This page has been archived and commenting is disabled.
Guest Post: The Next 15 Days Of Our Lives
From Mark Grant of "Out of The Box And Onto Wall Street"
The Next 15 Days Of Our Lives
An Important Week
I recall the early days of the Greek crisis when everyone asked why Greece was so important because it is such a small country. I responded that they had a total of $1.1 trillion in debt (sovereign, municipal, corporate, bank and derivatives) and I remember the blank stares. Now, if the newest bailout goes through, they will have more than $1.3 trillion in debt and while they could not pay the initial amount they certainly cannot pay any larger amounts so that it can clearly be stated that what is going on is the central banks of Europe and the ECB/EU lending money to Greece only as a conduit to pay back their own banking institutions. If you object to my math here recall that as the private sector involvement reduces the notational amount of sovereign debt but that the Greek banks are also going to be lent money so that the decrease in sovereign debt which excludes the ECB/EIB and IMF debt is not the headline bandied about in the press. So we have the hard date of March 9 when either the threshold for the exchange is met or not, the imposition of the CAC clause or not, the next “Question” to the ISDA if the CAC is triggered asking if there has been a credit event to trigger the CDS contracts, the possible consequences of a CDS trigger, the decision on the bailout funds by the EU and finally the March 20 hard date when Greece must make its bond payments or default. Regardless of your opinion, it may now be stated precisely, that there is a lot of risk on the table and on that basis alone I would assume a quite defensive position until this all gets played out. The risk/reward ratio is now strongly slanted towards Risk.
The Standoff
The IMF has offered $17 billion for the new Greek bailout according to the Finance Minister of Germany. The EU had hoped for a contribution of $51 billion so there is a shortfall in what has been theoretically approved of $34 billion which has been approved by no European Finance Minister or government. The IMF has said that they might increase their contribution if the firewall was made larger. Germany has stated that they will not increase the firewall as it is sufficient. We are currently at impasse here with the Greek March 20 bond payment looming large on the horizon. While this standoff is being largely ignored it is out there and quite real and some outcome must be reached in a timely manner or this could have a dire impact upon the next round of Greek funding if not concluded.
Spain
Spain has said that they will miss the financial targets mandated by the new EU agreement. It is not a small miss but a large one and this did not come from some unnamed public official but the Prime Minister. As Spain asks for leniency Austria has already said no and this will play out in a nasty manner I would guess. The miss is so large that I think the EU will demand more austerity measures which will cause more social unrest and a further division between the periphery and the core countries. If not that then the new agreement is worthless and I think Germany will dig in its heels. At current levels Spain and their banks are decent shorts and while the new LTRO drove up their bond prices; the effect will be short term and we are probably close to a turn in prices and yields.
China
Hard landing, soft landing; both unknown but what is known is that the Chinese economy is declining. China now predicts a growth rate of 7.50% versus 8.00% (a 6.6% drop) which is the lowest level since 2004. Contraction in China will lead to an Asian contraction and a rise in yields for not just sovereign debt but bank and corporate debt in Asia. Since the Chinese are generally optimistic in their projections we may see a real number, next quarter, of around 7.00% which will cause further consternation. I would be locking up profits in Asia now before we experience further deterioration.
Second Bailouts
Regardless of the protestations and political rhetoric there are two countries now likely to need further rounds of funding. They are Portugal and Ireland. I would say the odds for Portugal are now at 85% as I regard their current financial statistics. Their economy is in serious decline which will also affect Spain and it is quite possible now, in my view, that Spain will have to pony up to the till at some point in 2012. Ireland has done a decent job of implementation of the EU guidelines and the problem here is not getting the job done or doing what has been agreed to but just their economy. The Irish GDP is in a state of deterioration while their debt to the EU and to the bank’s bondholders remains. The slippage is slow but it is there and cannot be ignored so that I put a 40% possibility currently of the Irish having to come back to the table during the next twelve months without the EU agreeing to some PSI plan for Ireland. There is also the Irish referendum forthcoming, a slippery slope no doubt, and public sentiment may well worsen as new economic data becomes available.
Advice
The next two weeks are “risk-off” weeks in my opinion. There are multiple chances for screw-ups, a variety of ways that the Greek transaction could fail or be impaired, and unintended consequences looming in large numbers. I would be taking some profits, raising cash and watching for opportunities. There is way more risk than reward at present and “Preservation of Capital” should be uppermost in your mind. During the next two weeks guesswork will be replaced by reality and fanciful notions replaced by actual facts. Caution is advised.
»
- 11072 reads
- Printer-friendly version
- Send to friend
- advertisements -
.....and what happens on day 16 again?
Punch and pie will be served. Dancing girls are coming by for 8pm.
The Careless Whisper YOU CAN'T MAKE THIS SHIT UP & Threadjacking
Law Would Require Porn Produces To Submit All Unedited Porn To Police Dept To Review For Condom Compliance
http://www.latimes.com/news/local/la-me-simi-condoms-20120305,0,549548.story
Attorney General To Give Major Speech Explaing Why It's Legal For U.S. Gov To Kill U.S. Citizens Without Trial
http://www.washingtonpost.com/world/national-security/holder-expected-to-explain-rationale-for-targeting-us-citizens-abroad/2012/03/04/gIQACz41qR_story.html
Marcy Kaptur Vs. Dennis Kucinich In Tuesday Primary; Winner Faces Joe The Plumber
http://thehill.com/blogs/ballot-box/dem-primaries/214005-kaptur-kucinich-let-loose-in-cycles-first-redistricting-showdown
Op-Ed; Global Warming Is Bad: Tax A Gallon Of Gas Like A Pack Of Cigarettes
http://www.latimes.com/news/opinion/commentary/la-oe-schendler-cigarettes-lessons-for-climate-cha-20120304,0,6134172.story
Twitter Censors For The Man; Actress Account Suspended For Criticizing Gov Paid Birth Control
http://bellavidaletty.tumblr.com/post/18763569821/patricia-heaton-gets-twitter-account-suspended-for
V.P. Biden Dispatched To Latin America To Order Halt To Drug Legalization; Cartels Would Be Put Out Of Business
http://latino.foxnews.com/latino/news/2012/03/03/vp-joe-biden-heads-to-latin-america-amid-drug-debate/
High School Student Dates Three Of His Teachers
http://www.dailymail.co.uk/news/article-2110311/THREE-teachers-high-school-arrested-passing-male-student-16-sex-kissing.html
Oh....so in other words.
Mass hysteria.
http://www.youtube.com/watch?v=O3ZOKDmorj0
I think David Bowie is a prophet
http://www.youtube.com/watch?v=slKNd22GGaQ
What I don't get is why anyone would hit your down arrow?
wonderful.. world... :-) this web site is one of the few that.. doesn't censor
PL
Attorney General To Give Major Speech Explaing Why It's Legal For U.S. Gov To Kill U.S. Citizens Without Trial
Guess Obama could take the easy route to re-election and take out a few bansters. Probably holding that card till last.
SPOILER ALERT. Goddamnit you asshole. I clicked on the high school student banging his teachers link hoping to find some smoking hot chick with riskay photos in a bikini posing on a motorcycle or the like. Instead, I find he was banging dude teachers... This is pretty deceiving given the abundance of mediocre to smoking hot female teachers who have been caught banging their students and, for some reason, who also have riskay photos that are just safe enough to post unedited... please put a "sausage alert" on the link next time. Thanks for your cooperation.
my bad. i'll keep an eye out for the next hot female teacher with the high school jock story. in the meantime this VIDEO should brighten your day; (oh, and there's one or two important stories up there ^ that you may want to give some thought to.)
http://www.youtube.com/watch?v=xK8inPfHg_0
What's the going rate for lap dances?
This article is a joke. Everyone who can mist a mirror in the central banks of the world, plus all the financial news outlets, are all pulling in the same direction, which is to extend and pretend until the problems are magicked away by inflation and recovery. I bet nothing is changed, more or less, several years from now.
".....and what happens on day 16 again?"
Jack wakes momentarily, the dog licks his face.
Then they both go to sleep.
You will be greeted in heaven by 50 Sandra Flukes
That's not heaven buddy.....you took a wrong turn at Albuquerque.
Ain't touching that without a free raincoat.
.....and what happens on day 16 again?
That would be the day (Mar 20) we find out for certain that Greece defaults (or not).
Which means we find out if Greek CDS were worth their premium (or not).
Which means we find out if Contagion takes hold (or not).
Which means being net long could be painful (or not).
Which means we find out if this is the last time we have to think about if Greece will default (or not).
Which means we will go through this routine again in approx. 6 mos. if Greece does not default.
So lets hope we can just go ahead and get it over with so we have time to get our Greek Isles vacations planned before summer!
My money is on: They come up with some new all-powerful agreement. The responsible agencies declare that no default has occurred. I.E. same old, same old.
Until people are willing to simply call bullshit on the whole process, you are 100% correct... welcome to groundhog day.
GetZeeGold i see you are a ZHer as well. Keeping the same user name across multiple forums? I thought us PM guys were supposed to be security freaks.
GZG sure gets around, and that's no fluke!
And to think this all started with one fissionable rumor.
Risk off makes sense to me. Do not need to be in this market every week.
Yeah....clearly we are in an environment that is sans risk.
As an aside, what is this "Are You IN ?" political advertisement graced with Michelle Obama's lovely mug ? Is Ty trying to reduce page views ?
Your tax dollars at work.
The ads are non-denominational.
I get adverts for "Re-elect Orrin Hatch - a true conservative" and "ally bank is your friend" so even if the ads are a crock of bullshit they keep the Fight Club funded.
Get Mozilla Firefox and the add on addblocker. Pesky ads go away!
Ah, I see that the elegant Michelle junked you. Laughable.
what does "risk off mean"?
- the market
monopoly
"Risk off makes sense to me."
I thought all problems were settled by dance offs these days.
Agree Gully, that is the way it has been, but one of these days the music will end and I do not want to be without a chair. But play on if you want.
What position is really "risk off"? Being out of stocks but holding cash in a money market at your brokerage that may have been "re-hypothecated"? Opps, sorry, it's gone. Or what if CDS triggers a cascading cross default and collapses the system, think you are going to be seeing anything come back from any account anywhere? What about holding cash when the gloves come off and the printers go into overdrive? I'm not thinking there are too many places around that are truly "risk off", just less risky as a function of probabilities.
The douchebags must pay the fucking piper..
The Bernanke has communicated via Hilsenrath that he will now allow US equity market participants to go short with only "normal" market risk, no CB intervention risk. Last one short is a rotten egg!
I'm not touching the POS in either direction, the moment you go short greece will be solved. Again. LOL. There's no telling when the manipulation will stop. I think we're due, but who knows. No faith in this crap shoot whatsoever.
...the next “Question” to the ISDA if the CAC is triggered asking if there has been a credit event to trigger the CDS contracts, the possible consequences of a CDS trigger, the decision on the bailout funds by the EU and finally the March 20 hard date when Greece must make its bond payments or default.
If ISDA says, post-CAC: "no credit event/CDS trigger" its a much bigger deal for the rest of the Euro sov. debt marketplace than it is for just Greece. It will effectively be an announcement that all Euro sov. CDS (aka insurance) could just as easilly be rendered worthless by some future and similar wave of the wand.
Regulatory capture?.....who are the biggest writers of crappy EU sov. debt?
Which is pretty hilarious considering it would be a governmental action outside of the capabilities of the sellers' hands... thus, no putbacks.
(when in reality, the sellers/creators/folks on the hook are working lockstep with regulators and legislators to ensure no payout occurs... better hope none of those communications ever surface unless someone wants some putbacks).
yes but don't forget the magical ipad refresh occurs this week! nevermind 100b in market cap has been 'created' in aapl into the run up - another 500b should be just around the corner!
If Greece leaves the Euro Zone does it become an Offshore warehouse for SIVs funding European Banks through ECB credit carousels drawing through TARGET2 ? I mean this is getting to be like Parmalat -
http://www.wsws.org/articles/2004/jan2004/parm-j06.shtml
According to the charges, numerous shell companies were set up to generate fake profits for Parmalat and subsidiaries. In addition, Parmalat’s finance director, Fausto Tonna, has told interrogators that he participated in a “cut and paste” forgery, in which a document with Bank of America letterhead was scanned and then added to a document verifying a deposit account with that bank holding over $4.98 billion. The document was then passed through a fax machine several times in order to appear authentic.
it appears, key event leading to Parmalat’s exposure came when Calisto Tanzi and his son Stefano, who was a top executive at several of the family’s concerns, met December 9 with the private equity firm Blackstone Group in New York to discuss selling all 51 percent of the family’s stake in the food empire. During the conversation, in preparation for the opening of their books to a transition team from Blackstone, the Tanzis let slip that the cash on hand was somewhat less than the 3 billion euros listed in the company’s annual report. They admitted that, in fact, there were hardly any liquid assets, and the company was 10 billion euros in debt
Does anyone think that this is an isolated event amongst a sea of honest business pratices?
Where are the cops?
They are donating their services to Jon Corzine's birthday bash.
yeah, but non farm payroll will somehow print +450,000 and everything'll be good again....
...and that is the game. Getting the "market" to trade on the illusion of prosperity being present or "just around the bend." The Ponzi lasts so long as, on the margin, the illusion is the dominant gene...unless the gravitational force of reality overwhelms it.
So the key question to me is whether the collapse will be precipitated by the curtain being drawn back on the illusion or the gravity of reality taking hold. (My belief is the latter.)
Gravity..bitchez
That is some serious precision.
2.7 metric assloads, is that close?
Like black swans through the hourglass.....
The VIX has been acting strangely perhaps due to the present level of contango but there seems to be more than that. Maybe there is just a general lack of anticipation of future volatility but it looks quite the opposite to me. The fact that Credit Suisse has temporarily converred TVIX to a closed-end fund because of the enormous volume also throws confusion into the VIXens.
I view the recent market action as the eye of the storm. Last year volatility was high, then we experienced an unearthly calm and the VIX collapsed. Now, unless I miss my guess, we're passing through the eye wall and back into higher volatility again.
Thoughts?
http://screencast.com/t/9RMWVRMTpBY
Simalarities in Vix/vxx time and space. Lets see if the channel patterns follow suit.
What do you think about the ~$3 contango effect in the March rollover?
I'm not trading option futures right now, however this might interst you.
http://vixandmore.blogspot.com/
Mutual funds have depleted contributions, but they are recuired to be fully invested. They continue risk on by buying the dips along with thieir big bank daddys' necessity to park excess liquidity in risky stocks.
However hedge funds with no fully invested recuirement continue to knock down tthe rally of dip buying. The machines don't care either way. but go with the trend and attack all visible stops within the 2x bolinger band price ranges. I'm thinking the hedge funds win out, at least short term; we shall see.
"Like sands through the hourglass...these are the days of our lives..."
The soap opera continues.
With volume so low, and the machines on edge, there are only two viable investment options right now:
Gold and Long Volatility.
I will be bet anyone here that a 50/50 portfolio that is long gold and long volatility will over the next 12 months destroy any other portfolio you can come up with.
I'll take silver and fine art for two billion, Alex.
This will end badly- Probability 100%
This will end unpleasantly, but not terribly- Probability 0%
This will end well- Probability 0%
PRobably never ends, just sifts thru the shit. Risk off , boots on.
Oh it ends, just at different times for different people.
for the people of Greece, its ended, for the people in spain, its ending. Our turn in line will come, and for many millions of unemployed americans, their turn already came.
And the Mobius Strip of Extend and Pretend goes around and around.............................................
"what happens on day 16?"
"jack wakes up..."
NO, the flight attendant lightly taps him on the shoulder and asks him to fasten his seatbelt for landing.
"...so that it can clearly be stated that what is going on is the central banks of Europe and the ECB/EU lending money to Greece only as a conduit to pay back their own banking institutions..."
Now I get it. BTW did they really owe the money in the first place?
http://ca.news.yahoo.com/icelands-ex-pm-geir-haarde-prepares-face-trial-125310926.html
Iceland's ex-PM Geir Haarde tell court he is innocent as historic financial crisis trial opens . Iceland's former prime minister has rejected charges he failed to adequately protect his country's economy from financial shocks in the first criminal trial of a world leader over the 2008 financial crisis.we need more prosecutions like these .
Greece should get off the Euro zone, Western World zone, Whole World Zone and create a Free Zone. By passing a bank secrecy protection law.
There is only one outcome that will force the system to change, that will force the Ponzi to collapse, that will end systemic fraud and protect the future from the sharks of the present:
Let them play chicken until the CDS are triggered. Then, don't honor the contracts. Let market participants on both sides of this battle experience all their trust being destroyed. Then, they will finally be just like us.
Does anyone else here have a funny feeling that this whole world economic collapse was 'caused' by this brilliant POTUS as an attempt to collapse China because they got too big for their britches?
Just asking...
So the real question is whether or not to buy precious metals now?
The Greece round is already won -- by the bankers. They got away with introducing RETROACTIVE CAC's WITHOUT TRIGGERING CDS.
Now a holdout's choice is simply between not getting paid, and not getting paid while also destroying the world.