Posts Tagged ‘Dow’

Notes From Underground: Greece–Sometimes Nothing Is A Pretty Good Hand (Cool Hand Luke)

May 9, 2012

The financial markets have been suffering the whiplash that resulted from the uncertainty of the Greek elections. It is no surprise to the readers of this blog that politics would provide a problem for those “WHO ASSUMED A CAN OPENER.” The eurocrats and European financial elite are so vested in the EURO and the politics of the EU project that they assumed all citizens of Europe would fall in line. Every referendum that did not pass was reissued under threat of a curtailment of Euro funds from Brussels. Now that the bill is coming do for all the promises. The angry electorate is saying NEIN to more AUSTERITY through the ballot box and financial markets and Europe’s bankers are quaking.

It seems that the Greek politicians know that the fear of GREECE not “honoring” its previous commitments is a powerful tool to use in negotiations with the powers in Brussels. GREECE HAS NOTHING TO LOSE IS THE OPERATIVE MINDSET OF THE SYRIZA AND ITS  LEADER, ALEXIS TSIPRAS. It is the BANKS, ECB and IMF who are on the hook for a great deal of money. It is the ultimate moment of the PRISONER’S DILEMMA.

Yes, the GREEKS know they owe a great deal of money, but your banks own the paper. Also, if the Greeks were to turn violent at the continued threats from the ECB and the GREEK election results were overturned through the impact of interference from Brussels, there would be fallout from the other European nations searching for relief from austerity. I warn all readers to be leery of the nonsense that continues to be written about the politics of Europe as the SYCOPHANTS WANT TO PAINT A BETTER POLITICAL PICTURE.

A danger to the Greeks leaving the EURO would be that the drachma would be reinstated at a very depreciated level, leading to a massive resurgence in Greek tourism and other service industries, which would come at the expense of the Spanish and French tourism industries. A “liberated” Greece has the potential to create all types of economic turmoil for the other periphery nations. Just threatening the Greeks is not as simple as many optimists want to believe.

Today, Bloomberg ran a piece by a noted Financial Times journalist, Clive Crook, “Hollande Must Betray His Supporters to Save Them.” The writer notes that Mr. Hollande cannot betray the left until after June’s Parliamentary elections but then, “Whether it’s sooner or later, Hollande will be forced to acknowledge reality, and the disillusionment of the French left will be terrible.” Here again, the elite want their wishes to prevail over any sense of  the PUBLIC WILL. Mr. Crook goes on to say, “Wisely, Hollande’s campaign was more about posture than specifics. We know he’s against austerity and for taxing the rich–but he hasn’t drawn up a budget.”

This is the view of the status quo within the EU at all costs camp, but if the Greeks play their HAND OF NOTHING TO GREAT ADVANTAGE THE POLITICS OF EUROPE WILL BECOME VERY VOLATILE. This afternoon it was learned that Greece will receive its next TRANCHE OF BAILOUT MONEY tomorrow. See, NOTHING CAN BE A VERY GOOD HAND.

The problem for the policymakers in Brussels is that all the other debt-stressed nations are watching closely to see if the banks and the EURO GROUP cave in for fear of a CREDIT CRISIS emanating from the Greek’s decision to soften the BAILOUT AGREEMENT. Crook ends his article with this warning: “But Hollande can’t be a good thing without letting his supporters down. That’s a hard truth to contemplate in your first week in office.” This is a major dilemma for the financial and political elite of Europe. Let’s ASSUME A CAN OPENER.

Quick Hitter: The two-year Schatz dropped to a record low 6 BASIS POINTS. Again, the rush to safety added to China’s need to invest its EUROS is playing havoc with the world’s DEBT MARKET. Finnish two-year notes dropped to 18 BASIS POINTS and the Netherlands to 28 BASIS POINTS. The demand for safety and the need for quality collateral is causing massive dysfunction in credit markets. PRICE IS NOT A BAROMETER OF QUALITY POLICY. This is causing many hedge funds to place bets on the short side of the DEBT MARKETS. They are right that the risk/reward is certainly a temptation. It will just depend on your time horizon.

A CAVEAT FOR CHAIRMAN BERNANKE: BEN, you are opening up the Pandora’s box of the FISCAL CLIFF. The world’s financial markets and commodities are starting to be very concerned about the FISCAL CLIFF that Bernanke warned about at his last press conference .This is a problem as he has alerted investors that CONGRESSIONAL and presidential failure to deal with the fiscal problem can result in a 2 1/2% to 5% negative impact on GDP in 2013. Added to this is the possibility of an increased tax on dividends. The S&Ps and DOW are nervous as a major hit to the U.S. economy coupled with the EUROPEAN MORASS can send the GLOBAL ECONOMY into a massive deflationary spiral.

THE PORTFOLIO BALANCE CHANNEL IS BEN’S BABY, SO CHAIRMAN BERNANKE you had better gain control over the FED GOVERNORS AND PRESIDENTS who are pushing for a near-term rate increase. Bernanke and Geithner have been silent on Europe, but the phone lines are burning as U.S. policymakers are pushing Europe into a greater stimulus plan for if Europe implodes America will more than sneeze. Sometimes a walk to the FISCAL CLIFF RESULTS IN A PEEK INTO THE ABYSS.

A final note: The Portuguese 2/10 curve has exploded out to 414 BASIS POINTS. Being that the Portuguese 10-year is still yielding 11%, somebody is aggressively buying the Portuguese two-year note. It could be the use of LTRO money by private banks in an effort to enhance return but it may be the ECB adding to its purchases of sovereign debt. It is important to stay attuned to yield curve moves that indicate some action from authorities or very large investors. Could it be China chasing higher short-term yield to offset the ridiculous rates on the Schatz? Chinese buying of Euros has to be invested somewhere.

Notes From Underground: They Loaded 275 Billion Pounds and What Did They Get?

October 6, 2011

(Another day older and deeper in debt.)

No surprises from the ECB as they held rates at 1.5% as Trichet ended his reign at the helm of European banking by paying homage to the FONZ: Never admit that you were wrong. The ECB did announce that it was extending its policy of providing liquidity to EUROZONE banks at extremely low rates for a period of 12 and 13 months in an effort to prevent any immediate bank run. Also, the ECB announced that it would buy up to 40 billion euro of covered bonds, but that should not be a big deal for covered bonds are the best collateral so many banks will probably not be running for funding posting the highest rated debt.

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Notes From Underground: The Unemployment Data Was Almost as Disappointing as Europe

July 10, 2011

Friday’s unemployment report revealed that Thursday’s ADP data was, again, a “FALSE POSITIVE.” The 157,000 ADP gain failed to show in the BLS numbers and all the Wall Street economists were caught off guard as they spent Thursday night ramping up their guesstimates to be more in-line with the private sector prognosticator. The initial response by the EQUITIES was to sell off as the lack of job growth undermines the recent S&P and DOW rally. At day’s end, the equities staged a rally and the loss on the day was small, especially relative to the strength shown early in the week.

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Notes From Underground: Unemployment in the U.S.–Does Slowing Jobs Provide the FED With a Pause That Refreshes?

June 5, 2011

The U.S. jobs report provided great support to the bears on Wall Street as the 54,000 nonfarm payroll number led to a sell off in the DOLLAR and another drop in the Dow, S&Ps and all other equity indexes. For all the equity down/dollar up analysts, last week was a breakdown of that temporary correlation. U.S. equities were down more than 2% for the week while the EURO was up 2.5%. It seems that the global financial community is becoming more concerned about a softening U.S. economy and what it will mean for the budget discussions and FED policy.

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