| Just yesterday I briefly mentioned that prior several days of large market moves had been caused by traders reacting to how central bankers may react to certain situations. One of those situations was Greece, where a flat-out false rumor caused the markets to skyrocket. Greece was in the news again today; however, this time there wasn't a false rumor being thrown about by the government that a deal is ready to be inked. This time, Greece acknowledged that it is in trouble and that the prior day's fake rumor was needed to stop potential bank runs there. A few headlines from this morning - GREECE SAID TO BE FAR APART WITH CREDITORS ON DEBT TALKS
- IMF SAID TO INSIST ON GREEK REFORMS INCLUDING PENSION CHANGES
- IMF SAID TO BELIEVE DEBT RELIEF FOR GREECE MAY BE NECESSARY
And...According to sources, Tsipras was advised to make the statement by aides fearing that jitters were creeping back into the markets and could prompt a new wave of deposit outflows. Like the former EU technocrat Jean-Claude Juncker was quoted as saying. "When it gets serious, you have to lie." Moving on, Deutsche Bank published the following chart of its beliefs on the possibilities of Greek defaults and where they would lie. From Deutsche Bank -
Little has changed in terms of developments on the ground. Despite a number of reports that negotiations may be split into separate chapters and disbursements with more difficult issues left for September, this remains unlikely. The consistent European position has been that a full staff-level agreement between the institutions - inclusive of the IMF - and Greece is required to unlock funding. Talks in this direction has been progressing in stop-start fashion over the last few weeks, with the Brussels Group (former Troika) reconvening again yesterday to continue negotiations. But progress remains slow, with multiple European and IMF officials over the last twenty four hours stating that more needs to be done to reach agreement… The Greek government's liquidity position will ultimately drive the timelines over the next few weeks. Close to 1.5bn EUR is due to the IMF in four instalments over the course of June, with Greek government officials repeatedly stating that there are insufficient cash buffers to satisfy these payments. Given that the last IMF payment was made by drawing down Greece's SDR reserves at the fund, an exhaustion of cash buffers is a fair assumption. The most likely catalyst in coming weeks is therefore likely to be the Greek government's ability or not to pay the IMF... - No agreement reached, followed by non-payment to the IMF (40% probability). This scenario would likely provoke the most negative reaction from the ECB.
- Agreement reached, but no time/unable to pass through the Greek parliament before IMF payment (30% probability).
- Agreement reached, followed by timely passage through the Greek parliament (30% probability).
Given that the S&P500 has been trading in a coiling pattern over the last several days and given that Friday is the end of the trading month, volatility may SPIKE some time today. Will it be due to a Greece deal that isn't a hoax? Trade well and follow the trend, not the perma-bull OR perma-bear "experts." Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | 
No comments:
Post a Comment
Keep a civil tongue.