • Some say back to the drachma for a Greek reboot (Reuters)
  • Greece Imposes Capital Controls as Fears of Grexit Grow (BBG)
  • Panic Sets in Among Hardy Hedge Fund Investors Remaining in Greece (NYT)
  • Euro off Greece-driven lows after SNB intervenes (Reuters)
  • Western Union to close in Greece for rest of week (Reuters)
  • European banks, bonds shaken by Greek turmoil (Reuters)

Carnage Continues: EU Equity Futures Crash 7%, Bund Yields Plunge 20bps, Italy/Spain Bonds Dumped

It appears Greece matters after all - US futures are tumbling, Japanese stocks are tanking (as JPY is bid on mass carry unwinds), Chinese stocks are limit down and collapsing.. and now European equity futures are open and in free-fall. Bunds are well bid, down 20bps to 72bps. Peripheral bonds are being dumped (contagiously).

*EURO STOXX 50 FUTURES FALL 7% AT MARKET OPEN
*ITALIAN BONDS DECLINE WITH 10-YEAR YIELD RISING 57 BPS TO 2.72%

Ignoring Tsipras Plea For Calm, Greeks Storm ATMs, Stores, Gas Stations

Just a few hours ago Greek PM Tsipras addressed his nation imploring then to "remain calm" and reassuring them that their "deposits were safe." It appears the Greeks did not believe him. Many were wondering where the Greek bank lines were for the past several months. Turns out the local depositors were merely waiting until just after the last minute to withdraw their funds... horde gas... and stack food. Greece, it appears is Venezuela - the new socialist paradise.

Here Comes "Prexit": Puerto Rico In "Death Spiral", Debts Are "Not Payable", Governor Refuses To "Kick The Can"

As we noted last night, for a whole lot of time nothing at all can happen under the guise of "containment"... and then everything happens all at once. Because not even two full days after Greece activated the "Grexit" emergency protocol, leading to capital controls, and a frozen banking system and stock market, moments ago the NYT reported that the default wave has jumped the Atlantic and has hit Puerto Rico whose governor Alejandro García Padilla, saying he needs to pull the island out of a “death spiral,” has concluded that the commonwealth cannot pay its roughly $72 billion in debts, an admission that will probably have wide-reaching financial repercussions.

"Contained" Greek Contagion Smashes Japanese Banks Lower

Despite all the 'smartest men in the room' proclaiming that Greece doesn't matter, and Greek risks are "contained", Japanese stocks are tumbling led by bank stocks. Topix Banks Index has plunged the most since Feb 2014 (and 2nd most since the Taper Tantrum in 2013).

The Bush Family Goes "All In" For Number Three (With The Help Of Its Bankers)

It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.

The War On Some Drugs

The only answer to the War on Drugs is the same as that to the equally stupid and destructive War on Demon Rum fought during the ’20s - a repeal of prohibition. The question is really whether you have a right to control your own body and what you ingest. There’s little question that caffeine, cocaine, nicotine, heroin, alcohol, marijuana, sugar, and a thousand other things aren’t good for you, at least not in quantity. But we can’t see how that’s anybody’s business but your own. Once it becomes a matter of state concern, then everything becomes an equally legitimate subject of state attention. Which is pretty much where we are today - well on the way to a police state.

Keynes, The Great Depression And The Coming Great Default

Ideas Have Consequences... In Nazi Germany and Fascist Italy, in Great Britain, in Japan, and in the United States, there was a shift of opinion away from the free market in favor of government economic planning. The supreme mark of this transformation was the acceptance of John Maynard Keynes' unreadable book, The General Theory of Employment, Interest, and Money, which was published in 1936. A new generation of younger economists adopted this book and its outlook, which prevails today. The fascist economic idea of an alliance between government and business became almost universally accepted.

Why We're Headed Toward A "Cashless Society"

"Sometimes, when the government tells you to do something, it’s best to do the opposite." When do you need a stash of cash? When the feds try to outlaw it. Hold some dollars. And some gold. But,what good will cash be after it is declared illegal, we hear you ask? We’re not sure. Maybe we’ve spent too much time in Argentina, where people have more supple and more subtle attitudes to monetary regulations. Trading pesos for dollars, on the black market, is illegal. Do it and they take you for a scofflaw. Don’t do it and they take you for a fool.

Top German Politician Blasts Nuland & Carter: "F##k US Imperialism"

With intra-Europe relations hitting a new all-time low; and, having already been busted spying on Merkel, Obama got caught with his hand in Hollande's cookie jar this week, the following exultation from one of Germany's top politicians will hardly help Washington-Brussells relations. As Russia Insider notes, Oskar Lafontaine is a major force in German politics so it caught people’s attention when he excoriated Ash Carter and Victoria Nuland on his Facebook page yesterday... "Nuland says 'F*ck the EU'. We need need an EU foreign policy that stops warmongering US imperialism... F*ck US imperialism!" When he comes out swinging this way, you know something is changing. 

Collapsing CDS Market Will Lead To Global Bond Market Margin Call

As we previously noted, liquidity is there when you don't need it, and it promptly disappears once it is in demand. Consider it "cocktease capitalism." If liquidity lasts longer than 4 hours, call the CFTC because you may be experiencing a spoof. Right now, the ultimate spoof is setting up as the credit default swap market collapses, and a global bond market margin call is just around the corner.