Slow motion chicken

Macro Man's back from a family holiday in rural Texas, and lo and behold it looks like we're finally nearing the end of the world's longest, slowest game of chicken.  Some five and a half years after Greece's naughty public finances first came under the microscope, the endgame at last appears to be nigh.

"Who cares?!?!?!" shouts my 26-year old alter ego.   "Greece isn't Lehman!"

Yes, it's true that Greece isn't Lehman.  Greece is not an intermediary to trillions of dollars worth of financial transactions across a myriad of counterparties, and issues of re-hypothecation of collateral and similar "oi, where's my money!" issues don't really exist.  (Unless, of course, you're the IMF or one of Greece's other official creditors, in which case you're probably thinking "oi, where's my money!")

That having been said, capital controls are capital controls, and -quelle surprise!- the "one-off" imposition of such measures in Cyprus turned out to be...err......not one-off.   On a happier note, capital controls in Cyrpus rolled off a couple of months ago, so any Greeks not prescient enough to get their money out of dodge can look forward to doing so in the summer of '17.

"Yeah, yeah, cry me a river," mutters the alter ego.  "There's only two things you need to know about this mess:   stocks are going on sale, and the Fed is never tightening.  You know what to do, baby!"

It's true that the initial reaction to these sorts of fiascos is rarely the final one, and there's usually some sort of retest regardless of the magnitude of the initial move.   That having been said, the alter ego has never seen anything remotely resembling proper distress in his "professional" life, and running out of Schaefer kegs at that great party in 2008 hardly qualifies as a "crisis."

"Low blow, old man, but at least now I can see where you got all that gray hair- listening to stupid war stories from embittered market veterans back when you still had game.   Janet knows what time it is, and she can- to use your analogy- hook us up with plenty of kegs of delicious Bud  Light Lime at the drop of a hat.  QE uber alles, or whatever it is the Germans say."

Actually, it's "Deutschland, Deutschland über alles," which is as succinct a summation of Eurozone economic policy as you're likely to find.  The irony, of course, is that the initial market reaction- to sell euros- is as nice a treat as German exporters could ask for to punish those naughty, naughty Greeks. 

That being said, the "collapse" in the euro is at present rather underwhelming, to say the least: at the time of writing EUR/USD is still well above where it was in late May.  If you'd known the payroll figure and that Greece would apparently finally lose the game of slow-motion chicken, you'd be asking for your money back to see EUR/USD at 1.10.

Actually, can I have my money back?


"Serves you right, Grandpa, for trading those stupid macro instruments.  So old and yet so naive.  Repeat after me:  the only asset class to own is stocks (or high yield if you're a bond guy.)  There are only three permissible positions: long, longer, and longest.   QED."

QED?  I didn't know that they still taught Latin in schools.

"It stands for 'Quantitative Easing, Dammit'!   That's the only thing that matters.  You can't fight the ECB and the Fed."

Actually you can, and that's typically how guys like me make money when guys like you are doing this.  Nevertheless, there's no point arguing about it.  You're going to buy stocks (or at least claim to have if they bounce back), and I am not.  Regardless of what you might think of the SPX, why anyone overweight Europe wouldn't reduce by quite a bit is a question that we're likely to find the answer to over the next week or two.

Front VIX, which closed in the mid-teens on Friday, will potentially be a useful guidepost in gauging how the market reacts, though obviously the more useful signals will come at higher levels.  In the meantime, Macro Man will look to add opportunistically to his short euro position and once again wonder if the yen is the unintended accident waiting to happen.  Good luck out there.

"You too, old man, and don't forget to take your Geritol."

Hmmph.  One more episode of Spongebob for you, young man, and then it's off to bed. 

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Leftback
admin
June 29, 2015 at 3:38 AM ×

The Chicken Has Landed, MM? Welcome back, by the way, guv'nor.
I think I just saw Funny Money retching in the latrines. Hope he's OK.

What's Greek for "patacones"?

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Anonymous
admin
June 29, 2015 at 3:46 AM ×

Puerto Rico's governor: Island's debts are 'not payable' - @nytimes

Well neither are mine.

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obat kuat
admin
June 29, 2015 at 4:19 AM × This comment has been removed by a blog administrator.
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JohnL
admin
June 29, 2015 at 4:40 AM ×

Well I'm having a hard time feeling sorry for the clowns that bought up a bunch of high yielding Greece junk and now have a big lip on because the barber has the #2 clippers out.
If the math don't work it don't work just make sure you wear a hat eh!!

Now I'm a little suprised by shanghai's open after the pboc double rate cut. So interesting times.
Im liking Nico's spx position.

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Nico G
admin
June 29, 2015 at 6:47 AM ×

is Obat the new Abee ?

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Nico G
admin
June 29, 2015 at 7:03 AM ×

Eurostoxx auction gap was like, 2008 or worse (-5.5%)

Six Flags volatility is back

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FunnyMoney
admin
June 29, 2015 at 8:18 AM ×

I have been buying EU equities this morning from the open. Wish me luck :)

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Nico G
admin
June 29, 2015 at 8:46 AM ×

next time buy the future an hour earlier, and sell it when cash opens that's an extra discount for you

it is hard to price European equities at this point so yeah, good luck !

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FunnyMoney
admin
June 29, 2015 at 8:55 AM ×

@Nico. Thx. I'm guessing with the gap down on Spoos, you're (hopefully) having a good day?

Have unloaded half my position (FDAX, FESX) circa Dax 11150, stops to BE on the rest. Two chances from here. Hope you all have a good day.

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Nico G
admin
June 29, 2015 at 9:05 AM ×

it is not as morally gratifying to have a good day amid tragic circumstances, but yes good day here and a great week for Greece they should be proud of their astute politicians.

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FunnyMoney
admin
June 29, 2015 at 9:14 AM ×

@Nico - I'm no fan of the EU so fully agree, & good call on Spoos.
(Minor update - moved stops up to circa Dax 11k).

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Gnome of Zurich
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June 29, 2015 at 9:14 AM ×

After the initial sell-off by scared news watchers, I am still expecting the mother of all relief rallies in EUR und Euro Stocks. Or that is at least the way to bet. So I am a buyer of PIS Banks this morning (G got unfortunately expelled from the club). Anyone else for a PIS trade?

EUR was already strong last week on "no deal" days. I am expecting more of it.

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Anonymous
admin
June 29, 2015 at 9:22 AM ×

i think I'm too old for this game now---all i see is people saying everybody is a seller so btfd! good old double bluff....whats the risk reward here ESTX 3485, es1 2075
am i missing something( besides a buy button?)

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CV
admin
June 29, 2015 at 9:53 AM ×

Huh?!

WTF MM ... why didn't you tell us that you were on holiday!? :) I could have made a killing here*. Oh and that video is a peach!

--

*For those reading here a while, they will know that things always go crazy when MM is away!

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FunnyMoney
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June 29, 2015 at 10:00 AM ×

Just for completeness, offloaded another a quarter of my EU equities position (circa Dax 11170). Running the last quarter with trailing stop in case we re-trace.

On an FX note, interesting to see the SNB intervention in Euro :)

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FunnyMoney
admin
June 29, 2015 at 12:15 PM ×

During an early lunch break, my trailing stop was hit on remaining EU equities, so it's now clear to rally 400 pts :)

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Anonymous
admin
June 29, 2015 at 12:59 PM ×

From the headlines...

"Monkeys break free in great escape from research facility in Puerto Rico"

I thought they ran the island and are now demanding a Fed bailout.

Jason Malloy's analysis of Puerto Rican IQ...

http://humanvarieties.org/2014/03/13/hvgiq-puerto-rico-2/

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Anonymous
admin
June 29, 2015 at 1:27 PM ×

Funny Money,

Is that a new song you're singing today? What happened to the lyrics of I'm King of the Universe?

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FunnyMoney
admin
June 29, 2015 at 1:30 PM ×

@Anon 1:27, sorry I don't follow?

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Leftback
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June 29, 2015 at 1:49 PM ×

Play nicely, children. To be honest, the name calling has been slightly tedious, and I think that MM would prefer if we all interacted on a slightly elevated plane of behavior while we are in his manor. Otherwise, the yellow card might re-appear...

PR is a huge mess, a Greece on our doorstep here. That mess might deliver some delightfully tasty muni bargains if a bit of mid to low grade muni contagion begins. Abee will be all over that, I suspect. Patience and cash are such valuable commodities.

Cheap and well sized option bets on Europe eventually caving still seem the way to play the headlines for now, rather than equity, but LB also thinks that the Greek phone company OTE will exist next year and that Greeks will talk on their mobile phones and landlines. The whole knife catching dumpster diving investment business is a matter of time horizons.

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Anonymous
admin
June 29, 2015 at 2:23 PM ×

FT: @ Leftback 1:49 pm
With about 3 Bln euros in debt, it's also a bet on greece staying in the eurozone short term (likely but not sure)

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Leftback
admin
June 29, 2015 at 2:32 PM ×

A coulpe $B to avoid thinking about Spain, Italy and Portugal yields going into orbit? This seems relatively inexpensive. EVen Schäuble isn't that much of a moron. [Is he?]

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Anonymous
admin
June 29, 2015 at 2:40 PM ×

"Some companies may feel a direct hit from a Greek exit. Deutsche Telekom AG (DTE) could be forced to write down the value of its 40 percent stake in Greece’s Hellenic Telecommunications Organization SA (OTE). The investment generated about 6.4 percent of Europe’s biggest phone company’s earnings before interest, taxes, depreciation and amortization last year."

http://www.bloomberg.com/news/articles/2015-06-22/peugeot-to-siemens-fret-a-grexit-would-stunt-europe-s-recovery

How ironic...

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Anonymous
admin
June 29, 2015 at 2:42 PM ×

Tsipras is slick (like they all are), gets elected saying no deals, no more austerity, my way or the highway, Now that it is crunch time, he chickens out, shuts the Greeks off from their money and now they are forced to vote for a deal and austerity forever so they can get at their money.

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Anonymous
admin
June 29, 2015 at 2:46 PM ×

"...top 20 managers account for 40 percent of all assets..."

BBG: Global bond markets face the risk of a “liquidity illusion” because holdings are becoming concentrated in the hands of fund managers, according to the Bank for International Settlements.
The top 20 managers account for 40 percent of all assets as dealers reduce inventories, BIS economists wrote in their annual report. Assets under management more than doubled in about a decade to $75 trillion in 2013.

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Leftback
admin
June 29, 2015 at 2:52 PM ×

Anon @2:40. It seems unlikely that DTE or DB will be taking any huge hits here.... this is just the way things work, nicht wahr?

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econ man
admin
June 29, 2015 at 3:00 PM ×

Interesting. It seems like no one has any idea what is going on over there; Greece is just messing around.

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Anonymous
admin
June 29, 2015 at 3:25 PM ×

Puerto Rico banks slide on default worry.
10:15 AM ET • Popular (BPOP -7.5%), First Bancorp (FBP -8.1%), and OFG Bancorp (OFG -5.9%).

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FunnyMoney
admin
June 29, 2015 at 3:27 PM ×

@LB 1:49 - Agreed. (NB: To any Anons who wish to make veiled insults in my direction, that's fine by me, but do be aware that I'm not v clever, so you'd do better to just say what you mean).

So Dax rallied just shy of 200pts past my final stop, and is now rapidly re-tracing (lol). I like buying dips, but I'm not one for holding risk too long at the moment, especially after bagging circa +250 Dax pts before lunch, and a similar chunk on Eurostoxx. Maybe there'll be another dip to buy tomorrow, who knows? Well, I'm off to sing "I'm the King of the Equity Universe", have a nice day.

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Anonymous
admin
June 29, 2015 at 3:46 PM ×

www.nytimes.com/aponline/2015/06/29/world/europe/ap-eu-greece-bailout-the-latest.html

Months of bailout negotiations went off track over the weekend, when Greek Prime Minister Alexis Tsipras called a surprise referendum on the creditors' proposal for reforms in exchange for loans. Tsipras advised Greeks to vote 'No' to the proposals.

European Commission President Jean-Claude Juncker countered by saying "I very much like the Greeks, and I'd say to them 'You should not commit suicide because you are afraid of death. You should say 'yes.'"

A great quote but I'm not sure how convincing it will be to the Greeks ...

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Nico G
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June 29, 2015 at 4:30 PM ×

someone called for a boring summer... hell we can all hear martini shakers and we are having fun

the referendum is not a given yet - but a win win for Tsipras anyhow

you say yes? 'you decide yourselves for more can kicking you can't blame your government (me) and we are here to stay oh you said no like us? it's good to have your (democratic) backing, comrades it'll be a quick shell shock of pain much much better than Troikathanasia

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Anonymous
admin
June 29, 2015 at 8:03 PM ×

http://blog.kimblechartingsolutions.com/wp-content/uploads/2015/06/dollarformingbearishdescendingtrianglepatternjune29.jpg

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Anonymous
admin
July 1, 2015 at 6:43 AM ×

Nice comment on Greece by Daniel Alpert.

http://www.cnbc.com/id/102799368

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