Greece

Is the fabled Greek bailout not happening? Will Greece be expelled from the Eurozone finally? Is China withdrawing too much liquidity? Did Bernanke say anything true or factual yesterday? Will Goldman ever upgrade a stock with less than 20% short interest? Will algos ever stop gunning the market higher: can we close green 30 days in a row? How about 300? Will we ever see a billion shares traded in one day again (in other words a down day)? For this and anything else, this is today's open thread.

The Greek saga continues, exactly as was anticipated. For all of those who don't regularly read me, this is really not about Greece but about the start of either default or significant depression throughout a large swath of the Eurozone. Greece is the firestarter and it looks as if we are starting to burn...

A smattering of the relevant headlines which are causing Greek spreads to widen as investors realize they have been lied to once again.

04:51 03/18 GREEK PM: GREECE WILL NOT DEFAULT
04:51 03/18 GREEK PM: NOT LOOKING FOR PARALLEL NATIONAL CURRENCY
04:50 03/18 GREEK PM: OFFER OF HELP ON TABLE WOULD HELP FIGHT SPECULATORS
04:50 03/18 GREEK PM: WOULD PREFER A EUROPEAN SOLUTION
04:49 03/18 GREEK PM: GREECE IS TALKING TO THE IMF
04:49 03/18 GREEK PM: MUST PURSUE REFORMS TO INCREASE COMPETITIVENESS
04:45 03/18 GREEK PM: IF NO SUCH PLAN IN PLACE, GREECE MAY NEED IMF HELP
04:44 03/18 GREEK PM: IMF-STYLE HELP COULD BE OFFERED ON "AD-HOC" BASIS
04:44 03/18 GREEK PM: EUROPE MUST BE PREPARED TO OFFER IMF-STYLE HELP
04:43 03/18 GREEK PM: GREEK NOT IN NEED OF IMF LOAN
04:32 03/18 GREEK 10-YR SPREADS WIDEN 6 BPS TO +306 BPS AS GREEK PM SPEAKS
05:40 03/18 GREECE PM:IMF SAYS OUR PLAN QUALIFIES US FOR IMF AID IF NEEDED

Germany is openly saying what we all really know, Greece is probably !@#!$%. The problem is, how can Greece go down without pulling half the Euro zone with it? The Greek tragedy saga is much worse than the mainstream media is making it out to be. Reference my annotation on today's Bloomberg article...

In case you were wondering what just sent the market and commodities higher, and killed the dollar, look no further: S&P just released a note confirming Greece at BBB+, and removing the country from CreditWatch negative, presumably a major euro positive, a major dollar negative, and today's nitrous boost to stocks... Here is the forest for the trees: the market is again dependent on the moronic filth spewed forth by rating agencies. As to what turbo austerity will do to Greek GDP, ah, who cares. S&P will cross that bridge when Greek GDP plummets 10%.

German opposition crumbles, as a Greek bailout plan is now official. We expect Portugal, Spain, Italy, Latvia, Ukraine, Bulgaria, Austria, and, finally, the UK, to line up next at the trough. And for all of you cynical bastards who thought that G-Pap was full of methane when we claimed he was not looking for aid... You were right. So now, under the wise tutelage of Goldman, make sure to plough all your money into the Euro. After all there are at least a few months before the next bailout has to be effected.

More postcards from a post-austerity Greece where 10,000 protesters take to the streets. Pick the CDS speculators out.

The Washington Post reports that the next "Lehman-sized" event may be just around the corner, as the European Commission is now supporting a ban on trading sovereign CDS. While we are in process of tracking down whether this is actual news or just some exaggeration based on semantics, we will caution, once again, that the consequences of a CDS trading ban will be severe and very likely result in the opposite of what the EC intends on achieving. Keep in mind that everyone expected the Lehman bankruptcy to be contained as it was at best a fringe cog in the financial system. The result was a systemic collapse as one interlinked component of the financial fabric imploded after another. The rush to unwind CDS positions ahead of a ban will be massive and have unpredictable consequences. But the biggest threat is what happens to bond prices, which once basis trades are made impossible, will be promptly unwound, leading to pervasive selling of the cash leg not by speculators but by plain vanilla mutual fund idiot money. What scapegoaters seem to forget is that the vast majority of existing sovereign CDS notional is tied into perfectly boring insurance "basis" trades, in which the bond is held in combination with associated CDS. Once there is an inability to have hedged cash sovereign exposure, the demand for European sovereign paper will plummet, achieving precisely the opposite of what the CDS ban is attempting to accomplish.

Headline which tells you all you need to know:

15:32 03/09 GREEK PRIME MINISTER ENTERS MEETING WITH US TSY'S GEITHNER

Sorry, Merkel, Papanderou et al. BaFin finds that there is no sign that CDS speculation is involved when it comes to Greek government bonds, even as the volume in cash bonds has spiked. As a reminder - selling bonds has the same effect as buying CDS. And guess what: the real Greek cash-CDS basis is negative 112 bps (for "experts" this is swap-clean basis, i.e., Greek CDS minus German CDS compared to GGB minus Bunds). This means that cash bonds are far and ahead a leading indicator, and much more dominant when it comes to determining actual price/yield levels. So does this mean that GGB sellers will now be demonized with the same ferocity as those meddling CDS traders? Hopefully, this will finally be the end of the CDS as satan's spawn topic.

While we are not sure how Betty Liu feels about Rogers' invitation to come eat some Wienerschnitzel, what is certain is that Greek PM Papandreou is not too happy with the commodities pundit right about now. When asked should Europe bail out Greece, Jim says: "No, of course not, they should let Greece go bankrupt. It would be good for the euro, it would be good for Greece, it would be good for everybody." Alas, more true words have rarely been spoken. And with every financial professional already on the same side of the boat as Rogers, politicians are now left on their own to do what they know best: i.e., the wrong thing...and over and over again, and if someone can be blamed (evil, evil CDS speculators come to mind), so much the better. Also, should anyone wish to take a brave foray into the political arena (which appears is now the best paying job in the world, incidentally, just after Goldman CDS traders, hehe) on the crest of the anti CDS bashing, now is the time. It appears quite a few have risen to the challenge.

To paraphrase the 20-page speech: it is still just the speculators' fault, who are now "threatening not only Greece, but the entire global economy" so burn them all post haste before they can read all the declassified GS prospectuses, and scour the footnotes thus uncovering the truly deplorable state of all European budgets, also please ignore this huge corruption problem we have, it's under control, oh, and it is time our globalization "partners" realize that we are critical in the future of the free world, and bail us out, even though we have repeatedly said we need no steenkin' bail out, or else global financial crisis v2 - here we come. Now show me where Ben Bernanke's office is.

Some amusing headlines appearing elsewhere today, proclaiming the Greek crisis is over. Hardly: Uri Dadush of the Carnegie Endowment, and formerly of the World Bank says that "it is virtually inevitable that Greece will either default or need a bailout of some sort." Dadush, who a week ago wrote a provocative op-ed in the FT titled "End this inflation fundamentalism", in which he noted that "what happens in Greece will not stay in Greece" also says that "over and beyond the Greek bailout we have to do some thinking about our approach to overall fiscal and monetary approach in Europe." What? Visiting Ben Bernanke every 6 months is no longer sufficient? Oh wait, when everyone is undergoing austerity measures (now coming to Portugal, soon Italy, UK, Germany, Japan, and, lastly the, US), just who is it that will importeveryone else's exports? Why China of course. But hold on, isn't China a net exporter? Oh who cares about facts...The market's mind is already made up. Uri's conclusion will make Hugh Hendry proud: "I think under any circumstance we are going to see a significantly lower euro. I think we are going to see slower growth in Europe over several years, and I think there is a serious risk that the eurozone will implode unless there is a sea-change in the way fiscal and monetary policies are conducted."

The appearance of the Chair of the Congressional Oversight Panel, Elizabeth Warren, on Charlie Rose is a must watch. In addition to an in depth discussion of the the consumer protection agency, which despite all valiant attempts to the contrary, will likely end up under the Fed's jurisdiction, thereby making the world's most powerful cabal even more powerful, Warren touches on a variety of other issues, including the sovereign debt situation, commercial real estate, and the one concept at the heart of it all: the lack of impairments by stockholders (and certainly by debtholders) in what was a bankrupt financial industry. The world would not have ended had banks been forced to readjust their balance sheets: the outcome would have been far simpler - all those who had their collective net wealth associated with the balance sheets, and specifically the equity tranche, of firms like Goldman, JPM, Citi, BofA and Wells would have been wiped out. But why do that when not just they, but the entire government were willing to make it seems that a balance sheet reorganization is equivalent to liquidation. Once again, those at the top were more than happy to take advantage of the stupidity of the morts (whose great desire to be distracted by stupidity like primetime TV is well known to the financial-media complex) and in the process make themselves even richer, and more powerful. Now, we expect yet another blogger to come out with yet another book discussing this and every other deadbeaten horse issue out there. And with time amoral hazard itself will slowly become illegal, as everything, and we mean everything, succumbs to the decision making of the Federal Reserve's Politbureau. In the meantime nothing will change until democracy itself is reignited in this country.

The turf war to (not) bail out Greece is on. Even though nobody wants to do it, yesterday's announcement by the IMF that it is willing to lend the troubled country a hand (and a few billion drachmas) has put Jean-Claude Trichet on edge. And even assuming today's bond deal gets done without too many glitches, Greece has at best bought itself breathing room for a month or so.We expect the volume on bailout speculation to go down at best by a couple of notches. In the meantime, the ECB has made it clear that Greece's problem are Europe's and Europe's alone, thank you IMF and America. This was made quite explicit in Trichet's post-ECB rate press conference earlier, when he said that he does "not trust that it would be appropriate to have the introduction of the IMF as a supplier of help through stand-by or through any other such help."