and more news moving the markets
One day ahead of a key vote in the German Bundestag whether to ratify the 4-month Greek bailout extension, the biggest-selling, mass-market newspaper (or tabloid as some call it) with a circulation of 2.5 million, Bild, has made it very clear just how it feels about the latest Greek can kicking event.
Following a quiet overnight session in which the main event appears to be a statement by Chinese premier Li for more active fiscal policy, which has pushed the metals complex higher, although technically every other asset class as well, with US equity futures set to open in fresh record high territory, even as 10Y yields around the world continue to decline, attention today will fall on the CPI print due out shortly, because if consensus is correct, January will be the first month this decade when US inflation posts a negative print, mostly due to the delayed effect of sliding commodity prices. As Deutsche recaps, the most important number today is the headline CPI where the headline YoY rate is predicted to be negative by the market (-0.1%) for the first time since 2009. Over this period the YoY rate stayed negative for 8 months. However before this we hadn't seen a full year decline since August 1955. In other words, a few months before what may be the first US rate hike for a new generation of traders, the US is set to print its first annual deflation since Lehman, transitory or not.
Financial markets and investing reflect the same characteristics as my attempt at keeping fit
Although it may be unrealistically optimistic, I believe my paraphrase of a Churchill quote:
Back in March 2014 we forecast that it in the aftermath of the US State Department-sponsored military coup in Kiev, it was only a matter of time before Ukraine (all of its sovereign gold having since "vaporized") succumbed to full blown hyperinflation and economic implosion. Less than a year later, precisely this outcome has finally played out, and as a result, the entire nation has finally entered its economic endgame, one which has two conclusion: either it joins Greece in becoming a ward of Europe (of which it is not an official member) and the IMF (thank you Joe Q Public taxpayer), or it quietly fades away into insolvent "failed state" status.
If "everything is awesome" in Greece (and Europe) then why - oh why - did Greek government bond yields surge higher today, Greek stocks tumble, Greek bank stocks (and less so bonds) collapse, and Greek CDS jump? It appears that as the euphoria relief wears off, as WSJ reports, doubts over the willingness of Greece’s left-wing government to follow its creditors’ orders on budget cuts and economic overhauls spilled into the public today. IMF's Lagarde stated that the Greek proposal "is not conveying clear enough assurances that the government intends to undertake the reforms," and even Syriza officials admitted, "it is difficult to determine how the government can fulfill its promises, including the debt write-off, with this agreement,” as doubts arise across Europe's policymakers and markets.
"Greeks consider taxes as theft," which, among other things, explains, as WSJ reports, at the end of 2014, Greeks owed their government about €76 billion in unpaid taxes accrued over decades; the government says only €9 billion of that can be recovered, with most of the rest lost to insolvency. Syriza is now making tax collection a top priority among the measures promises the new Troika, but as one government official warned, "the Greek economy would collapse if the government were to force these people to pay taxes." The bottom line is that "normally taxes are considered the price you have to pay for a just state, but this is not accepted by the Greek mentality," and perhaps with this latest round of deference to the EU overlords, it is clear why...
We don't get it, and we definitely don’t get why nobody is asking any questions. The IMF and EU make a lot of noise – through the Eurogroup – about all the conditions Greece has to address to get even a mild extension of support, while the same IMF and EU keep on handing out cash to Ukraine without as much as a whisper – at least publicly...
As a frequent contributor to Bloomberg, I would welcome the opportunity to debate this with Barry.
What say you @ritholtz ? : )
and other things to keep an eye on today
- Invade Syria already, we know you will: Islamic State in Syria abducts at least 150 Christians (Reuters)
- Greece Struggles to Get Citizens to Pay Their Taxes (WSJ)
- Doubts Shadow Deal to Extend Greek Bailout (WSJ)
- In surprise result, Chicago's Mayor Emanuel faces election run-off (Reuters)
- Obama vetoes Keystone pipeline bill (Reuters)
- Another sign of the top: Cushman & Wakefield Going Up for Sale (WSJ)
- Lure of Wall Street Cash Said to Skew Credit Ratings (BBG) ... and threat of DOJ lawsuits also
- Oil rises to $59 as Saudis say demand growing (Reuters)
Reuters quotes Schauble who said that: "It wasn't easy an easy decision for us but neither was it easy for the Greek government because (they) had told the people something completely different in the campaign and afterwards." "The question now is whether one can believe the Greek government's assurances or not. There's a lot of doubt in Germany, that has to be understood," said Schaeuble who despite his misgivings, he has urged German lawmakers to approve the Greek extension in a vote in parliament expected on Friday. The finance minister made one thing very clear: No payments will be made to Athens unless Greek govt meets its commitments in full.
Stocks In Holding Pattern Following Blow-Off Top, Oblivious Of Fed's Warning Of "Stretched" ValuationsSubmitted by Tyler Durden on 02/25/2015 07:00 -0500
Following the first of two Janet Yellen testimonies to Congress, the market read between the lines of what the Fed Chairman said when she hinted that "the Fed needs confidence on recovery and inflation before beginning to raise rates" and realized that the case of a June rate hike is suddenly far less realistic than previously expected, as a result not only did we see another blowoff top in stocks to fresh all time highs, a move which sent the USD lower, has pushed the median EV/EBITDA multiple to the mid 11x (!) range and the forward PE to just shy of 18x ironically coming on a day when the Fed itself warned about "stretched" equity valuations, and led to brisk buying of global Treasurys across the board, pushing the 10 Year in the US back under 2%, and due to the global convergence trade (because if the Fed returns to QE, it will be forced to buy up Treasuries not just in the US but around the globe, since net issuance including CBs globally is now negative) and leading to today's German 5 Year bond auction pricing at a negative yield for the first time ever.
The post-1945 European settlement had many successes. But it is now crumbling. It needs drastic modification. That requires statesmen of the calibre of the men of 1945. It is time for politicians who wish to earn a place in history and upgrade themselves to statesmanhood to step up to the challenge.