Greece

From Reform To Collapse: The Dysfunctional Status Quo

You cannot "reform" away the dysfunction of the Greek Status Quo without dismantling the vested interests and the ruling Elites that benefit from the Status Quo. The same can be said of the Status Quo everywhere from the U.S. to China.

Merrill Lynch: "Greek Risk Is Back"

You read about it here first (here and here). Now it is time for the sellside (whose products your soft dollars so generously fund) to wake up to what is happening next week.

Overnight Summary: Not An Algo Was Stirring Ahead Of The Jobs Report

Judging by complete lack of move in the futures since the last time we looked at them at close of US market (if not so much the EURUSD which moments ago touched its lowest level since October 10 below 1.2865), absolutely nothing has happened in the intervening 14 hours. Which wouldn't be too far from the truth. Europe reported its manufacturing PMIs, which while largely unchanged at the consolidated (Eurozone 45.4 on Exp. of 45.3, last 45.3) and core level (Germany 46.0 vs Exp. 45.7, Last 45.7; France 43.7 vs Exp. 43.5, last 43.5) showed some weakness for the one fulcrum country that everyone looks at: Spain, whose Mfg PMI dropped from 44.6 to 43.5 on Exp of 44.1. But at least the threat the ECB will buy its bonds is there. And Speaking of Spain (whose car registrations tumbled 21.7% in October), the first external condition appeared today, when EU competition commission Joaquin Almunia said seized Spanish banks must fire half their workforce, according to ABC. Finally back in the US, the Fed's Rosengren said the Fed will not stop monetizing until the jobless rate falls below 7.25%. Luckily, with the NFP report due in 90 minutes, and the labor participation rate set to tumble once more, we may just get that in today's key data highlight which everyone is waiting for.

Dumpster Diving In The Lower East Side

When one thinks of dumpster diving in the "developed world", one usually starts with Greece, and ends with Spain (where this activity has been so pervasive, lately even the dumpsters have been on lock down). Certainly, Manhattan's Lower East Side is not one of the places that immediately comes to mind. Sadly, now that the city's more Bohmeian neighborhood has been without power and food for 3 days running, and the prospect of electricity being restored is still dim, the local residents have no choice but to do what their insolvent peers from across the Atlantic do every day (even as the capital markets fool themselves that all is well because Draghi said so). For a candid look at how the other part of Manhattan lives now, watch the clip below.

More Greek Drama: Coalition Member PASOK "In Turmoil As It Seeks To Quell Rebellion"

First it was news that Europe's weakest link may be broken following a Greek court doing the unthinkable, and actually enforcing the constitution, and now we learn that in addition to at least one definite defection from the Greek coalition government - PASOK (as reported earlier), the entire party is now on edge as its leader, former PM Evangelos Venizeloz seeks to quell a "rebellion" ahead of next week's vote which will hardly make the government any more popular in the eyes of the general population. From Kathimerini: "PASOK has plunged into turmoil as one MP and a prominent official quit the party following a fractious vote on the government’s privatization bill on Wednesday. The draft law paving the way for the sell-off of a number of utilities and ports passed narrowly and the failure of 17 PASOK MPs to support the legislation led to party leader Evangelos Venizelos, who failed to take part in the vote himself, calling an urgent meeting with his 33 lawmakers on Wednesday evening." Why is this relevant? Because two days ago, as reported, the third member of the ruling coalition: the Democratic Left, which mans 16 votes, announced it would vote against the Troika demands. This leaves the coalition with 160 votes on a matter in which it needs a majority. Should Pasok's 17 votes also be in danger of pulling out (assuming nobody from New Democracy votes no), then one can see why Greece may once again hold the fate of the Eurozone in its hands just as the US is voting for its next president and hardly needs more European drama.

Risk Off: Greek Court Warns Troika-Demanded Austerity May Be Unconstitutional

While Europe continues to plan and scheme, content in the knowledge that Greece can do nothing to derail plans of status quo preservation, especially ahead of next week's critical parliamentary vote that will see the country imposing even more austerity on its people (see the great profile in the AP today in "Hit by crisis, Greek society in free-fall"), Greece has just decided to pull a "Karlrushe Kardinals who say Nein" move, and as Reuters reported moments ago, the entire process may be scuttled by none other than yet another court, this time in Greece:

  • GREEK COURT SAYS PLANNED PENSION CUTS, RETIREMENT AGE INCREASE  SOUGHT BY EU/IMF LENDERS MAY BE UNCONSTITUTIONAL                    

What this means is that suddenly Greece once again has all the leverage (recall that last year the mere threat of a Greek moratorium cost G-Pap his job), a development which in June sent Europe plunging on fears that Greece may vote itself out of the Eurozone, leading to a Grexit, the return of the Drachma, redenomination, collapse in risk levels, the apocalypse and other bad things.

Not Exactly The Greek Orthodox

Given the length of time that has passed the markets are mostly immune now, deadened by some kind of economic Novocain where there is little feeling left and where the ECB’s “Save the World” rhetoric overshadows all issues and problems and so the prevailing attitude is “Yes, there is Greece; but it doesn’t matter.” I am afraid that this will not be the case in the coming weeks and that Greece will matter once again as the severity of the situation rises anew and like the Gorgon and their quite ugly heads will be revealed once again. You may recall the tale of the three sisters where Stheno and Euryale were immortal but their sister Medusa was not and she was slain by the mythical demigod Perseus. I fear that the immortals are about to be slain next and it could come in a number of ways.

Daily US Opening News And Market Re-Cap: November 1

As we enter the North American session, equity markets are seen marginally higher, as concerns over the never-ending Greek debt drama are offset by the release of an encouraging data from China. Chinese HSBC Manufacturing PMI printed a fresh 8-month high, while the official Chinese Manufacturing PMI came in line with expectations. In addition to that, a state researcher has said that the countries economy has bottomed and is stabilizing. Meanwhile in Greece, the fact that debt is now seen climbing to 192% in 2014 and an agreement on how to defuse the situation has yet to be found may lead to another speculative attack not only on Greek paper, but also other southern states. As a result, GR/GE 10s spread is seen wider by 30bps, however other peripheral bond yield spreads with respect to the German Bund are tighter. The second half of the session sees the release of the latest weekly jobs report, consumer confidence and the weekly DoE from the US.

Frontrunning: November 1

  • Millions still lack power (WSJ); New York Region Transit Tracker (WSJ), Blackouts Remain for 6.1 Million as Power Repairs Begin (Bloomberg)
  • U.S. regulator seeks $470 million from Barclays (Reuters)
  • J.P. Morgan Sues Whale's Ex-Boss (WSJ)
  • London Frets Future as Financial Hub Outside Bank Union (Bloomberg)
  • SNB now selling EUR: Swiss Central Bank Pulls Off Euro Sleight of Hand (WSJ)
  • United Said to Study Biggest Airbus A350 to Replace Jumbos (Bloomberg)
  • Draghi expands role in fight to save euro (FT)
  • Panasonic Plunges by Daily Limit on Loss Forecast, CDS Soars (BusinessWeek)
  • Italy risks economic ‘vicious circle’ (FT)
  • Starbucks's European tax bill disappears down $100 million hole (Reuters)
  • Bernanke Depression Guru Seeks Roosevelt Well-Being (Bloomberg)

Overnight Sentiment: Defending 1400, Again

It was a week ago when we first observed that the defense of 1400 in the ES at all costs must go on, or else the only thing that is keeping the market propped up - psychology (now with the AAPL euphoria long gone), would be gone as would all support. But once again, the overnight session has proven that, with a little help from its central banking friends, 1400 (and 1.2900 in the EURUSD) can be defended. This was in danger of being breached until China reported two PMI numbers: an official one which printed at 50.2, or modest expansion, and up from 49.8, magically right on top of expectations of 50.2, and the HSBC PMI, which also rose to 49.5, from 47.9: the 12th straight contraction print, but the highest number in 8 months. The market spin is naturally that this is an indication of a rebounding China. Sadly, just like in the US, this is merely pre-party congress data manipulation. The only thing that does matter out of China: whether or not the country will actually ease as opposed to doing day to day reverse repo injections. Without the former, the Chinese economy will not rebound, and will not lead to an improvement in corporate outlook for US tech stocks, period, the end.

Guest Post: The Financial Super-Storm of 2013

Four years of glorious central-planning "extend and pretend" have enriched the political and financial Aristocracies, and imbued them with a bubble-era hubris that they have indeed gotten away with murder: the $6 trillion the Federal government borrowed over the past four years, the Fed's $2 trillion in fresh cash, the Fed's $16 trillion bailout of the banking sector and various perception management manipulations have righted the storm-tossed ship. All those with power in 2008 remain in power and all those with outsized wealth in 2008 still hold their outsized wealth. Except the financial tides and winds have shifted, and the linearity of central planning is about to be disrupted by nonlinear, positive-feedback storms.