European Central Bank
"Greece will not make a June 5 repayment to the International Monetary Fund if there is no prospect of an aid-for-reforms deal with its international creditors soon," Reuters reports. PM Alexis Tsipras will meet with European Commission President Jean-Claude Juncker Wednesday evening, but no deal is expected today.
If U.S. equities feel brittle, they should. Yes, central bank liquidity from Japan and Europe may well push global equity markets higher. But what we really need is a pullback – that classic 10% correction that flushes out weak hands, reestablishes the discipline of “Risk” in the “Risk-Return” equation, and shows capital markets how to do more than just follow central bank liquidity. So watch June’s price action in U.S. stocks very carefully, because this process needs to start now. The bull market that began in March 2009 is now an ancient bovine indeed. After all, better 10% now than 20% or more later in the year. The first is inconvenient. The second is unwelcomed.
- Greece, creditors exchanging documents to reach deal - Commission (Reuters)
- Greece’s Creditors Reach Consensus on Proposal to Athensa (WSJ)
- Greece calls on lenders to accept 'realistic' plan sent on Monday (Reuters)
- Hundreds missing, many elderly tourists, after ship capsizes on China's Yangtze (Reuters)
- Oil up ahead of OPEC meeting as dollar slips (Reuters)
- U.S. Met Secretly With Yemen Rebels (WSJ)
- Euro zone back to inflation as May prices beat forecast (Reuters)
- Patients Get Extreme to Obtain Hepatitis Drug That's 1% the Cost Outside U.S. (BBG)
We have long argued that the most likely endgame for Greece is that PM Tsipras caves to the troika, compromises on the government’s ‘red lines’ and risks a government reshuffle on the way to a third program, thus averting a euro exit and keeping Greece from descending into a drachma death spiral, even as the “solution” effectively strips the Greek people of their right to choose how they want to be governed — a tragically absurd outcome in what is the birthplace of democracy. It now appears that scenario is set to unfold.
Will global QE carry on forever...the next month may give out some clues..will it be Junemaggedon after we had May-hem??
On Sunday, PM Alexis Tsipras penned a lengthy statement expressing his frustration at creditors’ insistence on presenting what he calls “absurd proposals” even as the Greek delegation has gone most of the way towards meeting the troika’s demands. "Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim. To some, this represents a golden opportunity to make an example out of Greece. If some, however, think or want to believe that this decision concerns only Greece, they are making a grave mistake. I would suggest that they re-read Hemingway’s masterpiece, 'For Whom the Bell Tolls.'"
There appears to be little or nothing in the monetarists' handbook to enable them to assess the risk of a loss of confidence in the purchasing power of a paper currency. Furthermore, since today's macroeconomists have chosen to deny Say's Law, otherwise known as the laws of the markets, they have little hope of grasping the more subtle aspects of the role of money in price formation. It would appear that this potentially important issue is being ignored at a time when the Eurozone faces growing systemic risks that could ultimately challenge the euro's validity as money.
Game theorists know that a Plan A is never enough. One must also develop and put forward a credible Plan B – the implied threat that drives forward negotiations on Plan A. Greece’s finance minister, Yanis Varoufakis, knows this very well. Many people in Europe seem to believe that Varoufakis, an experienced game theorist but a political neophyte, does not know how to play the cards that Greece has been dealt. They should think again – before Greece walks away with the pot.
- Former House Speaker Hastert indicted on federal charges (Reuters)
- Blatter expected to win re-election despite soccer corruption scandal (Reuters)
- NYSE Looks to Ease Late-Day Pileup (WSJ)
- What Will Happen to a Generation of Wall Street Traders Who Have Never Seen a Rate Hike? (BBG)
- Japan spending slump casts doubt on central bank optimism (Reuters)
- Unclear rules, market volatility take toll on bank capital (Reuters)
- Greece Told Budget a Red Line for Creditors Venting at G-7 (BBG)
- The Economist Who Realized How Crazy We Are (Michael Lewis)
- Pimco Said to Have Considered Goldman’s Cohn for Top Job (BBG)
ECB Cracks A Joke, Says It Will "Publicly" Respond To Allegations It Privately Leaks Market-Moving NewsSubmitted by Tyler Durden on 05/28/2015 11:26 -0400
The ECB will respond to the ombudsman and our answer will be public. https://t.co/RKAAfyeQ2h
— ECB (@ecb) May 28, 2015
Fearing an acceleration in deposit outflows from Greek banks, PM Alexis Tsipras suggested on Wednesday that a deal between Athens and creditors was imminent when in fact he had no evidence to support the contention. Greek officials now promise their optimism "is not just words."
Foreign investment is of course common around the world and is generally seen as a good thing. Americans mostly like it, for instance, when Japanese investors bid up shares of US companies or Chinese expats pay above asking price for Manhattan apartments. With only a few exceptions we take the money and don’t look back. But there must be a limit, a point where foreign interests own so much of a country that they call the shots and the locals become in effect their serfs. Greece might be the test case that shows us where that point is...
"German Finance Minister Wolfgang Schaeuble conceded the possibility that Greece may need a parallel currency alongside the euro if the country’s talks with creditors fail," Bloomberg reports. Meanwhile, "sideline" negotiations between Greek PM Tsipras and Angela Merkel breakdown in Riga.
The uncertainty surrounding the inevitability, if not the exact timing, of multiple and possibly overlapping volatility drivers is itself a source of volatility. For the average person, these signs can be scary. Taking steps to avoid the circus as much as possible, such as extracting money from the markets, securing personal assets, and waiting out the swings, can be a source of emotional comfort and future financial stability.
A robust economy would allow central banks to raise rates and still allow debts to be paid down. But that is not what is happening. And it won’t happen. Junkies rarely go out and get a job... and gradually “taper off” their habit. No. They have to crash... hit bottom... and sink into such misery that they have no choice but to go cold turkey. Now, major central banks are committed to QE and ZIRP forever. They have created an economy that is addicted to EZ money. It will have to be smashed to smithereens before the feds change their policies.