Do They Or Don't They? Will They Or Won't They?

Tyler Durden's picture

Submitted by Peter Tchir of TF Market Advisors

Do They Or Don't They? Will They Or Won't They?

It’s hard to believe that here we are again trying to figure out what Europe will do over the weekend.  In our case a long weekend.

In spite of the fact that the Greek story has been out there for almost 2 years now, it still drives the market.  Virtually all of the big moves this week came on the back of Greek headlines so it is impossible to argue that it is “priced in”.  My best guess is that a resolution (which the market believes is most likely) sparks a 2%-4% rally.  A default (which I think is most likely) sparks a 5%-10% decline.  So at these levels I will be short as I think the most likely move is lower, and the move lower is likely to be bigger.  With the market being choppy, being nimble remains a key. 

Yesterday was one of the bigger swings we’ve had.  The S&P moved almost 2% and is starting to feel like it did last fall – either extremely well bid with no sellers, or feeling ugly with no buyers and almost no middle ground.  Be careful about high yield.  Everyone is still talking about the “flows” but although JNK has been able to attract some new money, HYG has not added a single share this week. HY may be cheap, but if the new flows dry up, it will struggle from here.

The CPI data is also important.  The fed has set a 2% “target” and talks and acts like we are running below that rate, when in reality, inflation is above their target. An upside surprise here would be bad for the markets as it would be yet another argument against QE.  The economic data has been good (though I believe influenced by unseasonably good weather), but the market is impacted by the hopes of QE, so asides from Greece, that is the other big story to watch.

The market has a tendency to do well after the credit guys leave on holiday shortened trading days.  So with the desire to believe that Europe will not let Greece default (in spite of evidence to the contrary) the markets may remain in rally mode for the day because no one wants to miss the imminent resolution of the crisis.  I am far more convinced that we will get some very disappointing headlines because the situation really doesn’t work, and the tone of Europe has switched from “No Default” to “No Disorderly Default”.

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GetZeeGold's picture

 

 

I give up....at this point just do whatever the hell you want.

 

 

battle axe's picture

Perhaps Monday there will be a default while US markets are closed? A theory floated yesterday on ZH...

trebuchet's picture

a selective default has always been on the cards as defined by rating agencies

JPM Hater001's picture

<-------Greeks Default Before March 20

<--------Greeks Default way after because every last ounce of free capital sitting around will be hurled at them first.

He_Who Carried The Sun's picture

A wise move.
Merkel said in April 2011 2013 will be the year, and that's when the Greek will leave in order to "restore their competitiveness"....
Funny how people tend to forget that all these Dutch, Finnish, and German politicians do want to be re-elected and therfore 2013 !!

TradingJoe's picture

For once I agree with Pete! On his thoughts, not the potential "outcome"!

atomic180's picture

Totally confused now, IN CASH, believe we'll hear that the PSI wants more, no deal yet (BUT SOON) so Monday they get a BRIDGE LOAN TO NOWHERE...

GetZeeGold's picture

 

 

Trade your paper for gold.....now you're done.

 

 

 

 

sessinpo's picture

One upped gold/silver. Got stored food, 4 guns (pistol, shotgun, medium range carbine, long range rifle) and tons of ammo.

Wm the Shrubber's picture

I got short yesterday based upon the Costanza principle.  I did the exact opposite of what I thought I should do!

JPM Hater001's picture

God bless ya you chubby taco eating living with his mother and father slob

http://www.youtube.com/watch?v=rS72uV5XFSI - Constanze meets Steinbrenner

blindman's picture

Chooch to Gooch: The Ten Steps of Disco Dancin' - Bobby Braciola
how ya doin? go from chooch to gooch in 3 minutes.
http://www.youtube.com/watch?v=Zk9k_wbqQFw&feature=email

CrashisOptimistic's picture

 

1) There is no such thing as a sovereign default.  The bond holders don't accept a declaration of default because there is no bankruptcy court to force them to.  They keep sending bills demanding payment, forever.  So default doesn't do anything for Greece other than let them skip some payments and not be able to borrow money to fund pensions and government employee paychecks -- given no one will lend to them within 24 hrs of default declaration and a deficit requires borrowing.

2) The choice is endure that calamity NOW or go along with the EU's plan and stretch out the pain to a lesser amount for a longer time and even provide themselves with a bit of hope that a miracle will appear and end the pain altogether.  After all, about 50% of their debt is about to be forgiven so this approach of extend and pretend is about to yield results.

Based on these two realities, why would they default?

DavidC's picture

For the same reason Iceland said FU to the banks - short sharp pain and then recovery rather than long drawn out pain and no recovery.

DavidC

riphowardkatz's picture

The Iceland Greece comparison is inaccurate. Greece is not Iceland or even close.  Greece tells the banks FU then goes back to the drachma which is backed by no produtive capacity and supposedly everything will be fine?  Look at the components of Greece's GDP they produce nothing except government services. The drachma would buy very little in the world market. They will suffer enormous pain if they do it and Europe wont mind watching it.  Not to mention the sanctions that could be placed on Greece for the default. They will be made an example for any other country that dares not obey the ECB/EU  

End result is no default. Some haircuts (50%) Commitment to austerity.  Rich greeks getting taken to the woodshed. Germany saving face by declaring a victory by taking some amount of sovereignty. 

 

JPM Hater001's picture

I gotta disagree.  You know I've been watching some videos on the depression and poverty over there.  It is a really really really big problem.  We are looking at this like all their social programs are still functioning and their economy is still intact.

Reality...It is not.  Ergo- Regulation and overtaxation lead to business reduction leads to black markets leads to lower tax revenue leads social program deficits leads to more regulation and further over taxation and on and on this merry go round goes.  Whe it stops nobody know.

But it will stop.  And I think that's when the people decide to let it fail.  They will accept nothing less.

DavidC's picture

riphowardkatz,
Thank you I am aware of the differences between Iceland and Greece.

Greece's main 'industry' has been tourism and shipping. Tourists cannot afford to go Greece now (I have a friend who owns a property there and was surprised when he told me by just how much the cost of food and drink has gone up. By going back the Drachma (and I'm not saying this is the ONLY effect) would have the effect of reducing tourism and make it more appealing and popular once again.

DavidC

riphowardkatz's picture

Interesting observation.

I guess the questions would be 1. is tourism enough? Would enough people want to go tour a country full of people who are super pissed because of the real austerity that would have to result from not being able to borrow and from being shut out of international markets?

Without severe austerity going back to the drachma would most likely lead to massive inflation in a very short amount of time.

There are no good answers for the Greeks or anyone. 

 

fonzannoon's picture

Good point but it's a little late for that no?

Raskolnikoff's picture

There is no market anymore, just terminator machines robbing the humans blind of whatever capital they have left.

wandstrasse's picture

True - but not new at all. this is going on since decades. And only very few - too few - are aware of it.

LawsofPhysics's picture

There are human families on the other side of those machines dude.  Same as it ever was, now get back on that wheel and run.

PhilB's picture

Peter is out on his own assigning a greater than 50% probability of imminent default.

PhilB's picture

Should I pay or should I go now....

If I go there will be trouble...

If I pay it will be double....

 

 

Waterfallsparkles's picture

I really wonder how many Dow points we have gained on all of the Greece is Saved headline.

It also appears to me that the Market surges on the Greece is Saved headline but never gives back the gains.

I think that the Market will react like it did with Aapl after the parabolic move up.  It will crash.  Plus, what will the use to goose the Market after Greece fails?

Vincent Vega's picture

Once an outcome for Greece is finalized, attention can be turned to Portugal then Spain then Italy then UK then US.....this circus could drag on for years. It is very frustrating. They are trying to control the speed at which the Titanic sinks. <imho>

Bruin4's picture

I agree, two years on Greece, then years will be spent on Portugal, then IT then Spain and then Ireland - EASILY Obama will be out of office ( after his second term) before there is any real reversal in this melt up and then maybe, just maybe the focus can be put on the real 800# gorilla in the room  ( or is that a room full of 800# gorilla's?) The USA of insanity.

Market gains on fake labor and unemployment stats and on Greek rumors and then it NEVER NEVER gives back those gains on real news. Thats not allowed anymore, apparently you did not read your homeland security brief about this.

SheepDog-One's picture

But they dont need or intend to continue on for years, all they need is all the bonds and equities purchased by themselves using your money from the future and theyve already basically done that. No need to keep playing after you have the whole pot sitting in front of you. One of these mornings, theyll get up and walk leaving everyone broke.

DavidC's picture

One could equally well argue that the market might want to lighten up in holdings going into the weekend so we could see a drop today.

Who knows...

DavidC

Crash N. Burn's picture

Gotta love this - from http://maxkeiser.com/

The CADTM downgrades its IMF rating and places this institution on very negative outlook

"The Committee for the Abolition of Third World Debt (CADTM) has decided to downgrade the IMF’s rating due to this institution’s heavy share of responsibility for the deterioration of people’s living standards in countries subjected to austerity policies it has openly imposed or dictated from behind the scenes. The resulting high levels of unemployment, aggravation of the crisis and the increase in public debt of the States following its counter productive and unjust recommendations justify downgrading the IMF’s rating from NNN to NO- with a further very negative outlook."

XtraBullish's picture

Anyone that thought that this massive global reflation (whether a Ponz-a-tron or not) would not result in a massive Zimbabwe-esque explosion in share prices should go back and observe the 1970's.

LawsofPhysics's picture

you mean back when we had inflation all around (including wage inflation) and the market range traded for ten years.  Contradict yourself much?  What has been happening to wages again in america?

RobotTrader's picture

I'm wondering if this site will still be harping on the Greece news after the Dow gets over 13,000 and the SPY breaks out over the 2010 highs.

LawsofPhysics's picture

...and a loaf of bread cost $10.00.  Yeah, now that is winning roboturd.  There is a real cost for creating captial without adding any real value, but I am sure you know that.

SheepDog-One's picture

Only thing Robo knows is whatever momo on his screen happens to be green.

ekm's picture

This is the only site in the world that filters all REAL financial news and provides quite intriguing commentary and guidance.

News are yours to be digested and interpreted. Remember this:

THERE IS ONE THING TO KNOW ABOUT SOMETHING, THERE IS TOTALLY ANOTHER DIFFERENT THING TO DO SOMETHING BASED ON WHAT YOU KNOW.

Ultimately, with time and patience as CONSTRAINTS, EVERYTHING IS A BET.

ConspiracyTheory's picture

IF that happens, just blame it to the market since they are dumb and everyone here is smart. And the market is gonna collapse soon anyway (no time limit and no stop loss so put all your short in without time limit and stop loss).

knukles's picture

So much for the Euro myth of being so Civilized (Grand Theft Country) Caring (Banker Brand Socialism) Humanitarian (Starve the Greeks) and Philosophically Consistent (No to orderly Default)

Seriously.  Is is not amazing that the social and civil repurcussions have yet been so shall we say, mild and passive?
Shortage of Tear Gas or Flouride?
Jesus. 

At least Nancy Grace is getting all over Whitney Houston's mysterious demise.

This whole thing is fucked up beyond Kafkesque.

BobPaulson's picture

Exactly. It's like Invasion of the Body Snatchers where everyone is wandering around like robots, even the people who are just pretending to be robots so they don't get caught.

If there is one thing that is "different this time" I'm prepared to say that it is the advanced science of psychology from years of research in advertising and psiops that has allow it to get this far. The Matrix is an extreme metaphor but it is hard to argue we are not headed that way.

I'm still sitting at my desk for example, am still very secure and haven't joined any paramilitary or revolutionary group. I go to rallies and support protest causes but I haven't gotten violent yet. Perhaps I am waiting for the background social chaos to grow to the extent where I feel justified. Perhaps that will never come so my red/blue pill moment never appears.

pmcgoohan's picture

Thinking of letting go of some SPY and buying TVIX on the basis the volatility is near guaranteed over the next four weeks while SPY gets kicked in both directions by the daily German mess around.

Here I'll assign some probabilities to the Monday meeting outcome:

bailout rejected outright 20%

bailout signed off without further procrastination 30%

more procrastination 50%

John Law Lives's picture

That guy should be real careful where he goes in public from now on. No telling what bad guys might try to do to him.

GaryNeville's picture

Don't think there will be a major sell off till after QE, even if Greece does go bounce!

Once Bernanke anounces QE markets will rally 5% then the whole world will dump the lot!

 

ConspiracyTheory's picture

Uhh... 5% rally... is that saying "buy now?"

Dick Darlington's picture

OT: Update on the toxic waste that is the balance sheets of spanish banks

Feb. 17 (Bloomberg) -- Spanish banks reduced lending at a
record pace and defaults mounted as the country’s recession and
rising unemployment took a toll on their ability to make loans
to solvent borrowers.
     Lending fell by 3.3 percent in December from a year before,
the biggest drop since Bank of Spain records started half a
century ago, the regulator said on its website today. Bad loans
as a proportion of total loans rose to 7.61 percent from 7.52
percent in November as borrowing considered “doubtful” jumped
to 136 billion euros ($179 billion) from about 11 billion euros
five years ago, before Spain’s property crash.
     The prospect of a protracted recession in Spain is curbing
the appetite for loans and making banks more cautious about
lending. The economy may shrink 1.5 percent this year, according
to central bank forecasts, while unemployment stands at 23
percent. Exane BNP Paribas predicts an economic contraction
could stretch through 2013.
     “You have a credit crunch in Spain,” said Gilles Moec,
co-chief European economist at Deutsche Bank AG in London.
“It’s another reason for recession this year.”
     The new government of Mariano Rajoy announced on Feb. 2
plans to force lenders to take their share of about 50 billion
euros in provisions and capital charges for real estate as a
step toward freeing up lending in the economy.
     Banks piled up apartments and building land on their
balance sheets as loans to property developers and mortgage
borrowers soured during the crash. The government is talking to
banks to try to reduce the number of people evicted from their
homes for failing to pay their mortgages, Economy Minister Luis
de Guindos said in an interview with state radio RNE late
yesterday.
     Deposits gathered by Spanish lenders declined 4.6 percent
from a year earlier, the Bank of Spain said. Deposits increased
0.5 percent from November, the regulator said.

adr's picture

When you have no solution, the only solution is procrastination. You lie and say you are very close to finishing, just needs that extra polish. The longer it takes the greater the expectation that the solution will blow everyone away.