by Zero Hedge - July 4th, 2015 6:20 pm
Submitted by Tyler Durden.
With just hours to go until Greeks head to the ballot box to decide the country’s fate in the eurozone, the latest polls show a nation divided with only a half percentage point separating the “no” votes from the “yes” votes.
Underscoring the ‘dead heat’ preliminary poll results, the yes’s and the no’s staged dueling protests in the streets of Athens on Friday night. All told, as many as 50,000 people participated in the competing demonstrations with PM Alexis Tsipras making an appearance at the “No” rally.
As a reminder, this is the schedule for the referendum:
WHEN ARE RESULTS DUE
- Polling stations will be open from 7am to 7pm local time and the result may be known before midnight
- Pollsters haven’t confirmed if there will be exit polls; if there are any, they will come immediately after the polls close
- Software distributor SinglularLogic, which has been hired to run the vote counting and data processing, should be able to provide an estimation of the winner a few hours after polls close
- JPMorgan expects ~90% of votes will have been counted by midnight, based on past general elections in Greece; vote counting could be even faster this time as it’s a yes or no question
And this is where things stand:
* * *
As noted earlier today, Athenians are restless and we can’t help but wonder what the scene will be in the streets of Athens on Sunday evening once the results are tallied and one of these two dueling groups is forced to acquiesce to the other’s vision of Greece’s future.
by ilene - July 4th, 2015 5:59 pm
Courtesy of Lance Roberts via STA Wealth Management
This weekend's reading list is a smattering of articles to enjoy between your favorite beverage, grilled meat and really fattening desert. Just remember to go back to the gym on Monday.
1) Grantham: Stocks Will Continue Upward Until The Election by Justin Kermond via Advisor Perspectives
"Jeremy Grantham says equity valuations are heading toward the "two-sigma" level that is the requisite threshold for a true bubble. At some point – which is not imminent – he said a "trigger" will precipitate the reversion back to mean levels. The market will continue to deliver positive returns until the next election, according to Grantham.
Grantham cited two major causes for the looming bubble: post-Bernanke U.S. Federal Reserve policy and a "stock-option culture" that has both elevated corporate margins and stifled normal levels of capital expenditure investment required to grow the economy."
Read Also: The Last Crisis May Cause The Next One by Robert Samuelson via Real Clear Markets
2) Why This Chinese Bubble Is Different by John Authers via FT
"Whatever else, the incident demonstrated that China's market remains dominated by liquidity. It also showed how badly the authorities want an overextended stock market. So, to adapt an old market saw, perhaps everyone should buy A-shares on the basis of "don't fight the PBoC".
Bulls, led by GaveKal Dragonomics, say for global investors, keeping out of China is "the world's most crowded trade". Ever since metals prices turned down four years ago, suggesting slower Chinese growth, western institutions have been wary. They missed out on last year's boom, explaining their reluctance to see A-shares suddenly appear in their benchmarks."
Read Also: Putting The China Drop Into Perspective by Malcolm Scott via Bloomberg Business
Read Also: Maybe It's Not So Different by Streettalklive.com
3) Private Equity Is "Cashing Out" by Leslie Picker and Ruth David via Bloomberg
"When financier Leon Black said his Apollo Global Management LLC was exiting "everything that's not nailed down" amid rising valuations, he made headlines. Two years later, other private-equity firms are following suit — dumping stakes into the markets at a record clip.
Firms including Blackstone
by Zero Hedge - July 4th, 2015 5:10 pm
Submitted by Phoenix Capital Research.
The Cyprus bank bail-in committed of early 2013 may seem like small deal to most US investors.
After all, most Americans probably couldn’t even find Cyprus on a globe. And with the mainstream media spreading the narrative that the Cyprus bail-in was a one-time event that was meant to support the bank while punishing tax-dodging crooks, 99% of folks won’t think twice about the situation.
However, the reality of what happened in Cyprus is a far different matter. And the reason that this reality has not been featured as headline news is because doing so would reveal the following:
1) European politicians are both corrupt and incompetent.
2) Those meant to assess the risk of any financial institutions don’t know what they’re talking about.
3) The average citizen will be screwed while politically connected insiders will be given the means to circumvent the law.
Let’s assess these issues one by one.
First off, the Cyprus bank “bail-in” was not some sudden event. The country first asked for a bail-out in JUNE 2012. Here’s the timeline.
· June 25, 2012: Cyprus formally requests a bailout from the EU.
· November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
During the period of late June 2012 until November 2012, Cyprus’s problems were allegedly being assessed and nothing more. Throughout this period, NO ONE in a position of significant political or financial power suggested to Cypriots or anyone else who had money in the Cyprus banks that their money would be STOLEN.
Instead, numerous bureaucrats came out to assure the public that this situation was under control and that the risks to the Cyprus banks would be carefully assessed.
Then, in the span of a single week, a bank holiday was declared, bank accounts were frozen, and deposits were stolen.
Here’s the specific sequence of events:
· March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
· March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
by Zero Hedge - July 4th, 2015 5:00 pm
Submitted by Tyler Durden.
One week ago, we first explained that as the Cyprus bail-in “blueprint” scenario unfolds, the one final, and most important, remaining variable in the ongoing Greek drama, soon to devolve to tragedy, is how big the ECB’s ELA haircuts would be in the case of a No vote, which would be the first catalyst of a depositor haircut.
Then, overnight, in a report since denied by both the Greek finance ministry and by the European Banking Authority Plan, the pro-Europe FT did yet another hit piece on Greece desperate to push those Greek voters on the fence ahead of tomorrow’s referendum to vote “Yes” (just think of the lost advertising revenue if say Deutsche Bank were to go under).
Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday.
The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.
Ignoring whether the FT is now merely a venue used by conflicted parties to publish pro-Europe, anti-Syriza hit piecestthat benefit “bankers and businesspeople with knowledge of the measures” and are promptly refuted, the article does bring up a relevant point: if the ECB does escalate the ELA collateral haircuts, something we analyzed in our own piece last week, what kind of haircut scenarios are possible, and will “insured” deposits under €100,000 be indeed made whole, or will the bail-in affect, as the FT suggested, everyone with over €8,000 in savings?
Regarding the first part of the question, what are the possible scenarios, JPM had this to say yesterday when evaluating the history of bail-ins in Europe in recent years:
If the deterioration in asset quality means there is no sufficient collateral to cover ELA claims, either the ECB (via its ELA residual claim) or domestic depositors will have to suffer a loss. Our understanding is that there are no clear rules on whether this ELA residual claim will be ranked above depositors or not. In fact EU policymakers adopted different and inconsistent approaches in the past when faced with bank insolvencies:
- In the case of
Divided Greece; Eve of Referendum Polls Split; 20,000 Rally ‘No’ and 20,0000 Rally ‘Yes’; Back Home From 17 Days in Iceland
by ilene - July 4th, 2015 4:54 pm
Courtesy of Mish.
Eve of Referendum Polls Split
On the eve of the referendum, Greek voters are undecided how to vote. If one believes the polls, it’s essentially a dead heat with 43% ‘no’, 42.5% ‘yes’ and the rest undecided.
Of course, the accuracy of the polls is seriously in question.
Bloomberg reports Greece Divided on Eve of Referendum to Chart New Economic Course
“What is certain is that come Monday, Greece won’t be facing just massive economic problems; it will be a deeply divided country,” said Nikos Marantzidis, a pollster and professor of political science at the University of Macedonia in northern Greece. “If the economic situation deteriorates further, which it probably will, the divide will only run deeper.”
20,000 Rally ‘No’ and 20,0000 Rally ‘Yes’
RT has an interesting video of rallies with each side claiming 20,000 participants.
by Zero Hedge - July 4th, 2015 4:48 pm
Submitted by Tim Knight from Slope of Hope.
Well, it seems Ellen Pao managed to step in yet another bucket of syrup.
This is going to require a bit of back-story……….
Some people on the Internet really go for quantity. On their Twitter account, they follow hundreds of people. On Facebook, they connect with thousands of "friends." And in their browser, they visit dozens of web sites each day.
I tend to be a minimalist. I have precisely 100 friends on Facebook. If I decide I really want someone to be a friend, well, someone else is going to get the boot. On Twitter, even though I have over 13,000 followers, I follow only 8. And as for web sites, there are only three sites I visit repeatedly each day: Slope of Hope, ZeroHedge, and Reddit.
In case you've been hiding in a cave somewhere, Reddit is one of the most frequently-visited sites on the web, and it was recently valued at half a billion dollars. It consists of myriad "subreddits" which focus on particular topics of interest, each of which is managed by unpaid (and evidently very dedicated) moderators. Readers can upvote and downvote tidbits of the web, bringing to the front page of reddit itself, or any particular subreddit, the most interesting articles and curiosities.
There isn't a day that goes by where I'm not entertained and better-informed thanks to reddit and the millions of people who make it possible. Similar to Wikipedia, it's one of those delightful free gems on the web which isn't slathered with advertising and is made possible mostly by the heart and hard work of its community. Slope of Hope, in a miniscule way, is very much like that.
None of this would be especially interesting were it not for the shitstorm taking place at this very moment in the usually placid world of Reddit. To wit:
As you've gathered from the above, a woman named Victoria Taylor was fired for reasons that have not been explained, and Redditors are absolutely freaking out about it.
Victoria, pictured here, was the director of communications for the past couple of years. It strikes me as odd that the firing…
by ilene - July 4th, 2015 4:15 pm
Courtesy of Perry Mehrling
The 85th Annual Report of the BIS is not perhaps the obvious first choice for beach-reading on a holiday weekend, but having read through its 119 pages, the core message reminds me of nothing so much as the most memorable line of the 40-year-old summer blockbuster “Jaws”: “You’re going to need a bigger boat.”
Notwithstanding everything that has been done since the Great Financial Crisis, it is not at all safe to go back in the water. Indeed danger of financial fragility is greater now than a year ago.
The danger this time comes, interestingly, not so much from the banks as from the policymakers, who persist in using empirically discredited pre-crisis thinking as a guide to macroeconomic policy. The problem, in a nutshell, is that “a monetary policy focused on managing near-term inflation and output may do so at the cost of higher fluctuations in credit and asset prices than in the past.” (p. 75)
In the modern financially globalized economy, the connection of monetary policy to domestic inflation and output is much attenuated, while the connection to asset prices is much increased. Monetary authorities who are focused on stabilizing quarterly aggregate demand can and do easily miss the effect of their actions on building up financial imbalances in the longer run, especially so when those imbalances are building up outside their own national borders.
In this respect, the biggest danger comes from the largest policy actors, the Fed and the ECB, since the “dollar zone” accounts for nearly 60% of world GDP, and the “euro zone” much of the rest (p. 87). The major central banks are keeping domestic interest rates low in an effort to stimulate domestic output in the short run, but the consequence is to blow asset bubbles in the world as a whole. The problem is “excess financial elasticity” and the current major source of the problem is policy.
Why are they doing it? The problem, suggests the Report, is with the faulty ideas on which policy makers are depending (p. 13):
by Zero Hedge - July 4th, 2015 4:05 pm
Submitted by Tyler Durden.
For the new normal America…
I pledge allegiance to no flag, but to truth and morality…
…which doesn’t seem to exist in the Divided States of America.
And to no republic, for it stands for nothing; One nation, under surveillance,
with Liberty and Justice destroyed
and inalienable rights taken from us all.
* * *
However, there should be hope… As STA Wealth Management's Lance Roberts notes, as you celebrate the 4th of July with your family and friends, it is vitally important to remember exactly what we are supposed to celebrating. The following excerpts are from the Independence Day speech given by John Fitzgerald Kennedy (then just a candidate for Congress) on July 4, 1946. I encourage you to read the speech in its entirety.
On The Religious Element
"The informing spirit of the American character has always been a deep religious sense.
Our government was founded on the essential religious idea of integrity of the individual. It was this religious sense which inspired the authors of the Declaration of Independence: 'We hold these truths to be self-evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights.'
Our earliest legislation was inspired by this deep religious sense: 'Congress shall make no law prohibiting the free exercise of religion.'
Today these basic religious ideas are challenged by atheism and materialism: at home in the cynical philosophy of many of our intellectuals, abroad in the doctrine of collectivism, which sets up the twin pillars of atheism and materialism as the official philosophical establishment of the State.
Inspired by a deeply religious sense, this country, which has ever been devoted to the dignity of man, which has ever fostered the growth of the human spirit, has always met and hurled back the challenge of those deathly philosophies of hate and despair. We have defeated them in the past; we will always defeat them.
On The Idealistic Element
"In recent years, the existence of this element in the American character has been challenged by those who seek to give an economic interpretation to American history. They seek to destroy our faith in our past so that they may guide our future. These cynics are wrong, for, while there may be some truth in their
by Zero Hedge - July 4th, 2015 4:05 pm
Submitted by Tyler Durden.
The US Federal Reserve has been universally lauded for the apparent success of its extreme monetary policy of recent years. With key world stock markets near record highs, traders universally love the Fed’s zero-interest-rate and quantitative-easing campaigns. But this celebration is terribly premature. The full impact of these wildly-unprecedented policies won’t become apparent until they are fully normalized.
Back in late 2008, the US stock markets suffered their first full-blown panic in 101 years. Technically a panic is a 20% stock-market selloff in a couple weeks, far faster than the normal bear-market pace. In just 10 trading days climaxing in early October 2008, the US’s flagship S&P 500 stock index plummeted a gut-wrenching 25.9%! It felt apocalyptic, the most extreme stock-market event we’ll witness in our lifetimes.
This once-in-a-century fear superstorm terrified the Fed’s elite policymakers on its Federal Open Market Committee. As economists, they are well aware of the stock markets’ powerful wealth effect. With equities cratering, Americans could dramatically slash their spending in response to that devastating loss of wealth and the crippling fear it spawned. And that could very well snowball into a full-blown depression.
Consumer spending drives over two-thirds of all US economic activity, it is far beyond critical. So the Fed felt compelled to do something. But like all central banks, it really only has two powers. It can either print money, or talk about printing money. The legendary newsletter guru Franklin Sanders humorously labels these “liquidity and blarney”. With stock markets burning down in late 2008, the Fed panicked too.
Led by uber-inflationist Ben Bernanke, the Fed embarked on the most extreme money printing of its entire 95-year history to that point. The FOMC cut its benchmark Federal Funds Rate by 50 basis points at an emergency unscheduled meeting on October 8th. It lopped off another 50bp a few weeks later on October 29th. And then on December 16th, it slashed away the remaining 100bp to take the FFR to zero.
The federal-funds market is where banks trade their own capital held at the Fed overnight. It’s that supply and demand that determines the actual FFR, so the Fed can’t set it directly by decree. Instead the Fed defines an FFR target, and then uses open-market operations to boost funds supplies enough to…
by Zero Hedge - July 4th, 2015 2:55 pm
Submitted by Tyler Durden.
One week ago, when we scoured through the latest OCC quarterly derivative report (in which we find that the top FDIC insured 4 US banks continue to account for over 90%, or $185.5 trillion of all outstanding derivatives which as of March 31 amounted to $203 trillion; nothing new here), we found something fascinating: based on the OCC’s derivative update, JPM had literally cornered the commodity derivatives complex, when from “just” $226 billion in total Commodity exposure, JPM’s notional soared by 1,690% in one quarter to $4 trillion, or about 96% of total.
Some, without even bothering to read the article, did what they always do when reacting to Zero Hedge articles: accused it of writing a “wrong” post first and asking questions later and coming up with some utterly incorrect response to show just how wrong Zero Hedge was because, guess what, the Office of the US Currency Comptroller had clearly “fat fingered” trillions in critical data which is far more logical.
As usually happens in these situations, Zero Hedge was right (there was some tongue in cheek apology but hey, at least someone got to boost their traffic briefly by namedropping this web site; incidentally apology accepted), which could have been checked simply just by looking at bank call reports, in this case the quarterly Regulatory Capital report, schedule RC-R, which made it very clear that indeed JPM’s OTC commodity derivatives had exploded to $4 trillion.
For those too lazy to check before tweeting, here is the number of OTC cleared “Other” commodity derivatives for JPM before, as of December 31:
And after, as of March 31:
Furthermore, while we await the OCC to respond to our inquiry (we aren’t holding our breath), nobody has disputed our claim (because it is purely factual) that as of Q1 the OCC decided to exclude Gold as a separate commodity category (see call reports above) and lump it in with Foreign Exchange for some still unexplained reason. It would appear that gold is money after all…
So to summarize: as we reported first (and we would be delighted if other so called financial experts dedicated as much effort to digging through the primary data as they have to desperately try to disprove our article), JPM has indeed…