So we have the Greek debt crisis, the European Union budget problem and the European bank oversight issue and twenty-seven countries all wanting “this, that and the other” except “the other” is not that much fun unless Ms. Merkel surprises everyone by saying she is a little tired and pulling a Mae West and telling all twenty-seven nations that one will have to leave. The scenario is unlikely of course but then everyone involved is now playing the grand old game of “Work Around” where someone must pay and it is going to be anybody but them. “Not this little piggy,” says the IMF and “not this little piggy” says the ECB and “not this little piggy” says the European Union. This is all because no one wants the political winds to “blow their house down.”
That Greek suicide rates have exploded over the past two years is very much expected: after all, in order to preserve the sanctity of the failed monetary status quo, the Greek economy and its less than prosperous population have been sacrificed by the legacy elite and the wealthy. The socio-economic collapse has resulted in a total crash in economic production of goods and services, an nosebleed-inducing unemployment rate which increasing at a mindboggling 1% per month, and the rise of neo-nazism, with the Golden Dawn party now the third most popular political organization in the country (and rising rapidly). Sure enough, Kathimerini has confirmed that the" Greece's suicide rate increased by 37 percent between 2009 - 2011, To Pontiki newspaper reported quoting police data. The data, which was presented in Parliament by Public Order Minister Nikos Dendias following a request by SYRIZA MPs, showed that 3,124 suicides and attempted suicides have occurred in the debt-stricken country since 2009, the weekly newspaper said." As noted, no surprise in this very tragic headline on the day in which the world's still wealthiest nation gives gratitude for all its "wealth."
US closing fine, Asia closing fine. PMIs a tick better than expected. Fine. Spanish auction fine. Greek bonds fine. All fine. Slight Risk On. Fine. Fine, fine, fine… All is good. Free that Bird – or Eat it!
"Free Bird" (Bunds 1,43% +0; Spain 5,64% -6; Stoxx 2534 +0,6%; EUR 1,288 +60)
The Latest Greek "Bailout" In A Nutshell: AAA-Rated Euro Countries To Fund Massive Hedge Fund ProfitsSubmitted by Tyler Durden on 11/21/2012 15:06 -0400
What is the latest state of play that has the biggest support from all parties? It appears that the plan which is now back in play, is one which Greece had previously nixed, namely a partial Greek bond buyback of the private bonds at a discount to par: with numbers currently rumored anywhere between 25 cents and 50 cents on the euro. And even if Greece agrees with this proposal, there is a question of where Greece will get the money for this distressed debt buyback? After all Greece is completely broke, and any new cash would have to be in the form of loans, as not even the most nebulous interpretation of the Maastricht treaty would allow an equity investment, or to use the proper nomenclature, "a fiscal investment" into Greece. But the kicker is when one traces the use of funds. Because what is will happening is a payment not to Greece, obviously, but to its creditors: entities which for the most part are hedge funds, and which have bought up GGB2s in the mid teen levels as recently as 4 months ago (recall Dan Loeb's major position in Greek bonds).
Greece? Sorry, what’s with Greece? French downgrade. Unexpected, but then again not that much. So what? Fiscal Cliff? As no one speaks about it, it can be ignored. Risk? If it doesn’t fall, it has to rise.
"Rise To The Occasion" (Bunds 1,43% +2; Spain 5,7% -9; Stoxx 2518 +0,4%; EUR 1,282 +10)
Uh… Very uncomfortable French downgrade. Not surprising per se, but uncomfortable. Ask the EFSF… Brings back the question of “Who’s Next”? European Risk (Equities & Credit), however, oblivious and taking rising yields as a sure sign for Risk On. I’d see the risk of France (and everyone else) starting to count contingent costs.
"A Tout Le Monde" (Bunds 1,41% +6; Spain 5,79% -9; Stoxx 2509 +0,6%; EUR 1,281 unch)
You don’t have to be an economic genius to understand that the perpetual uncertainty over the Eurozone’s future has led to a widespread freeze on industrial investment and development. Industrial production is collapsing at an accelerating rate, falling 7% year-on-year in Spain and Greece, 4.8% in Italy, and 2.1% in France. Since the answer to the question of Who will ultimately pick up the tab? when a Eurozone member defaults or leaves is not at all clear, every player there is eyeing the others suspiciously. In fact, the "stability" of Europe right now hinges completely on no one making a move. What odds do you give that Mexican standoff of lasting? Time is working against all countries in the Eurozone because the good are being dragged down by the bad.
Another day, another melt up overnight wiping out all the post-Moody's weakness, this time coming courtesy of Europe, where following the French downgrade, the EURUSD filled its entire gap down and then some in the span of minutes following the European open, when it moved from 1.2775 to 1.2820 as if on command. And with the ES inextricably linked to the most active and levered pair in the world, it is is no surprise to see futures unchanged. It appears that the primary catalyst in the centrally planned market has become the opening of said "market" itself, as all other news flow is now largely irrelevant: after all the central planners have it all under control.
European equities ripping and squeezed after Friday’s dismal close. Credit the same and, as more often than not lately, overdoing the equity move. EGBs rather muted with the Core pretty much where it stood throughout last week – with exception of Friday afternoon. Spain back on the radar. Europe still under US influence. Huge relief. From what and why exactly still needs to be seen. In the meantime: Rip & Tear!
"Rip And Tear" (Bunds 1,35% +3; Spain 5,88% +2; Stoxx 2495 +2,7%; EUR 1,281 +110)
While the prior week was marked by some kind of awakening, this week was more about finding a direction. Eventually mostly downwards, but always in jumps, marked by tentative rebounds. Europe mostly lost, so unused not to be the focal point anymore, waiting for US input. If it wasn’t for the Fiscal Cliff, and in absence of further news out of the Periphery, we seem to have
"No Direction" (Bunds 1,32% -2; Spain 5,86% +5; Stoxx 2429% -2,1%; EUR 1,27 -10)
Europe mostly boring. Several inconclusive downside tests in European equities. Static bonds, unwilling to tighten further. More US equity weakness, more downside. Way is shown by US equity dump. Periphery? What Periphery? What problem? Credit, EGBs, most commodities just watching. Dismal close.
"That's the Way (I Like It)" (Bunds 1,32% -2; Spain 5,86% -3; Stoxx 2429 -1,2%; EUR 1,27 -90)
The US crashing close yesterday was cushioned in Europe by better than expected (backward-looking) GDP figures in Germany and France. EZ in recession nevertheless. Limited fall-out, albeit lower (equity) levels tested. Periphery okay’ish, then good on better Italian GDP. Spain tag along with limited own dynamics, mainly trailing Risk assessment. EGBs difficult to move lower from here. Watching the US. Someone. Please. Show the way.
"Are You Gonna Go My Way? " (Bunds 1,34% +0; Spain 5,89% -3; Stoxx 2459% -0,6%; EUR 1,279 +50)
Listening to Rehn, Van Rompuy, Juncker and their cohorts is rather like listening to the cheerleaders at the football game and their advice on financial matters is probably right in-line with the knowledge of the cheerleaders; but then I don’t want to insult the cheerleaders. Everything is always “good, fine, hailed, welcomed” and the sunrise is always moments away. Europe officially entered into a recession it was just announced this morning. The economy in Europe is so bad now that a picture is only worth two hundred words. The Europeans blame everything on the ratings agencies lately. There is some wisdom to this. “Moody” is how they are feeling and “Standard & Poor” is what they will be feeling soon. Recently in Spain it was reported that a teacher asked one of her students what his father did for a living. The little boy said his father did a striptease in one of the clubs in Madrid. The teacher was shocked and asked if this was true. The young fellow said, “No, he is the head of corporate credit for Bankia but I am too embarrassed to tell anyone.”
See-sawing – and still looking for direction. Open weaker, in line with the US close. Some exuberance ahead of the Italian auction, despite negative figures. Awakening that nothing was justifying this. Re-correction while awaiting the US take of things. With the US opening flattish plus, Europe had a light lift and started tagging along, tick for tick, stuck in a loop. Some more European gloomy news to end the day. Way Down. For the moment mostly an equity move. And cut.
"Way Down" (Bunds 1,34% unch; Spain 5,92% +9; Stoxx 2475% -0,8%; EUR 1,274 +20)
As Greek discussions overnight revealed a spat between Europe and the IMF, and given yet another closing slump in the US, Risk started on a weak footing with Risk nearing Friday lows, before being ramped up by rumours, showered again and finally supported by the US opening in negative, albeit tame manner, before moving into positive territory and taking everything along. Given the noon despair, the afternoon relief seems…exuberant. Especially as the US still lead the way.
"That's The Way" (Bunds 1,34% unch; Spain 5,83% -5; Stoxx 2494% +0,8%; EUR 1,272 +1)