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SocGen Says "Raise Cash" As Volatility, Turbulence Ahead
The arrival of ATM lines and capital controls in Greece combined with the bursting of Beijing’s margin- and PBoC-fueled equity bubble have plunged financial markets into turmoil to start the week with traders and central bankers alike reduced to deer in headlights ahead of a previously unthinkable Greek referendum on the euro and the continuation of brutal limit-down trading in China.
As SocGen notes, there’s only one thing left to do when it looks like the bottom could fall out at any moment: move to cash.
Via SocGen:
As we expect more volatility ahead, notably through the Federal Reserve tightening of monetary policy and poor liquidity conditions, we have built our investment recommendations and allocation to go through turbulence. Accordingly, we raised the cash position, see our latest Multi Asset Portfolio – US to unwind QE: increase cash. The unanticipated recent Greek political news flow and consequent market stress are addressed in our portfolio construction by the resilience we built into higher volatility scenarios and unexpected sources of turbulence. Indeed, the risk is not so much Greece but the structural illiquidity of the market which will exacerbate any moves up or down which should be part of the equation.
In the short term, we will see markets reacting to rising uncertainty. Indeed, don’t be surprised by a sell-off of risky assets in the eurozone (e.g. equities, peripheral bonds, euros) and the buying of safe havens such as US Treasuries, US dollars, and Swiss assets. Bunds will likely be considered as a safe haven within the eurozone, while peripheral bonds and/or OAT spreads (seen as a proxy of the eurozone a few weeks ago) should widen.
And here’s more from UBS on the flight to safety (via Bloomberg):
USTs will likely benefit from FTQ as Greece risks rise due to the imposition of capital controls, UBS
strategists Boris Rjavinski, Matthias Rusinski and Mike Schumacher said in June 28 note.
UST 10Y yield could fall ~60bps amid a worst-case scenario for Greece; yield dropped ~60bps after 1st IMF bailout request in April 2010, ~40bps after hung election in May 2012
UBS European macro strategists est. 40% probability of Grexit, which “could be further compounded by a 40% probability of inadequate policy response” in worst-case scenario
2-3yr TIPS breakevens could “underperform significantly” amid major risk-off move, “given their sensitivity to the current data and oil prices”
Note that SocGen seems to be more concerned about how broken markets will behave in the face of turbulence than they are about the actual source of the panic. So it's not so much about quantifying the damage a Greek default would inflict, or even about possible contagion in periphery assets. More important, SocGen says, is the "structural illiquidty" of the market.
In other words: we're about to find out what happens when structurally thin markets meet stiff macro and geopolitical headwinds and if China's economic deceleration and the state of proxy wars in Ukraine and Syria are any indication, this week could be but a dry run for the main event.
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the fed will never raise rates, deal with it
Shit, meet the Fan’s big brother – the Jet Engine. ;-)
Looney
These guys are RIGHT ON TOP OF THINGS.
"Please remember to close barn door." As they watch the horses galloping away over the crest of the far hill.
Yeah raise cash, so we can ban it because of the "crisis", then we can rake you over the coals when you turn it back in. Hey we might even call you a hoarder.
Hey I'm all for keeping dry powder but I take everything the banks say with skepticism.
Methamphetamine, Heroine, Cocaine, and PCP are all illegal too.
How are their street values holding up?
[Things are always more expensive on the Black Market...]
Cannabis prices here in the PNW say otherwise.
How is your tail holding up? And the visit with the dr.
As long as "Raise Cash" doesn't mean " SELL!!! " then everything should work out fine...
Where are the 15:30 BTFDers?
This market reminds me of the scene in Harry Potter and the Prisoner of Azkaban where Harry and Sirius Black are being attacked by Dementors in the woods, and Harry is convinced his father will appear and conjure a Petronus Charm to repel the Dementors and save them.
After waiting, with no one appearing and the Dementors continuing their murderous attack, Hermione finally screams:
"No one's coming! You're dying, both of you... and no one's coming!"
Every once in a while old Yeller has to give the shorts some hope so the pile on just in time for the Greece is fixed news and she squeezes their nuts like an over-ripened melon.
So, tomorrow then.
She can't let is go on too long, or the machines might actually start to sell.
Give TPTB some credit, they know when they have to back off to make it look like a free market.
Well, that did it:
The S&P 500 Index is officially negative for the year...
Which is why I took the profit on my S&P Shorts; news anouncements like that, encourage the muppets to BTFD.
+1 Agreed.
Today's decline is very "orderly" if you look at the DJIA curve for the day.
Of course not Ted, all this jawboning about rate increases r merely to keep some sort of lid on the equity bubble. The main tip was when Pimco decided to sell treasuries a few weeks back. They are to institutional barometers as Gartman is to retail investors.
The failed fed experiment can't raise anything!
Cashed out of my S&P500 Shorts today for $13,400+ P&L; Now, I'll wait till the muppets get it bid back up again to overhead resistance and do it again. This is the fifth time, by the way. Is this supposed to be difficult ? I didn't notice.
Isn't this kind of like the vampires asking the non-vampires to stock up on their own blood?
What's the size of SocGen's OTC derivatives book again?
Zero if the Paris Bourse closes...
Cash is evil, so get into cash...groovy.....
Information OVERKILL at Mo. Quality not Quantity. Soon we'll get reporting on Tsipras's toilet visits.
Physical gold is artficially priced. Why not that?
Shit Bitcoin has more value being able to out run captial controls.
notably through the Federal Reserve tightening of monetary policy
Again the lie that the Fed will tighten.
Let's not forget that US inflation numbers are completely fake - so real US GDP is much, much lower:
Let's not forget that the Chapwood Index for 2014 was 9.7% and official CPI in the land of the free was only 0.8%. So the Nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.
The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.
What is the Chapwood Index?
"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."
http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...
http://www.chapwoodindex.com/
Who coulda knowed the UST bears would get slapped again with that ' flight to safety ' nonsense ?
In order to "raise cash" a bank must "sell assets".
So brace for sell-side to rip the markets.
Downside market moves are in full swing.
So start selling French equities for fear of full scale Nationalizations?
Or "just raise cash"?
An asset to him looks like a liability to you and me, it's a strange world running on borrowed time.
Assets/liabilities = balance sheet
No, crossing red lines equals a dr visit, no assets involved, only liabilities.
"Unanticipated"??????????
yeah - i liked that too
"Raise cash", for what? Kindling? Ass wipe? It's fiat. Worthless. It's the primary problem of the situation.
If you believe that all your fiat is worthless, then please send it to me, I know what to do with it.
Did you like the fact that someone downvoted you for pointing out the obvious; lotta really smart people on this blog. And they up-voted the moron who claimed he can't buy anything with dollars; amazing, isn't it ? People living in a dream world.
Increase margin maintenance requirements. That'll force down precious metals prices, and return cash to the banks.
Yeah like I'm going to listen to SocGen (or ZH).
Puerto Rico downgraded to CC vs. B at Fitch Ratings
Margin party of five your table is ready, Margin party of five your table is ready
Damn! We had it all fixed until Greece..... Looks like we need moar QE.
Signed,
A central banker.
It sucks to be a Central Banker in Europe this week. If they scaremonger too much then the Spanish and Italian dominoes fall, if they scaremonger too little then Greece will never pay their debt back.
What to do, what to do?
"Increase the money supply."
Correct, NoDebt. Here is your degree in Economics.
(This is pretty much all I remember about college at this point.)
That's because education in this country SUCKS, nothing to pay execpt the consequences bitches.
Move to cash? LOL. A bit bloody late.
Lehman 10X
Except now no monetary bullets left, no CB dry powder, no trust, no leadership, and no way will there be a TARP.
Financial system is crawling with gnawing vermine and the destruction has gone unchecked for years. They've eaten holes everywhere taken profits and skipped.
We're off the edge of the map now, boys. Beyond here there be monsters.
Be optimistic cougar, we know who these vermine and "arsonists" were/are and the public executions will be quite entertaining. So we have that to look forward to.
yep - already did - sold all the stuff - gonna sit this next 1 out on the sidelines, watch wit my popcorn
They lost me at "unanticipated recent Greek political news".
whatever