Greece

Postponed

“Postponed” is the official stamp across the world. This is the operative word of governmental policy. Whether Europe or America, whether capitalist or socialist government; this is the credo, the banner, the flag waving in the wind for dealing with economic problems. Throw more money at it and barrels of it, have the central banks print and defer any pain much less any tough decisions. We live in a state of postponement, defer and delay which cancels the consequences of the moment but places more severe consequences, greater pain and tougher choices but moments out into our future. Make no mistake; the world has become a more dangerous place either haunted by the specter of rampant inflation or haunted by valuations of debt and currencies that could turn the financial markets into a swirl of dislocation where a plunge into a freezing sea of disarray awaits as capital goes to gold, senior debt regardless of yields and nations deemed to be safe havens.

Friday Humor: Top Ten Reasons Why Fiat Currency Is Superior To Gold

In the spirit of the holidays and hope for a more prosperous 2013, we thought readers might appreciate a little humor to partially offset the relentless 'cliff' doom and gloom. So please, don’t take this too seriously. But if you happen to stumble across a ‘paperbug’ or two over the holidays, perhaps you could share some of the points made here. Humor sometimes helps people realize just how hopelessly misguided they are... Quantitative easing changes nothing. Remember, the PhDs are in charge of our economies and they know exactly how much our money should be worth. Those of us concerned that our money might lose purchasing power are just being paranoid. Choice is dangerous. Think Adam and Eve and you’ll get my point. Those arguing in favour of monetary freedom, of choice in money, of repealing legal tender laws, they’re just like that nasty snake Lillith in the Garden of Eden, the source of all trouble I tell you. ‘Tis the season to borrow and spend folks, as indeed it has been since 1971.

Monetary Malpratice: Deceptions, Distortions & Delusions

By the Deceptive means of Misinformation and Manipulation of economic data the Federal Reserve has set the stage for broad based moral hazard. Through Distortions caused by Malpractice and Malfeasance, a raft of Unintended Consequences have now changed the economic and financial fabric of America likely forever. The Federal Reserve policies of Quantitative Easing and Negative real interest rates, across the entire yield curve, have been allowed to go on so long that Mispricing and Malinvestment has reached the level that markets are effectively Delusional. Markets have become Dysfunctional concerning the pricing of risk and risk adjusted valuations. Fund Managers can no longer use even the Fed's own Valuation Model which is openly acknowledged to be broken.

Frontrunning: December 24

  • Global Currency Tensions Rise (WSJ) - in other words, when everyone eases to infinity, nobody eases
  • EU to give Spain, France more time to cut deficit (Reuters) - But not because their economies are not "recovering" fast enough, oh no.
  • As we expected, Grupo Bimbo considering a bid for Hostess' snack cakes and bread brands (NY Post)
  • Time for bus-control: Eleven children killed in latest Chinese bus crash (Reuters)
  • Greece Should Write Off Billions of Overdue Taxes, Report Says (BBG) - not all taxes in perpetuity?
  • India clamps down on gang-rape protests, PM appeals for calm (Reuters)
  • But Meredith Whitney said... Push for Cheaper Credit Hits Wall (WSJ)
  • For Greece, last major austerity package, says eurozone official (Kathimerini)...  "unless there is another one"
  • Americans Miss $200 Billion Abandoning Stocks (BBG) ... and two flash crashes... and $15 trillion in artificial central bank props
  • Goldman Sachs Takes Long View Over Payouts (FT)
  • Cliff Would Strike Low Incomes Hard (WSJ)
  • Afghan policewoman kills US police adviser (AP)
  • For Sale in Japan: Electronics Assets (WSJ)

Sentiment: Listless Traders Looking Forward To Abbreviated Rumor Day

As DB's Jim Reid summarizes, "it is fair to say that newsflow over the next 72 hours will be fairly thin before we head into a tense final few business days of the year." It is also fair to say, that the usual tricks of the new normal trade, such as the EUR and risk ramp as Europe walks in around 3 am, precisely what happened once again overnight to lift futures "off the lows", will continue working until it doesn't. In the meantime, the market is still convinced that some compromise will appear miraculously in the 2 trading sessions remaining until the end of the year, and a recession will be avoided even as talks now appear set to continue as far down as late March when the debt ceiling expiration, not cliff, will become the primary driving power for a resolution. That said, expect to start hearing rumors of a US downgrade by a major rating agency as soon as today: because the agenda is known all too well.

Marc To Market's picture

 

Yes, it is the holiday season.  Yes, you are unlikely to be taking action with your investments.  Yes, the morphing of what is into what will be continues uninterrupted.  

 

There were several developments over the weekend that will influence the direction of the the markets in the days ahead, with the usual caution about the impact of the thinness of conditions.  

 

First, the major focus remains the US fiscal cliff.  One of the most important ways in which the US fiscal crisis differs from those seen in Iceland, Greece, Portugal, Ireland is that it has not been triggered by a capital strike. Investors have not fled the US.  Interest rates have not trended higher.   It is not a fiscal crisis.  It is a political crisis

 

2012 Year In Review - Free Markets, Rule of Law, And Other Urban Legends

Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).

David Rosenberg's 35 Charts For 2013

How does one of the best strategists view the world as we close the page on 2012, and look toward 2013? Find out with the help of these 35 charts.

AVFMS's picture

Trailing the US, as not much else to do. EGBs firming up, but mostly because they‘re supposed to do so, as Equities end a little softer, because they have to, as well. Credit likewise. So no Risk highs under the Xmas three… All because of the US. Blue.

"Blue Christmas" (Bunds 1,38% -4; Spain 5,23% +1; Stoxx 2644 -0,6%; EUR 1,318 -40)

Marc To Market's picture

It had seemed that many participants were looking past the US fiscal cliff and were to be content taking on more risk.  However, yesterday's late developments have provided a cold slap of reality.  Our base scenario, under which the US does in fact go over the cliff appears more likely now that Speak Boehner's "Plan B" failed to draw sufficient Republican support to allow a vote.   Indeed, there is some speculation that the failure of Boehner's gambit may see a leadership challenge right after the New Year.  

 

The lack of a coherent Republican strategy has prompted a large unwind of risk-on and thin holiday market conditions may be exacerbating the price action.  In the risk-off mode, the US dollar and yen have performed best.  The dollar-bloc, which has generally lagged in recent days, remains under pressure.

Cyprus Bonds Slump To 3-Month Lows As IMF Demands Haircuts

As Greek bonds go from unintended consequence strength to strength, helped by a EU planned buyback, so Cypriot bonds have been monkey-hammered in the last week or so (and dramatically so today) as the IMF withholds support, demanding a haircut is imposed. As Speigel notes, Cyprus did its part on Wednesday night by passing a 2013 budget with far-reaching austerity measures, yet the would-be creditors (providing the bailout funding) are at odds with the IMF playing 'bad cop'. The IMF is demanding a partial default (rather like being half pregnant) involving haircuts for private creditors before it joins the deal. The IMF is concerned that, despite the austerity measures the country has now adopted, it still wouldn't be able to shoulder the interest payments due on its debt - gracious, where have we heard that uncertainty before? "The situation in Cyprus is much worse than it is in Greece," one high-ranking EU official said, and its hard to argue when you note that with a GDP of EUR18bn in 2011, its banking system has 'assets' of EUR150bn, and fiully EUR10bn of the EUR17bn bailout (should it appear) is aimed at propping up the idiocy of the banking system!