All Quiet On The Day After The Day After

Tyler Durden's picture


The much anticipated Greek vote on "self-imposed" austerity (just like all those other votes on "self-imposed" austerity before it, all of which failed to impose any austerity but merely guaranteed further corruption and certified the Greek inability to be effectively governed) came, saw and passed... and nothing: the EURUSD is now well lower than before the vote for one simple reason - the vote was merely a placeholder to test the resiliency of the government, which following numerous MP terminations, has seen its overall majority drop to 168 of 300, which includes the members of the Democratic Left who voted against the Troika proposal. Which means any more votes on anything split along austerity party lines and the vote will likely no longer pass. And, as expected, Germany already picked up the baton on kicking the can on funding the Greek €31.5 billion payment (due originally many months ago) when Schauble said that it will still be too early to make a Greek decision net week.

In economic news, Australia reported better than expected labor news even as the Japanese collapse continues, with both its September current account surplus and machine orders missing expectations by a mile.

Market-wise, Europe is limping into the US open, with the EUR weaker again due to not only a report that Spain may not seek an ECB bailout this year (as said here over and over, Spain will not seek a bailout until the 10 Year SPGB is back at or above 7%) but also a Market News report that the ECB is now reluctant to actually activate the OMT bond-buying program: of course, why "start" when one can have their broke country and eat it too fund it at near-German levels . Paradoxically, Spain also sold €4.76 billion in 2015, 2018 and 2032 debt (more than the expected €4.5 billion) at muted conditions, thereby the market continues to encourage Spain not to request a bailout, although this may not last, as promptly after the bond auction Spanish debt tailed off, the 2Y and 10Y both sold off, and the Spain-Bund spread is back to 445 bps, the widest since October, and means Spain can finally be getting back in selloff play: and probably not at the best possible time just as everything else, which was in suspended animation until the Obama reelection, also hits the tape.

Today we get two key, if largely irrelevant, central bank decisions come from the BOE and ECB, both of which are expected to do nothing much.

Finally, the most important event going on right now, is the Chinese Congress. For those who missed it, our previews are here: The Far More Important 'Election' Part 1: China's Political Process and The Far More Important 'Election' Part 2: China's Market Implications.

What to watch for today, from SocGen:

Central bank meetings will be centre-stage today, with both the BoE and the ECB on the agenda. The BoE is expected to keep its monetary policy unchanged, namely key rates at 0.50% and Asset Purchase Target ATP at GBP 375bn. Expectations of further quantitative easing have abated after recent positive surprises in the UK.


The ECB is also expected to opt for the status quo. Market reaction will depend on the press conference. However, we don't expect Mr Draghi to deliver a different message to the one from the October meeting. The ECB president is likely to repeat that the OMT programme remains an ECB tool, but comes with conditionality. It will however be interesting to see if he makes any specific comments after the autumn forecasts the EC released yesterday. Nevertheless, he will continue to make clear the euro's survival is a top priority and that the ECB will do all it can to play its part. From an economic standpoint, both growth and inflationary risks are likely to be biased to the downside. All in all, this month's ECB meeting is not likely to make a big difference for market participants: the economic situation does not warrant a rate cut (for now), and the ball is still in Spain's court regarding whether or not the OMT will be activated,.


Lastly, EU finance ministers will meet to discuss the EU budget. Don't expect much progress here, as UK prime minister David Cameron has already vowed to veto an accord if it's unacceptable.


All in all, EUR/USD and swap rates (both US and EUR) will remain driven by risk sentiment today. As the latter is fragile, keep an eye on technical levels as EUR/USD is approaching its 32.8% Fibonacci ratio at 1.2740, while 10Y EU swap rates are nearing a support at 1.65%, and 10Y US swap rates are converging towards a support at 1.65%.

The comprehensive recap comes, as usual, from DB:

Overnight the Greek parliament passed the austerity bill which includes cuts to pensions, public sector salaries, tax hikes and increases in the retirement age. The final vote was 153 for the motion (out of 300 MPs) vs 128 against with 18 abstentions and came amid a second day of protests of almost 100,000 people outside parliament. The coalition came out somewhat bruised, with PM Samaras expelling one member from the New Democracy party with coalition partner PASOK expelling six lawmakers for their failure to support the bill. The Greek parliament reconvenes on Sunday (11th) to vote on the 2013 budget, after which the Eurogroup meeting is expected to approve the next EUR31.5bn bailout payment on Monday (12th) -- if all goes according to plan.

Back to the US election, our Washington correspondent Frank Kelly hosted another call yesterday and suggested that Obama's first 10 days could be crucial and we need to watch to see how conciliatory he is with Republicans. If he shows no signs of compromise in the early stages of his new term it could set the scene for a difficult relationship with the Republican House! Boehner laid out a potential olive branch yesterday, saying that Republicans are open to raising more tax revenue via closing special interest loopholes and deductions, if it is accompanied by tax reform that lowers income tax rates and is in conjunction with entitlement reform. Obama, by contrast, has proposed making a “down payment” on debt reduction by letting the portion of the Bush tax cuts that apply to high-income earners expire. After surveying clients, DB's David Bianco noted there is widespread expectation for the dividend tax rate to be hiked from the current 15% to 20-25% (to be in line with the capital gains rate), with the relatively low increase the trade off for allowing a higher top marginal income tax rate.

On that note, both Fitch and Moody’s were quick to warn of the negative implications to the US rating if an agreement to stabilise the fiscal outlook was not reached soon. For those interested, DB's Chief Economist Peter Hooper will be hosting a conference call today  n the "Outlook for the fiscal cliff after the Election". Call details are included at the bottom of today's EMR.

Turning to overnight markets, most Asian bourses are trading lower, paced by losses on the Hang Seng (-1.4%) and Nikkei (-1.4%). Chinese equities (-1.2%) have failed to be inspired by the start of China’s week-long 18th Communist Party Congress. In a speech at  the congress, General Secretary Hu Jintao said the government aims to double per capita GDP by 2020 and will accelerate financial reforms including yuan convertibility and interest rate liberalisation.

General Secretary Hu also outlined a few new points and DB's Jun Ma noted that the most interesting one is the proposal of "four new modernizations" being industralization, informatization, urbanization, and modernization of agriculture. Of these four key  elements of China's new development strategy, most attention has been given to urbanization. Jun Ma believes that urbanization will be viewed by the new government as the main source of growth for the coming decade, and many policies will be designed to maintain a high pace of urbanization. Meanwhile, on the sidelines PBoC’s deputy governor Yi Gang said he expects the economy in Q4 to be “relatively good”. Curiously it was only a month ago that the governor Zhou himself warned of “relatively large” downward pressures on the economy. Elsewhere in Asia, credit is trading modestly wider (+5bp) and is performing relatively well versus equities.

Looking at the day ahead, the main focus will on the post- meeting announcements from the ECB and the BoE. The ECB’s statement is expected at 12:45pm London time followed by the usual focus on Draghi’s press conference at 1.30pm. The market is not expecting any major policy changes from the ECB but it will be worth watching for any hints on Greece or Spain from Draghi at the Q&A. The BoE’s statement is due at midday today and again the market is not expecting any change to interest rates and the asset purchase program but this week's poor data has slightly increased the risks of further action. Data wise the German and French trade data will be interesting as recent data from core Europe has been generally on the softer side. In the US we get the first initial jobless claims print post-Hurricane Sandy, together with the September trade balance data. However markets will mostly be trying to work out all the risks concerning the fiscal cliff.

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Thu, 11/08/2012 - 08:04 | 2959790 markmotive
markmotive's picture

Eye of the storm? It seems to me that forces are still stirring...perhaps Tuesday's outcome is not good for the Greeces of the world?

Jim Rogers slams Obama's election


Thu, 11/08/2012 - 08:07 | 2959797 GetZeeGold
GetZeeGold's picture



Still have the People's House......get ready for war you MFers.


It's quiet now.....the calm before the storm.


Thu, 11/08/2012 - 08:08 | 2959800 markmotive
markmotive's picture

Goldcorp CEO Opinion: Gold to $2000 in 6-12mths regardless of winner

Hold onto your hats folks...

Thu, 11/08/2012 - 11:27 | 2960452 Silver Bully
Silver Bully's picture

'Still have the People's House......get ready for war you MFers.'

You like watching gridlock? What a waste of popcorn. Hint: there might be a lot of smoke, but there will be very little fire.

Thu, 11/08/2012 - 08:00 | 2959791 realtick
Thu, 11/08/2012 - 08:20 | 2959805 GetZeeGold
GetZeeGold's picture



You must have just come off a long vacation. Funny thing about cherry picking charts is that you can rig them to show just about anything.


I should know....I've done it with a fair degree of success.

Thu, 11/08/2012 - 11:34 | 2960496 Silver Bully
Silver Bully's picture

Wait, someone still thinks they can trade this joke of a manipulated market with TECHNICAL ANALYSIS?


Oh, muppets. You guys slay me.

Thu, 11/08/2012 - 08:06 | 2959799 mrpxsytin
mrpxsytin's picture

Can someone/some people please explain to me why the governments continue to sell debt? Are they on autopilot? If I were heavily in debt I wouldn't continue to get further in to debt.

This is probably an obvious question, but I find the whole activity completely absurd. Stop the debt already, it's getting ridiculous.

Thu, 11/08/2012 - 08:10 | 2959802 spanish inquisition
spanish inquisition's picture

In a ponzi scheme you need to replace the money you are paying out by raising mo money. Otherwise the scheme will collapse.

Thu, 11/08/2012 - 08:17 | 2959812 mrpxsytin
mrpxsytin's picture

Yes, but what premise are they operating on that justifies the continuation of the Ponzi scheme?

Why do they choose to keep it going rather than let it unwind?

I'm trying to understand their mindset. Their motivations for keeping the scheme going. It just doesn't seem rational, which leads me to the belief that the system is running on autopilot. They keep it going because that is all they know how to do. Would this be accurate? Or is there some conscious decision to keep this scheme going? 

Thu, 11/08/2012 - 08:23 | 2959826 cosmictrainwreck
cosmictrainwreck's picture

you're trying to make some "sense" out of this & "them/they". It's really simple: some years back, a magic line was crossed which presented only ONE scenario: inflate or die. It's not like they have a "sheme" or any such; just reality

Thu, 11/08/2012 - 08:34 | 2959839 mrpxsytin
mrpxsytin's picture

You've identified the premise as "inflate or die".

I don't think this is a logical premise. Where in reality does it suggest the human race must inflate or die?

If anything, reality would indicate that when humanity inflates beyond the carrying capacity of the environment it leads to massive death. Thus, 'inflate or die' becomes 'inflate AND die'.

I don't believe your explanation justifies the current economic behaviour.

Inflating the system only makes it weaker. Supply lines are stretched, sectors become poorly managed, and quality control lapses. So if our leaders honestly do think that we face the choice between inflating or dying, they are totally incompetent.

Thu, 11/08/2012 - 08:41 | 2959858 cosmictrainwreck
cosmictrainwreck's picture

you're still using "logic".... what's that got to do with it? While I do not dispute your "inflate AND die" all I'm saying is the whole fucking sytem is gonna blow up in a DIS-ORDERLY and chaotic manner, in an unpredictable time-frame. As I heard one guy say: "only mistake I made was to totally underestimate the depth of cunning, cleverness and depravity of the central bankers and TPTB..." [re keeping the impossible still flying]  

Thu, 11/08/2012 - 11:50 | 2960586 Silver Bully
Silver Bully's picture

'Thus, 'inflate or die' becomes 'inflate AND die'.'

It is simple short term greed. The people want to continue to live their current lifestyle. The politicians want to stay in power. Everyone wants to continue kicking the can and pay up later (kick it long enough and someone else has to).

What is there to contemplate?

'I don't believe your explanation justifies the current economic behaviour.'

Oh, you mean is it the right way? That's well beside the point now, isn't it? The public and their dear leaders will continue on this pathway, regardless if it is right or wrong.

When a country's loses its soul, walks away from its gods, and turns on itself, don't be surprised when good men do nothing. There are more good men left. If there were, politicians would fall on their swords to get our house in order at all costs to save the republic instead of inflating our currency away to preserve their careers. The people would go back to saving money instead of WILLINGLY spending themselves into debt slavery.

There is no justification. There is only cold, hard reason and hollow degeneracy.

Thu, 11/08/2012 - 08:33 | 2959837 spanish inquisition
spanish inquisition's picture

If you are a small group in power and want to stay in power, there is certainty in the current structure and the ability to manipulate to maintain control. If you "unwind", there is no certainty that you will maintain control and/or  that the time and expense required to rebuild your organization is prohibitive and can set your agenda back decades. 

Or to simplify....It is easier to maintain a flawed inefficient corrupt reality to maintain power by deluding yourself and others, than face the unknown of a different reality.

Thu, 11/08/2012 - 08:43 | 2959862 mrpxsytin
mrpxsytin's picture

I think it boils down to inertia.

A system likes to maintain its motion. If it is moving it likes to keep moving, if it is stationary it likes to remain stationary.

Humans are the same as any other physical object. We have psychological inertia. The popular phrase 'I have my mind made up' is an example of this. Once the mind is made up, it is very hard to change course. This psychological inertia could explain much human behaviour.

Thu, 11/08/2012 - 09:00 | 2959914 spanish inquisition
spanish inquisition's picture

By agenda, those in power have a vision of what the human race should look like and feel it is their duty to steer us in the "right" direction. If they need to reduce the population it is nothing personal, "it is for the greatest good", but really it is about staying in power.

If I am in power and recognize your theory of psychological inertia, I could increase it through the use of GMO's and vaccinations. I can also push you into action through a controlled media to buy a car or change general opinion of the masses to start a war.

Introspection is the beginning of the path. Realization of psychological inertia is as close to any starting point I can imagine, welcome to the path.

(off to work)

Thu, 11/08/2012 - 08:17 | 2959814 GetZeeGold
GetZeeGold's picture



All the money....not just some of it....ALL of it.


We stop giving away free crap.....and we're out of business.


Thu, 11/08/2012 - 08:10 | 2959803 TeamDepends
TeamDepends's picture

It's akin to selling someone swampland in Florida or a bridge in China.  You know, the thrill of separating a chump from his money.

Thu, 11/08/2012 - 08:12 | 2959808 GetZeeGold
GetZeeGold's picture



Keep the bridge, the swamp, and the paper......we only accept gold around these parts.

Thu, 11/08/2012 - 08:15 | 2959809 tocointhephrase
tocointhephrase's picture

...and Silver

Thu, 11/08/2012 - 08:18 | 2959816 GetZeeGold
GetZeeGold's picture



Yeah....that too.....needed be said.

Thu, 11/08/2012 - 08:24 | 2959819 TeamDepends
TeamDepends's picture

What about golds little brother who may someday grow up to be twice as big and strong as gold and might just whoop his ass for all those times gold farted in his face and thought it was hilarious?

Thu, 11/08/2012 - 11:54 | 2960606 Silver Bully
Silver Bully's picture

Gold is an marathon runner.

Silver is a sprinter.

Preserve your wealth with gold.

Make fiat money with silver, to buy more gold.

Thu, 11/08/2012 - 08:25 | 2959828 Juan Wild
Juan Wild's picture

If you can get through this video without dozing off you'll understand why debt must never end in this global ponzi scheme called central banking.Make a pot of coffee and pause, rewind often. ;)

Money as Debt 

Thu, 11/08/2012 - 08:21 | 2959821 youngman
youngman's picture

Well Greece got their vote....sure why not..easy 40 billion....much easier than growing a business or something..

China is playing change the deck one knows what is going on there..but it looks pretty...

Student loans and auto loans to the moon....Obama´s new redistribution

The NEW statistics will start to come out election statistics...

Thu, 11/08/2012 - 08:23 | 2959827 GetZeeGold
GetZeeGold's picture



I predict next months vote will be even tougher.

Thu, 11/08/2012 - 08:30 | 2959834 asteroids
asteroids's picture

Greek youth ( < 24) unemployment is amost 60% !! This is approaching collapse levels. I would not be surprised if this lost generation becomes pissed.

Thu, 11/08/2012 - 08:38 | 2959844 GetZeeGold
GetZeeGold's picture



Looks like we're gonna need another balout.....totally didn't see it coming.

Thu, 11/08/2012 - 11:52 | 2960595 covert
covert's picture

more turbulance will come.



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