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Greek Bond Curve Inverts As Stocks Crater
Amid the collapse of the global carry trade, no nation on earth has benefited more (and is now suffering more) from the dash-for-trash, buy-the-pig-sty trade than Greek stocks and bonds. Combining carry unwinds with uncertainty over snap Presidential elections (which could usher in a left-wing anti-EU party into power) and a 'technical-only' extension of its handouts from Troika and Greek capital markets are in freefalll. The Athens Stock Index is down over 11% on the day, destroying 3 weeks of gains; the Greek 3Y bond price has collapsed (as the carry-traders pile out through small doors) inverting the yield curve - never a good sign.
Greek stocks and bonds slumped after Prime Minister Antonis Samaras opted to bring forward the process of choosing a new head of state, risking parliamentary elections in Europe’s most indebted state as early as January.
Samaras today nominated Stavros Dimas, a 73-year-old former European Union commissioner, for the post. Voting will begin next week, on Dec. 17, with two further rounds possible. Samaras will have to rely on opposition votes to push through his pick for the mainly ceremonial post; without them, his government will fall.
“It is a high stakes gamble,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note. “Snap parliamentary elections in January could then bring left-wing Syriza into power in Athens.”
Stocks are tumbling...
Greek stocks -11% after govt brings forward presidential election. Biggest fall in around quarter of a century: pic.twitter.com/MUUcJweFil
— Jamie McGeever (@ReutersJamie) December 9, 2014
and so are bonds...
Leaving the yield curve inverted for the first time since the bailout...
Remember the long-end is mostly held implicitly by the ECB as collateral while the short-end is what 'traders' trade around... it is clear that the market wants out.
* * *
“Syriza may find itself winning an election, with less than a month before the program expires and Greece is left without a financial backstop,” said George Pagoulatos, a professor of European politics and economy in Athens.
But of course, when push comes to shove, no one wants to give up onmthe free-money EU gravy train so this will merely result in re-negotiation of the bailout terms.
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Nothing that a ton of German money* cannot fix.
*Remember that money is simply a claim on labor, and a nation's government's funds are nothing but a claim on their population'S labor. Thus, when Germany gives money for free to Greece -- it is literally giving away their nation's productivity to a third party for free. That money could have been spent on Rail, Green Energy, Autobahns, infrastructure, eduction, etc., etc., here in Germany. Instead it wnet to bailout the Greek government and banks.
I want all the German readers on here to reread this short paragraph over and over again until they fully understand what that means.
the money is subsidising germany's imports to the rest of the EU. they are not doing it for the love.
I would encourage you to look at profit derived from exports to the EU vs German bail outs to date (half trillion EUR) and then the economic growth foregone by joining the common currency. (Went from 2.5% per annum growth before the EUR to 0.8% -- compounding is bitch, and lost opportunity cost here is over 600 B€ annually. If you use 1999 German GDP as a base for the opportunity cost calculation.)
If you tell me that Germany nets a profit of more than 700B annually from exports to the EMz I would need to see your calculations.
the half a trillion is on the never never. in a free floating exchange rate system the german mark would have appreciated against all the other currencies within the EU. germany have been the single biggest beneficiary of currency union as their "currency" is locked at an artificially low level. the transfer payments to the piigs is all about preserving the status quo
Pray tell oh wise one,
If a fictional DMark goes through the roof -- does the cost of raw materials for its exports rise or fall?
this is about floating exchange rates. the piigs used to devalue their currencies practically on a weekly basis. they can't do that anymore within the euro framework. germany (biggest beneficiary of currency union) do not want the system to fail.
You failed to answer my question.
What happens to the cost of raw materials if the DMark comes back and goes sky-high?
Explain to me what happens to the cost of energy in Germany in such a situation.
How is it possible then, that the DMark from 48-99 led to higher German growth than the EUR did if, as you say, Germany is the biggest beneficiary from the EUR?
your question is irrelevant. if a currency appreciates your imports cheapen and your exports look less attractive. a floating currency acts as a pressure valve.
Why would the PIGS leave the euro when they have more votes than Germany? The pigs have the ECB over a barrel. Did somebody just fire up the deutsche marks printing machine in Berlin?
https://www.youtube.com/watch?v=tOW5eljyjms
merry christmas?
"a floating currency acts as a pressure valve. " ---
LMFAO!!! Perhaps, but only if said currency and/or it's "valuation" cannot be gamed or manipulated by a chosen few. FYI, a "currency" is also only valid as long as people accept it. Are those German factories still running on Russian oil and gas?
What an arrogant statement. I cannot wait for all those paper claims on real goods to start seeking them out. When that happens, the guillotine will become the new "pressure valve".
tick tock motherfucker.
don't hold your breath. you can only trade the end of the world once
So you cannot defend you dribble and have nothing useful to add. Again, perspective is important asshole. Who's "end" in particular? The world is always at war. Plenty of "end of the world" trades out there. If you live in Syria, you are experiencing an "end" right now.
thanks for identfying as a useless troll. Go back to graduate school kid. Let us know when you have something useful to contribute.
From the ashes comes opportunity. Same as it ever was.
keep me posted how you get on trading the syrian end of the world.
from the tone of your post i guess you've been trading the end of the world all the way down from $1900
Why would the PIGS leave the euro when they have more votes than Germany? The pigs have the ECB over a barrel. Did somebody just fire up the deutsche marks printing machine in Berlin?
https://www.youtube.com/watch?v=tOW5eljyjms
your investment return model is flawed. Don't mix profits, monetary liquidity and monetary money printing so forthrightly. There are transactional costs, investments and pure funny money management that may reside on one's books but is paid by all.
As for the economic growth forgone by joining the monetary regime, that is nonsense. Huge growth occured and the rest of EUrope subsidized Germany's unification at their own expense. For example, France jacked up their interest rates, causing recession, to protect Europe's re-unification "investment".
Germany does not give "free" money. For its largest market, it buys a very beneficial fixed exchange rate for its predatory export driven economy and an improperly strong say in the political affairs of its customers. That is money well spent.
most of the bailout money was used to bail out German and other European banks
Big EU countries have taken the industry,farming,fishing from some smaller countries, by exchanging money for productivity sectors, they claimed that little countries don't have the capacity to produce heavy industry or better agriculture, and have to focus in that they do best that is nothing.
Consider three options for the German government (BMW = all German industry):
#1: Keep “loaning” money to the PIIGS with no hope of repayment, just so they can keep buying BMWs.
#2: Let the PIIGS go broke, buy all the unsold BMWs, and dump them in the North Sea.
#3: Let the PIIGS go broke, and tell BMW to sell their cars to someone else.
#2 costs less than #1 while maintaining the same level of German employment. But I doubt that even the most fanatical Keynesian could argue with a straight face that #2 is better than #3.
Think of the "upside potential" in the bond "market" if rates can go to negative infinity!!!
"winning"
Strap in everybody. This is going to get bumpy until some central bank "does whatever it takes".
where's bullard? come on damn it. i'm SHORT djx. short damn it. i' ve GOT to lose money on this.
they can't possibly let the party start now - it's xmas season.
bullard - go baby. qe4 and the promise for ever. i love you. open it. open the piehole.
I'm feeling you on that one. You'll do fine for a while. Then you'll get your face ripped off like everyone before you.
Damn! I just moved everything I own out of Greek bonds yesterday because they were dropping.
Everything went into Greek stocks instead, and now this happens.
WTF? I guess I'll have to move everything left into S&P futures today and try to make up my losses.
'Investing' sucks. Why didn't you guys warn me?
A good many snap elections lately. Odd.
I have thought about that too. Could be something about to happen and the pols want to secure their positions ahead of it. But who knows.
We cratered some folks.
We raised some folks.
Everything is TANKING! European markets fall on China rout; Tesco tanks 15%; Greek stocks crash, US Stock futures all down. Is today CRASH day?
http://investmentwatchblog.com/european-markets-fall-on-china-rout-tesco-tanks-15-greek-stocks-crash-us-stock-futures-all-down-is-today-crash-day/
Sorry, it's all Greek to me!
Yo. This could mean that Greece is going to default.
Stop it, Stop it. I'm laughing so hard "I can't breathe"TM
If you can't breathe, you better not talk.
Agreed. I'll limit myself to just typing on my keyboard.
the jawbone of super mario can totally fix this
when he dies we have to put his jawbone in a special secret crypt, seal the entrance and kill all those in the know
Dow poised to open below the significant gap up on Nov 21st at 17720....
If prices remain below here at the close, there would be a "Bearish Island Reversal" print on the chart marking hopefully a top to this five year facade
Hilarious, the market is down 11% and only wipes out 3 weeks worth of gains, WTF!
Drachma .......coming
DOWn 500 today?
Beware of Greeks bearing inverted bonds !!!
But what about the Santa Claus Rally?
Once again anxious bears will pile into inverse ETFs or short positions, only to have their faces ripped off by mid-day by Fed-proxy intervention or Fed jawboning. ONLY when the day arrives that Faith in Fed ends and millions see the buy-backs propped up earnings party ending, will the markets collapse. Millions will have to abandon hope that limitless Fed money creation works anymore; yes you can Fight The Fed. I don't see us there yet and I still hear nothing but happy talk. I'll go with the prediction the final collapse begins in Silicon Valley and spreads everywhere. When that insane property bubble goes due to more and more layoffs, look out below. It is already starting, very, very slowly...
Syriza is nowhere near an anti-EU party.
People that are aware know that Syriza is just another systemic party controlled by the PTB.
Nothing will change for the better with Syriza in to power.
The solution is simple.
Call a few members of the Billionaire Guardians Of The Galaxy Group, have them bail out the banks by purchasing the crappy Greek bank paper at a huge discount, then sell the crappy paper to any number of Central Banks at face value.
Everyone is a winner!
Except everyone else.
The Comedy has never been more divine. A bankrupt country with its economy in deep depression and unemployment exceeding 1932 USA levels has spent the last 4 years with sovereign bond interest rates below 4% and a stock market with rising prices. That makes as much sense as expecting Viagara to make a corpse take an active role in a porn movie.
If ever there was an example of modern economic and financial insanity, it has to be the market activity in Greece since 2010. Amazingly, in the modern world of central bank manipulation, the Greek experience is normal. ZOMBIE ECONOMICS.