Greece

The Myth Is Over: Europe Fails To Agree On Greece

Given our earlier comments, it is hardly surprising but the Eurogroup meeting just ended and there is no agreement; headlines via Bloomberg:

  • *FRIEDEN SAYS NO DECISIONS REACHED TODAY ON GREECE BY EUROGROUP
  • *FRIEDEN SAYS EURO FINANCE CHIEFS TO CONTINUE TALKS ON MONDAY
  • *SCHAEUBLE SAYS EUROGROUP UNABLE TO REACH CONCLUSIVE AGREEMENT
  • *LAGARDE SAYS MORE WORK NEEDED FOR GREEK SOLUTION
  • *JUNCKER IDENTIFIED 'CREDIBLE' IDEAS TO BRING DOWN GREEK DEBT (well he would wouldn't he?)

EURUSD is tumbling (as are S&P 500 futures in their oh-so-correlated manner)

GREuphoria, Interrupted... Or Not

UPDATE: *EURO FINANCE CHIEFS REACH DECISION ON GREECE, OFFICIAL SAYS

Can't wait to see what they came up with...

EURUSD is limping lower (-20 pips to 1.2800) as the early morning hours tick by in Europe and still Greece is not ceremoniously considered fixed. Reuters, citing official sources, got its hands on the 15-page report prepared for the meeting and it is grim reading indeed - summarized below (via Bloomberg): "The [extensive] package of options will not make it possible to arrive at a debt-to-GDP ratio of close to 120 percent in 2020 without taking recourse to measures that would entail capital losses or budgetary implications for euro area member states or envisage a more comprehensive Debt-buyback entailing the activation of collective action clauses." It would seem the GGB trade may well be the 'no brainer' trade of the year after these new haircuts.

Pump, Dump, And Pump; Black Gold Red, Stocks Green, Bonds Blue

Umm yeah...close-to-close, equity indices were mixed (Dow small red - HP/IBM, NDX/SPX small green on closing rampfest) amid dismal volumes but for anyone that paid attention to the debacle in the markets today, this was another odd one. Thanks to EUR strength's correlated power (retracing last night's France loss), stocks trickled up all morning into the European close; Bernanke suggested he was not omnipotent and stocks dumped 13 S&P points (~1%) to yesterday's day-session open; and then on no news - as Greece remains unfixed and cease-fire deadlines come and go, we pumped ingloriously on small lots and stupid volume up to VWAP/unch - paused for thought - and then ran to the day's highs just after the close day-session close in S&P futures. Treasuries suffered - yields up 5-6bps on the day as our broad risk-asset proxy lifted along with modest moves in FX carry pairs and USD weakness into the close. Oil was headline-maker (away from BBY and HPQ that is) - down almost 4% from the highs yesterday but closing still green on the week just above $87 as Israel re-flared. Credit was less noisy and VIX compressed a little more to 15.11% at the close (lowest in 5 weeks).

Guest Post: Europe Is Now Sinking Fast

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.

On Political Brinksmanship And Stock Market 'Vigilantes'

Despite the hope of the last day or two, policymakers remain, we suggest, as far apart as they ever have, with 'no news' simply that. An oversold bounce does not a fiscal cliff fix, and as BofAML's Michael Hanson suggests in his 'brief history of brinksmanship': "one lesson from the recent past is that market reaction has been an important mechanism to reaching compromise and forcing action." Unfortunately, he adds, as we have been quite vociferous about, that "history also shows that the equity markets have to sell off sharply before policy makers listen to the 'stock market vigilantes'." With some politicians still thinking going over the cliff might be their best strategy, it could once again take a sharp market sell-off to focus the minds of the negotiating parties. If we actually manage to go over the cliff, even if only for a brief period of time, a repeat of the TARP sell-off seems only too probable.

Grant's "To-Do" List

As we approach the end of the year and the various cliffs, bungee jumps and political idiocy that is in front of us you might want to take some time and pay attention to some friendly advice.  Yes, of course you know everything, yes of course there is nothing that escapes your attention and you are personally plugged in to the inter-galactic computer that provides not only financial answers and but divine indulgences but still; keeping an open ear might be a novel experience. Take some profits. You and I have no idea what these “detached retinas” might do in Washington. If you are betting for a living then I would say that the craps table is now safer than Europe. These people have flown over the cuckoo’s nest and have become disoriented by the flight. Parties such as this are funny things; the jesters jest, the Kings lord, the Palace of Versailles is abuzz and it all goes along until someone switches off the lights. Keep your eyes on the switches!

Frontrunning: November 20

  • More QE could distort rather than deliver (FT)
  • Soros Buying Gold as Record Prices Seen on Stimulus (BBG)
  • EU Leaders Face Greek Aid Gap in Brinkmanship With IMF (BBG)
  • Weak data point to bigger economic drag from Sandy (Reuters)
  • Shirakawa Pushes Back With Criticism of Abe Unlimited Easing (BBG) But... but... Bernanke??
  • French Downgrade Widens Gulf With Germany as Talks Loom (BBG)
  • Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
  • BOJ in the Balance as Next Government Picks Top Posts (BBG)
  • Exchanges Get Closer Inspection (WSJ)
  • Greece edges closer to €44bn bailout (FT)
  • Japan Government to Spend 1 Trillion Yen on Next Stimulus (BBG)
  • China’s Richest Woman Divorces Husband, Fortune Declines (BBG)

French Downgrade Comes And Goes As Europe Open Fills EURUSD Gap

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.

A Spanish Casa (And Residency) Es Su Casa For $200,000

Unwilling to sacrifice their sovereignty at the altar of the ECB's contingent OMT (and unable to wrench 'help' from their previously colonized friends in Latin America; it seems Rajoy and friends are more than willing to sacrifice their actual land... and citizenship in order to maintain their 'independence'. Reuters reports that Spain is considering offering rich investors from countries such as Russia and China the right to settle in return for them buying up property in the stagnant housing sector. For buying property worth as little as $200,000, wealthy foreigners could be offered a residency permit, the country's commerce secretary said on Monday. This is the same nation with near 11% loan delinquencies, greater-than-50% youth unemployment, and a bad-bank loaded with heavily discounted real-estate assets that are still too expensive to encourage investors, and an ever-present devaluation risk hanging over its paralyzed economy. We wonder how the other nations of the EU will feel about Spain 'diluting' the citizen-asset pool with this new non-tax-paying, non-labor-utilizing 'wealth'. How long before Greece sells plots on Santorini (w/passport)?

Stocks Jump Most In 5 Months But Bonds Ain't Buying It (Again)

Best day in 5 months for stocks. AAPL jumping to one-week highs with its 2nd biggest low to high swing in 3 years. Wherever you look, the worst came first and so the talking heads re-appeared saying the worst is over and all is rainbows, unicorns, and mountains are once again molehills. Unfortunately, while ETFs were smashed higher (HYG biggest move in a year on 2nd largest volume ever back above its 200DMA, VXX crushed -9%), risk assets broadly speaking were not playing along with Treasuries especially drifting lower in yield from the European close (and EURUSD) as stocks surged to the highs of the day. Commodities soared with Oil leading the way - though post-Europe everything flattened and leaked lower. VIX collapsed 1.2vols to end just above 15% (notably ahead of stocks relatively speaking) but equity volume on the day was dismally low as S&P 500 futures broke back above the 200DMA amid larger than average trade size.