Alex Tsipras is feeling the strain of Greece's prolonged battle with Europe. His eyes are rimmed red as he hunches over his laptop, browsing Match.com to find a sexy finance minister to replace the lamentably departed Yanis Varoufakis. The fatigue weighs heavily, and his shoulder and neck muscles ache from hours in front of the computer.
As his eyes flick from candidate to candidate, none of them suitable, they glaze over slightly, then stray to the margins of the page. He barely registers the Flash ads for Viagra and weight loss supplements, then fixate on a small banner on the lower right hand corner of the page:
Although Alex likes to live life on the edge, he has never clicked on one of these ads before. If something seems too good to be true...well, it probably is. Then again, that is the Brothers Grimm on that 1000 mark note...maybe fairy tales really can come true! He rubs his eyes, shrugs his aching shoulders slightly, and clicks the link.
A youtube video appears, discussing the background and particulars of the London Agreement of 1953. Although Germany did win a substantial concession on its debt amount from its creditors (including Greece), as "weird tricks" go losing two world wars appears to be a bit extreme, even for Syriza.
"Hmmph," thinks Alex, and is about to close the youtube he hears something that stuns him like a thunderbolt straight from the hand of Zeus. There it is. The one weird trick. Germany only had to pay down its debt while running a trade surplus, and then payments were capped at a modest proportion to gross exports. Hoping he hasn't missed something he gets up and, showing an unaccustomed vigor in his step, strides across the room and plucks his 'Greek National Statistics Yearbook' from a shelf.
Riffling through it, a smile slowly spreads across his face. One weird trick indeed. If what's good for the goose is good for the gander, he now knows what to ask for when the new round of negotiations start. Sure, any terms you wish for, as long as we only have to pay whilst running a trade surplus:
As his eyes flick from candidate to candidate, none of them suitable, they glaze over slightly, then stray to the margins of the page. He barely registers the Flash ads for Viagra and weight loss supplements, then fixate on a small banner on the lower right hand corner of the page:
Although Alex likes to live life on the edge, he has never clicked on one of these ads before. If something seems too good to be true...well, it probably is. Then again, that is the Brothers Grimm on that 1000 mark note...maybe fairy tales really can come true! He rubs his eyes, shrugs his aching shoulders slightly, and clicks the link.
A youtube video appears, discussing the background and particulars of the London Agreement of 1953. Although Germany did win a substantial concession on its debt amount from its creditors (including Greece), as "weird tricks" go losing two world wars appears to be a bit extreme, even for Syriza.
"Hmmph," thinks Alex, and is about to close the youtube he hears something that stuns him like a thunderbolt straight from the hand of Zeus. There it is. The one weird trick. Germany only had to pay down its debt while running a trade surplus, and then payments were capped at a modest proportion to gross exports. Hoping he hasn't missed something he gets up and, showing an unaccustomed vigor in his step, strides across the room and plucks his 'Greek National Statistics Yearbook' from a shelf.
Riffling through it, a smile slowly spreads across his face. One weird trick indeed. If what's good for the goose is good for the gander, he now knows what to ask for when the new round of negotiations start. Sure, any terms you wish for, as long as we only have to pay whilst running a trade surplus:
27 comments
Click here for commentsPriceless..... tears rolling down my cheeks, kind of guessed where you were going, but that was nicely done. One of your best.
ReplyGnome of Z is making a big call on a Grexit today. The question is, though, isn't US, Russian or Chinese money worth the same as EU money? Rather than Match.com, I think Alex will likely be spending a lot of time on Seekingarrangement.com. If the guys in Frankfurt can't get it together, surely someone else is going to be salivating to make little Alex their Sugar Baby? I am sure it's worth a few billions to help little Alex pay off his student loans for a while as long as he keeps Sugar Daddy happy? Even though he didn't pay back the money he got from his Sugar Momma Christine, perhaps she just wasn't his type? Now you know that little Alex has a warm harbor and a lot of people are eager to dock their big warships there..
Dr Copper, mind the gap, yikes
ReplyCando could turn into Canadian Tire money soon if the downtrend continues!
ReplyFrom July 02 chart:
http://www.dailyfx.com/forex/technical/elliott_wave/oil/2015/07/02/eliottWaves_oil.html
MM - nice post - the problem with using the 1953 idea is that its effectiveness is greatly reduced as long as the greek currency remains the euro - it could certainly work in combination with a managed grexit and a new currency that is blessed by the EU, but of course the fact that it would then become the optimal course for the other stragglers wouldn't be lost on anyone.
ReplyI think currency volatility will explode soon - we may be seriously looking at having to price in political risk premium for 3-4 intra europe shadow currencies that currently do not exist.
I reminded myself today that the euro has only been in existence for 12-13 years - kind of an eye-blink as far as financial history goes - we will see.
@ washedup- that's the beauty of the one weird trick (from a debt management, not growth, perspective)- as long as Greece is trapped in its Eurozone Hades, they face zero prospect of ever having to pay back official creditors (or even pay interest to them). Just PSI restructure every 5 years, and voila! ;)
ReplyA few things that are not directly related to China (more of a concern than Greece to me) are looking attractive. Santander is not very expensive at these levels, and it's not like you're expecting meaningful monetary tightening in EU any time soon, rather the reverse. Brazil is amazingly cheap, but it's cheap for a reason, especially as long as China struggles and commodities tumble. Brazil and Russia still look great opportunities for those value investors with a longer time horizon, but don't hold your breath for the turnaround, it will be a while. Greece is more or less priced for a reintroduced drachma and financial Armageddon, so might be worth a few penny punts for those who like to bet on the ponies.
ReplyI fully understand how that would be right way risk for greece - just remember the global growth regime for the DM was quite different in the 50's - China could potentially play that buyer role at this turn in history, but they have, shall we say, other distractions currently!
ReplyThat said, Euclid should hire you as a consultant, or at the very least take a f@3ing printout of this blog to the meeting he just went to this morning - better than showing up in casual clothes looking like he was just visiting to look for his lost keys, no?
that last comment was in response to MM 4:05
ReplyMM! Still the maestro!
ReplyThis has to be the most frustrating pantomimes to date! My message remains that they will do a fudge, but the tone from Germany is hawkish, and Tsipras et al surprise me with their incompetence on a daily basis. Incidentally, the solution MM is advocating here was ALWAYS on the table; some of us talked about a "student debt clause" I believe. The EU cannot write down the principal but you can extend the maturity into infinity or create a "conditional" payment schedule. More like a CA surplus, it would probably be nominal GDP growth. I still think that it will ultimately end up with something like this, but if Tsipras is bend hell on protecting the VAT status of his islands(!), I am afraid he will need to print some drachma very soon, and that will be the beginning of the end.
Meanwhile, in markets ... I, too, am in the hammock and I still can't really be bothered to get out; I think Q3 could be a write-off too, and riddled with banana skins. The 200dma level in Spoos looks interesting or ominous depending on your perspective, and I believe that while the world will keep spinning after Grexit, the crystalisation of a €500B loss will lead to a few WTFs?! in unexpected places. Maybe it is really as easy as its always been ... nothing happens until Spoos puke +10%-to-20%! That would be romantic, right ;).
No real comment on, or skin in the China game. If it can inflate, it can deflate! It is an odd exercise in "capitalism," and quite hilarious to see the level of market manipulation (or attempt!). The only thing that I do think is important is that this circus is clearly preventing investors to allocate to EM on a benchmark basis.
before returning long equities anywhere you'd want to see ugly selling and the proverbial sentiment extreme of fear and loathing and we are a very very long way from that, think spoos 1800 minimum, and imagine where Europe/Russia Brazil etc will be trading when spoos trade down 10%. In the meantime if you are not interested in shorting, and it is clearly too late to short on most markets, enjoy your summer hammock. stoxx in particular is not safe until 3000
ReplySo mkt thinks no rate hike soon?
Replyhttp://stockcharts.com/h-sc/ui?s=$tnx&p=D&b=3&g=0&id=p41298869661
http://blog.kimblechartingsolutions.com/2015/07/interest-rates-attempting-breakdown-after-historic-rally/
It is an odd exercise in "capitalism," and quite hilarious to see the level of market manipulation (or attempt!).
ReplyI don't see huge differences between what pboc is trying to do and whats been done throughout the DM for the better part of the last decade.
I find it interesting that a common rationale on the way up was "govt easing, pboc has our back etc". This is turning out to be true, but so far ineffective. The lesson here is that CB effectiveness is primarily psychological, and when that changes for whatever reason the illusion of control can be quickly shattered.
Grextend and Pretend. Maturity Grextension. Get to it, you dumbf*ck Krauts. It worked for you, so why not the Greeks? You can just imaginehow Mangler and Schäuble will try to spin a default. Will they really want to tell the German electorate that they have just locked German taxpayers into some really large losses after transferring risk from DB back in 2010?
ReplyNico, we're not buying any indexes whatsoever, just picking a few cherries that may yet fall farther from the tree before this is over. All in all, it's been a great time to be laying in the hammock, flicking a few nickels here and there with the VaR dialed down close to zero. Any time the VIX starts to vanish in the summer, one should dial down risk, find a nice novel and sip an iced tea. Thanks to CV for reinforcing this instinct as early as May.
Agree with CV that the whole EM investment landscape (even the most solid of EM credit) is now a total minefield b/c of the China bubble, Greece and the resulting dollar surge. Watch out for Uncle Buck, he can do a lot of damage when he gets rolling.
Careful, River, sure all bets are off with the FOMC for now, until Greece resolved, but as soon as it is, rates will zoom again in US, UK and Germany. There is easily 30-50 bps of fear in the 10y, perhaps more and that can unwind in less than a week like another mini Taper Tantrum. In addition there is nothing at all alarming in the domestic US economy to give the Fed pause. Yet.... so, for the time being, look at your long-term TLT chart and try to figure out some more of those deep support levels?
for a nice summer book Vollmann 'royal family' is a lovely hammock shaker
ReplyBrilliant idea. Just only 20 years earlier there were also the Mefo-bills courtesy of Herr Doktor Hjalmar Schacht but since starting a world war wasn't on the viability menu lets not get into that in detail.
ReplyCongratulations to all those who voted for the fudge outcome. I heard they coated the can with a titanium surface too so it can withstand for a while longer.
"Irish fin min sees acceptance for reprofiling of Greek debt"
lol, btmfd works again.
ReplyRoll in Funny Money to collect your reward. Amazing how a market can rally because the Egroup Fin Mins don't think the Greek guy is a jerk after one meeting.
ReplyGuess they still think the PM is though! Ramp on hope.
Reply@LB thanks for the concern!
ReplyHave been one of your fans since that famous '09 call!
You sure helped me decipher Carney doublespeak!
@Anon 8:54PM - Reward collected. Thx.
ReplySo I bought some Dax today on the dip (~10680) and am once again flat. My life recently feels like a hideous version of "Groundhog Day": wake-up, coffee, EU session.. Grexit panic on the wires, equities dumped, USD bid, 3 extra Eurogroup meetings before lunch, stare at screens till eyes bleed, US session.. US data sh*t, USD offered, BTFD in equities, agree another final-final Greek meeting for tomorrow, dinner, get more news (Greece rumoured fixed/Janet's gonna raise rates) hold back tears...
China is quiet tonight, just 5% down now! .... at some point that market will have one tremendous face-ripper (perhaps after a Greek deal takes USD down temporarily and allows for a EM bounce?), unwary shorts will be squeezed and we will see a modest retracement - before the whole thing goes down the chute again. As for the US, still sticking with the idea there is one more rally ahead to bring in more tools from the sidelines before things go pear-shaped.
ReplyThe Greece problem is not a problem that Germany can fix. If Germany was to capitulate and write-down the Greek debt, it would alter the fundamental culture inside of Germany. In the world of naked currency selling (asset-backed lending), lenders cannot afford for borrowers to have any hope of forgiveness of debt. The entire charade rides on the borrower's understanding that a debt will be paid no matter what it takes. This is especially important with respect to sovereign debt because the collateral is just the tax base. Since WW2 total war just isn't what it used to be.
ReplyThis is where the IMF comes in with its international mandate and apolitical (/sarc) veneer. The IMF needs a lot more demand for its resources than little Greece if the SDR is to ascend to the dominant international reserve asset status. There is a shortage of SDR on the order of tens of trillions worth, if that's where we are supposed to go, no?
Expect Germany to stand down soon, chancellor Merkel is closer to a Greg Abbott or Jerry Brown now. The IMF can call liquidity from members as it requires. It also benefits from not having to carry a bunch of pork belly payroll and welfare programs which, in theory, gives it extraordinary flexibility to deal with non-payers.
We are now in the funky period where the IMF either steps up or falls on its face trying. I expect real big things from them in the days, weeks, months and years ahead. Greece is just pre-season.
skol vikings!
Let me sing along with the Greeks...Mate,Mate,Mate...let me stay here with my own currency...Mate,Mate,Mate...let me retire here on the beaches with Zorba and bet the unders/overs with seashells and sambuca...Mate,Mate,Mate...let me wake up once again to the smell of horse sweat and old money on the summer tracks of the Eastern seaboard.
ReplyLet'em win.
The tax base in Greece is “blue collar” workers and old citizens living on their pensions. Others either don’t pay or pay far too little. Why, the tax system doesn’t work and the people in the government on higher levels don’t want to fix it, because they too benefit from it. There have supposedly been a international group in Greece looking at the tax collection authorities. Conclusion, total work over needed. But how do you bring about change if the people on top of you isn’t gonna let it happen? Plus you don’t actually have the resourcing to try doing it.
ReplySo why don’t Merkel et al offer help or even require international experts to be put in where needed? Along with approving new programs. Kind of like a distressed corporation – bring in the restructuring consultats!
So, how about that eurusd.. didn't go below 1,09ish again..
http://virus-removal-support.tumblr.com/post/123362510300/techserve-llc-houses-for-optimum-online-
ReplyThis has to be the most frustrating pantomimes to date! My message remains that they will do a fudge, but the tone from Germany is hawkish, and Tsipras et al surprise me with their incompetence on a daily basis. Incidentally, the solution MM is advocating here was ALWAYS on the table; some of us talked about a "student debt clause" I believe. The EU cannot write down the principal but you can extend the maturity into infinity or create a "conditional" payment schedule. More like a CA surplus, it would probably be nominal GDP growth
Tsipras cousin is now responsible for international economic relations. You can't make this stuff up.
ReplyWe have witnessed the impact the little Swiss state can have on EU fx intervention, but the US can buy euros until the cows come home. Unlike the Swiss who don't have the diverse menu of options to offer CHF holders, the USD has the goods, services and military to back it all up.
ReplyThe stronger the USD gets, the more power the US can bring to bear in the EU. The EU has intentionally tried to avoid accumulating USD reserves, so that is your bull story on gold down the road. Buying EU on the cheap further entrenches the USD.
Just remember, currency is only a means to a transaction. A CB can short-sell its currency and a treasury can print its currency only to the degree that their economy can offer attractive goods and services to the external holders. Internal over-supply of currency can be remedied through tax increases.
This should help put the N225 performance into better perspective. Toyota and Honda would both be wise to introduce a truly super car at an extraordinarily high price. I suspect there would be far more willing and able buyers than they could, or would, supply.