Creditors

Greece has no future, so long as it clings to the euro. The dollar won't servce you much better. A drachma will only harm the Greek people. That leaves one other option.

Overnight, the Telegraph's Ambrose-Pritchard reported that "Mr Varoufakis told the Telegraph that the quotes were accurate but some reports in the Greek press had been twisted, making it look as if he had been plotting a return to the drachma from the start.  "The context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history," he said. It remains to be seen if treason charges are forthcoming but Varoufakis isn't wasting time, and after giving unofficial on the record comments to the Telegraph, moments ago he issued the following public statement on his blog.

There is now a new symbol for Greece's perpetual debt servitude...

• Chinese shares tumble 8.5 percent in biggest one-day drop since 2007 (Reuters)
• Japan’s Economy Shrank Last Quarter, Top Forecaster Says (BBG)
• Creditor teams in Athens to work on third bailout (AFP)
• Tsipras’s Paradox Is Six Months of Pain and Enduring Popularity (BBG)
• Goldman-Backed Instant Messaging Company Seeks New Investment (WSJ)
• Best Buy will sell the Apple Watch on August 7th (Engadget) - when is it coming to Dollar General?
• Senate votes to revive Ex-Im (Hill)
• U.S.-Turkey Deal Paves Way to Set Up Buffer Zone in Northern Syria (WSJ)

It all started in China, where as we noted previously, the Shanghai Composite plunged by 8.5% in closing hour, suffering its biggest one day drop since February 2007 and the second biggest in history. The Hang Seng, while spared the worst of the drubbing, was also down 3.1%. There were numerous theories about the risk off catalyst, including fears the PPT was gradually being withdrawn, a decline in industrial profits, as well as an influx in IPOs which drained liquidity from the market. At the same time, Nikkei 225 (-0.95%) and ASX 200 (-0.16%) traded in negative territory underpinned by softness in commodity prices.

Now that Tsipras has succeeded in compelling Greek lawmakers to cede the country’s sovereignty to Brussels in exchange for the right to use the euro, tales of unrealized redenomination plots have come out of the woodwork. Just two days after FT reported that former Energy Minister Panayotis Lafazanis planned to seize the country's mint and currency reserves, Kathimerini reports that Yanis Varoufakis, on orders from Tsipras, developed a top-secret parallel banking system. Now, the opposition lawmakers who helped Tsipras pass the new bailout measures through parliament are demanding answers. 

With every passing day that Greece maintains its capital controls, the already dire funding situations is getting even worse, as Greek bank NPLs are rising with every day in which there is no normal flow of credit within the economy. This has led to a massive bank funding catch-22: the longer capital controls persist, the less confidence in local banks there is, the longer the bank run (capped by the ECB's weekly ELA allotment), the greater the ultimate bail out cost, and the greater the haircut of not only equity and debt stakeholders but also depositors.

Now that the AIIB and the BRICS bank have officially launched and are expected to begin operations soon, it appears that not only will the yuan play a key role for both institutions, but in fact, the two development banks will collaborate on their lending activities. 

Syriza hardliner Panayotis Lafazanis and "a diverse group of far left activists from supporters of the late Venezuelan president Hugo Chávez to old-fashioned communists," planned to take over the Greek mint, commandeer the country’s reserves, and arrest Yannis Stournaras, the governor of the Bank of Greece, FT says, describing a secret plot hatched at an Athens hotel last Wednesday.

"The letter has been sent." Greece formally invites the troika back to Athens sparking anger, resentment among a conquered people.

After yesterday's latest drop in stocks driven by "old economy" companies such as CAT, which sent the Dow Jones back to red for the year and the S&P fractionally unchanged, today has been a glaring example of the "new" vs "old" economy contrast, with futures propped up thanks to strong tech company earnings after the close, chief among which Amazon, which gained $40 billion in after hours trading and has now surpassed Walmart as the largest US retailer. As a result Brent crude is little changed near 2-wk low after disappointing Chinese manufacturing data fueled demand concerns, adding to bearish sentiment in an oversupplied mkt. WTI up ~26c, trimming losses after yday falling to lowest since March 31 to close in bear mkt. Both Brent and WTI are set for 4th consecutive week of declines; this is the longest losing streak for Brent since Jan., for WTI since March.

In almost all cases, including the most recent rise, the intermittent change in psychology that drove interest rates higher in the short run, occurred despite weakening inflation. There was, however, always a strong sentiment that the rise marked the end of the bull market, and a major trend reversal was taking place. This is also the case today. Presently, four misperceptions have pushed Treasury bond yields to levels that represent significant value for long-term investors. While Treasury bond yields have repeatedly shown the ability to rise in response to a multitude of short-run concerns that fade in and out of the bond market on a regular basis, the secular low in Treasury bond yields is not likely to occur until inflation troughs and real yields are well below long-run mean values.

Junk-rated Chicago is paying nearly 8% to issue debt these days and although the city's fiscal woes are set to persist, some asset managers are taking the plunge ahead of a key court ruling scheduled for Friday.

On Wednesday evening, Greece took another step toward transforming itself into a vassal state of Brussels when lawmakers passed a second set of prior actions ahead of formal discussions around a third program. As Deutsche Bank noted earlier this week, there’s something quite absurd about the adoption of the new bailout terms being left to a government whose leader openly opposes the deal. And Deutsche Bank isn’t alone in their skepticism. JP Morgan has more on why no one "should put the odds of Greece staying in the euro above 50%".

• Greek PM keeps lid on party rebellion to pass bailout vote (Reuters)
• Greek Prime Minister Alexis Tsipras Remains Popular Despite Tough Bailout Deal (WSJ)
• Beijing's stock rescue has $800 billion bark, small market bite (Reuters)
• Capital exodus from China reaches $800bn as crisis deepens (Telegraph)
• Why Investors Shy Away From China’s $6.4 Trillion Bond Market (WSJ)
• Oil Rigs Left Idling Turn Caribbean Into Expensive Parking Lot (BBG)
• Bank of America replaces CFO in management shake-up (Reuters)
• The Financial Buzz? Pearson to sell Financial Times (Reuters)