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Economic and and financial news and analysis

Alexis Tsipras’ Open Letter Nails The Stupendous Folly Of Brussels’ ‘Extend And Pretend’

By Alexis Tsipras via Alexis Tsipras’ “open letter” to German citizens published on Jan.13 in Handelsblatt, a leading German language business newspaper Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice…

Punxsutawney Phil? Pending Home Sales Decline MoM By 2nd Biggest Amount Since June 2010


Groundhog Day alert! (Bloomberg Economics) — December’s drop off in pending sales of existing homes provided a rare downside surprise amid some generally upbeat housing data from last month, and suggests existing home sales may be set to soften leading up to the spring selling season. • The headline index fell 3.7 percent, compared to […]

Greece’s fight against "fiscal waterboarding" will halt economic recovery


We are about to witness a historic showdown between the major euro area institutions and Greece. Greece’s newly appointed finance minister Yanis Varoufakis, a staunch bailout critic, will lead the negotiations on debt haircuts. On the other side will be the creditors: the International Monetary Fund and the European Commission – with additional support from the ECB. Private bondholders may get dragged into the fight as well (although many of them are Greek banks who will do what the government tells them). A number of Eurozone politicians have already expressed skepticism about any debt forgiveness for Greece. But Varoufakis is likely to focus on the argument that Germany has to take a great deal of the blame for the situation in which Greece now finds itself – calling the imposed austerity measures “fiscal waterboarding”. Here is a good quote from Strafor:

Stratfor (via Forbes): Another version, hardly heard in the early days [of the Eurozone crisis] but far more credible today, is that the crisis is the result of Germany’s irresponsibility. Germany, the fourth-largest economy in the world, exports the equivalent of about 50 percent of its gross domestic product because German consumers cannot support its oversized industrial output. The result is that Germany survives on an export surge. For Germany, the European Union — with its free-trade zone, the euro and regulations in Brussels — is a means for maintaining exports. The loans German banks made to countries such as Greece after 2009 were designed to maintain demand for its exports. The Germans knew the debts could not be repaid, but they wanted to kick the can down the road and avoid dealing with the fact that their export addiction could not be maintained.

The debate will also focus on the fact that Greece has done an amazing job in cutting its debt/GDP ratio – in spite of the falling GDP.

Source: @RBS_Economics 

Greek government bond yields spiked on Syriza’s rhetoric as well as on the right-wing antiausterity party becoming Syriza’s new coalition partner. The battle lines have been drawn.

The Greek government bond yield curve has become more inverted as markets price in principal reductions that are likely to apply evenly across the curve (which is what typically causes such inversion).

It is expected that if such haircuts are applied, they would hit both official and unofficial accounts (including bonds held by the ECB). Of course debt forgiveness would haircut the government bonds held by Greek banks – who are some of the largest holders. That’s why shares of Greek banks got decimated today. New bank bailouts will be required if there is any hope for credit availability to the private sector. For now most credit activity will come to a grinding halt – and with it any hopes for economic recovery.

Source: @WSJGraphics

The overall equity market fell over 9% today as government officials halt privatization and extend an olive branch to Russia (see story).

The newly elected government may ultimately get its debt forgiveness. But in the process the damage done to the nation’s private sector will be severe – just as the nation begins to come out of a depression that rivals some of the worst downturns in global history.


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Respect The Trends In These “Widowmaker” Trades

“Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” -Sir John Templeton There are a couple of trends out there in the markets right now that are becoming so-called “widowmakers.” Specifically, I’m referring to oil and long bonds. Oil has been crashing while long bonds have been soaring. Oil […]

The Wreck Of The Monetary Hesperus

For 73 months running the Fed has lashed the money markets to the gross financial anomaly of ZIRP. Never before in the history of the world has any central bank or other monetary authority decreed that overnight money shall be indefinitely free to gamblers or that liquid savers should have their hard earned wealth chronically confiscated by negative…

Death Valley Days Continue: Mortgage Purchase Applications Only Up 1% From One Year Ago


I remember the pundits cooing over lenders (and Fannie Mae/Freddie Mac) expanding their credit boxes (aka, lowering their credit standards) and how 2015 would be a year to remember. No so far.. Mortgage applications decreased 3.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for […]