Correct - and if u were to dig deeper into the underlying cause of the decline from trend GDP its almost completely explained by a decline in worker productivity from pre EMU levels - the thought that the Germans had any use for the rest of Europe beyond being consumers for their glistening machines helped by low credit costs is ludicrous - so why would a greek heavy end capital manufacturer have bothered to do anything at all in the last 15 years? Germany had a compact with RoE and now its in jeopardy. Am I the only one who thinks that the seminal event over the weekend wasn't greece or puerto rico, but the fact that the china RR cut did nothing for their equity markets?
I'm with you washed - China decline is meaningful and its looking more and more like the leadership is just turning dials hoping to create something. This is very similar to a path I could see for DM markets where sentiment turns against CB's and govt efforts to control markets. I admit to being surprised that SNB thought a 1% decline in EURCHF was enough to warrant intervention. Were they expecting more?
Personally, I think Greece / Tspiras is doing the right thing. I worry about a trend of sovereigns "mailing in their keys", but I think thats getting a little ahead of ourselves. There are a lot of specifics about Greece that are different than say Japan.
is the SHCOMP decline meaningful? A mater of scaling in my eyes. Go further back on the chart that the last 20% drop and you'll see we are still up 100% over the past year. Dangerous dump or mean reversion to reality?
Further to Polemic's point, why would you not expect a big roll over in a highly overextended market to occur when the unexpected referendum gets announced? It is to early to determine that the drop in the SHCOMP is meaningful or not (or whether the RR cut is in fact being ignored, or just overwhelmed by, the sudden Greek news).
pol - not disagreeing with your larger point that in the scheme of things shcomp is perhaps fine - will make just 2 observations a) the average china punter probably got long at levels higher than here, and i would expect to see a lot of pis@#d off cab drivers, bartenders, and fruit stall owners in beijing and shanghai which could create its own weather system and b) chinese equities have shown a remarkable tendency to not give two hoots about their economy, anybody else's economy, and anybody else's equities in the past, and todays concern about greek matters (to anon 4:57's point) should atleast be treated as an eyebrow raiser. we shall see - in any case their reserve ratio, as i have stated on this blog in the past, is still way too high and should find itself at the all time lows of 6 to 7% in the not too distant future.
I agree that default/abandoning EUR is a good thing for Greece in the long term, if they can endure the short term pain.
Regarding SHCOMP, congratulate to those shorting the market.
That market is driven by liquidity, more than any other markets. Short end SHIBOR rose nearly 50% in the past two months. It is deleveraging that really pushed down the market. The underlying reason of rising SHIBOR/tight liquidity environment? IMO, it could be the huge amount of local government bonds issuring to local banks, local banks' seeking deposits near the end of the first half of the year, or the majority of corporations getting cash to pay their tax liabilities for 2014. Take your pick.
The lesson for SP? This might be what would happen if short end T bill yields finally rise (by 50%?) due to Fed raising rates.
have you guys spent some time in China - the level of gambling there is beyond belief. On one famous horse racing week end in Hong Kong they would bet the entire amount bet in one year in England. Just like that. So Chinese equities are just a casino there is no reason at all to waste anytime checking book values, and the Western sell side desks implemented there are one fine joke. The parabolic move this year was a copy of 2000 Nasdaq, and more so the bullshit IPOs and those people rushing to milk the market. The correction too well resemble 2000 but i am speaking my (half) book. China made a big mistake opening those markets to Jo le taxi, unless it was their scope, to bankrupt a large chunk of the middle class, sort of a Mao like purge of the financial variety.
the Hong Kong stock exchange ended up being the last buyer in 1998, and bought half the float. a few years later they were sitting on gargantuesque profit mainland China probably remembers the drill. Again, the timing of the Chinese was catastrophic, reaching a climax just when the spoos were kinda looking toppish and Europe, rotten. The summer will be long
The Greeks will vote yes, I think, even though they should not. More conservative older Greek voters who didn't support Syriza will vote yes. A few of the more pragmatic Syriza supporters will vote yes. The banking and business community will vote yes. As for the middle class, the propaganda and fear-mongering from the EU have already begun to influence the undecided voters. I agree it is a win-win for Tsipras, as if Greece does vote yes, he can claim to have: a) taken the higher ground of protecting democracy. b) saved the country from default, for now and c) Syriza themselves cannot be blamed for the austerity that ensues, this last being the most crucial piece for domestic considerations. These are politicians, after all. Power and a semblance of stability is what matters. Tsipras can't help the Greek people from the opposition benches.
left - I agree in that there certainly has been a tendency for the collective masses to display a preference for status quo off late (the swiss and scottish referendums and british elections being good examples) - plus, a bunch of folks who just stood in ATM lines may not like the idea of doing some version of that for the next 2 years. That said, I don't think Tsipras would stay if the vote is a no - to me it reads like 'tsipras and no vote' or 'boot tsipras and yes vote' - at this point I wouldn't assume that he and syriza have no power to influence the opinion in Greece, and if he sees a no vote as the only way to stay in power, the equation kind of solves itself.
A more cynical view suggests that this is more Kabuki theatre. What if Tsipras and Dijsselbloem, Schäuble etc have a deal, but Tsip goes, "all right, job's a good un', you've got us by the short and curlies, but I'm going to get strung up from the Acropolis if I announce this lot of pension cuts, innit? So we're having a bit of a referendum to cover my arse. Now go and say bad things about that plonka Yanis again to the media while I board up the banks for a few days, then we can party again next week after we save The Universe again".
An awful day for the USD. Not sure many people saw that in the script. You can argue the logic here is that punters think that the Greek crisis will give the Fed another excuse to delay a rate hike. Not sure that I buy that argument, it's likely that the swap lines are being used. Treasuries are bid, but considering Greece AND Puerto Rico hitting the headlines, that's not really surprising and the size of the move in rates isn't yet all that impressive.
Long USD and short Treasuries will probably take center stage again in a day or two, but tomorrow may well be more of the same. This is what happens when everyone is long and unhedged, plus there are very few shorts. We've seen this before. Very very happy to have limited risk on here. Opportunities are coming.
Indeed LB, opportunities are coming! Don't get me started "too much" on the Greek farce. It was embarrassing to listen to Juncker's serenade today, but this is all part of the propaganda which is now starting. Expect more to come. I disagree vehemently with the "win-win" for Tsipras, though. I think he is out, slowly or not so slowly, but his days are numbered.
It is better for Greece to be in the EZ with Draghi and QE at the helm, and Syriza has squandered that opportunity. Now, it has all gone pear-shaped of course, and we are left at the devices of another yes/no vote, how depressing. This is not an attempt to exonerate the EU/IMF mind; the policies have been a folly ... but what people don't understand, or don't appreciate, I think is that the periphery has friends in Draghi, Hollande etc, but if you negotiate in Brussels only to walk into local parliament with a message completely opposite, well ...
Incidentally, if Greece/Syriza wanted to leave and default (and if they thought that the EZ was doomed anyway), surely it would be better to wait for Italy and Spain to go belly up, sucking on Draghi's tit in the meantime, and not wander out into the cold alone. If Syrzia had played ball, Draghi would have been buying Greek bonds by now ... Greek real GDP growth was above zero for the first time since the crisis began in Q4 you know ;). Finally, maybe Greece rises from the ashes like a Phoenix after a default/devaluation or maybe, it ends up like Argentina? It is a gamble, and with the Eurozone enjoying its first semblance of growth since the crisis, it is a big one!
Anyway, rant over.
Meanwhile, in other news, can I paraphrase Polemic's point on SHCOMP, in relation to Europe. DAXy was up 40% from October at the end of April ... surely it doesn't take a macroeconomist to tell you guys that a correction ain't so odd ;), QE or no QE. But we have been here before in back in October, I remember the scorn and ridicule, rinse, repeat. Now is probably not the time, though, it could be a difficult summer ...I am running a ridiculous high cash position + plus a little net short on FTSE given what my macro dashboard is telling me, but cash is a call option on volatility after all, so I am happy just looking at the carnage for now.
I don't really know whether Syriza "lost on blinking first" or if they are in fact winning in the form that indeed getting the new win-win mandate in either referendum option. I think in historical context however it's safe to say based on how much the Euro regime is shoveling resources, time and emergency meetings to keep Greece in the euro is based on the so-far-ignored and hidden fact that France, Spain and Portugal aren't really in that a good shape. Elephant in the room: Greece is not unique which will become obvious, given enough time.
The eurocrats and Syriza probably both are aware of this. The goal of the former is bring Greece back in the austerity line and certainly get rid of the troublemaker regime BEFORE obvious cracks elsewhere in southern Europe's nascent recovery start becoming obvious and latter is to kick the can once more, perhaps a couple of years and play more time. Tsipras isn't stupid contrary to what the mass puppet media might think. He must know that given time some of the big boys start going belly up after which Greece will atleast no longer be alone and what happens to the Zone after that is such bending forces come into play that it must transform more clearly into an income transfer Union or risk braking up.
The scene is like from the Return of the Jedi Palpatine (Djieselbloem) is toughening Luke (Tsipras) up saying his rebel friends down on the forest moon are unable to blow the shield generator up, doomed in the process. Ps. agree with LB on Greeks voting yes. Whether that's the end of Syriza I'm not so sure. The eurocrats/institutions will be willing to present a new deal regardless of who's in charge and if it's Syriza at the very least they will stop the extreme haggling about it, with the "new mandate". If Greeks themselves don't freak out and fall to the domestic blame games the EU propaganda is trying to incite, there's not much more the eurocrats are able to do in order to plant a more favorable puppet regime.
16 comments
Click here for commentsCorrect - and if u were to dig deeper into the underlying cause of the decline from trend GDP its almost completely explained by a decline in worker productivity from pre EMU levels - the thought that the Germans had any use for the rest of Europe beyond being consumers for their glistening machines helped by low credit costs is ludicrous - so why would a greek heavy end capital manufacturer have bothered to do anything at all in the last 15 years? Germany had a compact with RoE and now its in jeopardy.
ReplyAm I the only one who thinks that the seminal event over the weekend wasn't greece or puerto rico, but the fact that the china RR cut did nothing for their equity markets?
I'm with you washed - China decline is meaningful and its looking more and more like the leadership is just turning dials hoping to create something. This is very similar to a path I could see for DM markets where sentiment turns against CB's and govt efforts to control markets. I admit to being surprised that SNB thought a 1% decline in EURCHF was enough to warrant intervention. Were they expecting more?
ReplyPersonally, I think Greece / Tspiras is doing the right thing. I worry about a trend of sovereigns "mailing in their keys", but I think thats getting a little ahead of ourselves. There are a lot of specifics about Greece that are different than say Japan.
is the SHCOMP decline meaningful? A mater of scaling in my eyes. Go further back on the chart that the last 20% drop and you'll see we are still up 100% over the past year. Dangerous dump or mean reversion to reality?
ReplyFurther to Polemic's point, why would you not expect a big roll over in a highly overextended market to occur when the unexpected referendum gets announced? It is to early to determine that the drop in the SHCOMP is meaningful or not (or whether the RR cut is in fact being ignored, or just overwhelmed by, the sudden Greek news).
Replyno playa hating
Replypol - not disagreeing with your larger point that in the scheme of things shcomp is perhaps fine - will make just 2 observations a) the average china punter probably got long at levels higher than here, and i would expect to see a lot of pis@#d off cab drivers, bartenders, and fruit stall owners in beijing and shanghai which could create its own weather system and b) chinese equities have shown a remarkable tendency to not give two hoots about their economy, anybody else's economy, and anybody else's equities in the past, and todays concern about greek matters (to anon 4:57's point) should atleast be treated as an eyebrow raiser.
Replywe shall see - in any case their reserve ratio, as i have stated on this blog in the past, is still way too high and should find itself at the all time lows of 6 to 7% in the not too distant future.
I agree that default/abandoning EUR is a good thing for Greece in the long term, if they can endure the short term pain.
ReplyRegarding SHCOMP, congratulate to those shorting the market.
That market is driven by liquidity, more than any other markets. Short end SHIBOR rose nearly 50% in the past two months. It is deleveraging that really pushed down the market. The underlying reason of rising SHIBOR/tight liquidity environment? IMO, it could be the huge amount of local government bonds issuring to local banks, local banks' seeking deposits near the end of the first half of the year, or the majority of corporations getting cash to pay their tax liabilities for 2014. Take your pick.
The lesson for SP? This might be what would happen if short end T bill yields finally rise (by 50%?) due to Fed raising rates.
Farmer
have you guys spent some time in China - the level of gambling there is beyond belief. On one famous horse racing week end in Hong Kong they would bet the entire amount bet in one year in England. Just like that. So Chinese equities are just a casino there is no reason at all to waste anytime checking book values, and the Western sell side desks implemented there are one fine joke. The parabolic move this year was a copy of 2000 Nasdaq, and more so the bullshit IPOs and those people rushing to milk the market. The correction too well resemble 2000 but i am speaking my (half) book. China made a big mistake opening those markets to Jo le taxi, unless it was their scope, to bankrupt a large chunk of the middle class, sort of a Mao like purge of the financial variety.
Replythe Hong Kong stock exchange ended up being the last buyer in 1998, and bought half the float. a few years later they were sitting on gargantuesque profit mainland China probably remembers the drill. Again, the timing of the Chinese was catastrophic, reaching a climax just when the spoos were kinda looking toppish and Europe, rotten. The summer will be long
http://dailyreckoning.com/good-on-you-alexis-tsipras-part-i/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dailyreckoning+%28The+Daily+Reckoning%29
Replyformidable piece
The Greeks will vote yes, I think, even though they should not. More conservative older Greek voters who didn't support Syriza will vote yes. A few of the more pragmatic Syriza supporters will vote yes. The banking and business community will vote yes. As for the middle class, the propaganda and fear-mongering from the EU have already begun to influence the undecided voters. I agree it is a win-win for Tsipras, as if Greece does vote yes, he can claim to have: a) taken the higher ground of protecting democracy. b) saved the country from default, for now and c) Syriza themselves cannot be blamed for the austerity that ensues, this last being the most crucial piece for domestic considerations. These are politicians, after all. Power and a semblance of stability is what matters. Tsipras can't help the Greek people from the opposition benches.
Replyleft - I agree in that there certainly has been a tendency for the collective masses to display a preference for status quo off late (the swiss and scottish referendums and british elections being good examples) - plus, a bunch of folks who just stood in ATM lines may not like the idea of doing some version of that for the next 2 years.
ReplyThat said, I don't think Tsipras would stay if the vote is a no - to me it reads like 'tsipras and no vote' or 'boot tsipras and yes vote' - at this point I wouldn't assume that he and syriza have no power to influence the opinion in Greece, and if he sees a no vote as the only way to stay in power, the equation kind of solves itself.
A more cynical view suggests that this is more Kabuki theatre. What if Tsipras and Dijsselbloem, Schäuble etc have a deal, but Tsip goes, "all right, job's a good un', you've got us by the short and curlies, but I'm going to get strung up from the Acropolis if I announce this lot of pension cuts, innit? So we're having a bit of a referendum to cover my arse. Now go and say bad things about that plonka Yanis again to the media while I board up the banks for a few days, then we can party again next week after we save The Universe again".
ReplyAn awful day for the USD. Not sure many people saw that in the script. You can argue the logic here is that punters think that the Greek crisis will give the Fed another excuse to delay a rate hike. Not sure that I buy that argument, it's likely that the swap lines are being used. Treasuries are bid, but considering Greece AND Puerto Rico hitting the headlines, that's not really surprising and the size of the move in rates isn't yet all that impressive.
ReplyLong USD and short Treasuries will probably take center stage again in a day or two, but tomorrow may well be more of the same. This is what happens when everyone is long and unhedged, plus there are very few shorts. We've seen this before. Very very happy to have limited risk on here. Opportunities are coming.
Kabuki would destroy the sparkling liquid velvet poetry that is the Greek language
Replyi love Kabuki but they seriously sound constipated almost to the tune of Screamin Jay Hawkings
LB you owe me copyright for the win-win on Tsipras (cf. previous thread), shame on you
:D
Indeed LB, opportunities are coming! Don't get me started "too much" on the Greek farce. It was embarrassing to listen to Juncker's serenade today, but this is all part of the propaganda which is now starting. Expect more to come. I disagree vehemently with the "win-win" for Tsipras, though. I think he is out, slowly or not so slowly, but his days are numbered.
ReplyIt is better for Greece to be in the EZ with Draghi and QE at the helm, and Syriza has squandered that opportunity. Now, it has all gone pear-shaped of course, and we are left at the devices of another yes/no vote, how depressing. This is not an attempt to exonerate the EU/IMF mind; the policies have been a folly ... but what people don't understand, or don't appreciate, I think is that the periphery has friends in Draghi, Hollande etc, but if you negotiate in Brussels only to walk into local parliament with a message completely opposite, well ...
Incidentally, if Greece/Syriza wanted to leave and default (and if they thought that the EZ was doomed anyway), surely it would be better to wait for Italy and Spain to go belly up, sucking on Draghi's tit in the meantime, and not wander out into the cold alone. If Syrzia had played ball, Draghi would have been buying Greek bonds by now ... Greek real GDP growth was above zero for the first time since the crisis began in Q4 you know ;). Finally, maybe Greece rises from the ashes like a Phoenix after a default/devaluation or maybe, it ends up like Argentina? It is a gamble, and with the Eurozone enjoying its first semblance of growth since the crisis, it is a big one!
Anyway, rant over.
Meanwhile, in other news, can I paraphrase Polemic's point on SHCOMP, in relation to Europe. DAXy was up 40% from October at the end of April ... surely it doesn't take a macroeconomist to tell you guys that a correction ain't so odd ;), QE or no QE. But we have been here before in back in October, I remember the scorn and ridicule, rinse, repeat. Now is probably not the time, though, it could be a difficult summer ...I am running a ridiculous high cash position + plus a little net short on FTSE given what my macro dashboard is telling me, but cash is a call option on volatility after all, so I am happy just looking at the carnage for now.
Happy trading.
I don't really know whether Syriza "lost on blinking first" or if they are in fact winning in the form that indeed getting the new win-win mandate in either referendum option. I think in historical context however it's safe to say based on how much the Euro regime is shoveling resources, time and emergency meetings to keep Greece in the euro is based on the so-far-ignored and hidden fact that France, Spain and Portugal aren't really in that a good shape. Elephant in the room: Greece is not unique which will become obvious, given enough time.
ReplyThe eurocrats and Syriza probably both are aware of this. The goal of the former is bring Greece back in the austerity line and certainly get rid of the troublemaker regime BEFORE obvious cracks elsewhere in southern Europe's nascent recovery start becoming obvious and latter is to kick the can once more, perhaps a couple of years and play more time. Tsipras isn't stupid contrary to what the mass puppet media might think. He must know that given time some of the big boys start going belly up after which Greece will atleast no longer be alone and what happens to the Zone after that is such bending forces come into play that it must transform more clearly into an income transfer Union or risk braking up.
The scene is like from the Return of the Jedi Palpatine (Djieselbloem) is toughening Luke (Tsipras) up saying his rebel friends down on the forest moon are unable to blow the shield generator up, doomed in the process. Ps. agree with LB on Greeks voting yes. Whether that's the end of Syriza I'm not so sure. The eurocrats/institutions will be willing to present a new deal regardless of who's in charge and if it's Syriza at the very least they will stop the extreme haggling about it, with the "new mandate". If Greeks themselves don't freak out and fall to the domestic blame games the EU propaganda is trying to incite, there's not much more the eurocrats are able to do in order to plant a more favorable puppet regime.