Calling an outcome on the situation “down there” has now become an exercise in total futility and I shall therefore desist.
I think I hit the wall last night when I received a call from a newsroom and when I was asked how I would explain the near standstill in trading in Greek bonds and in the corresponding sovereign CDS market. I had not really noticed this – at our little shop we haven’t traded anything significant in Greek paper in quite a while – so I found myself obliged to do a bit of thinking on my feet.
Not being sure whether I was right or not, I suggested that trading was a percentage game but with the outcome of the negotiations between the Troika – which Greek voters have apparently democratically chosen not to be allowed to be called the Troika anymore – and the mighty of Athens being so hard to call, (it must be that at 50/50), there is no trade to be done. Traders take educated guesses but, in the current case, all the education in the world cannot help one guess whether the toast will fall butter-side up or not.
There is a lot of shuffling going on as the Greek banking system is now utterly back to the wall. Benoit Coeuré, former Chief Economist to the French Treasury and now an outspoken and highly quotable member of the Executive Board of the ECB, is reputed to have replied yesterday, when asked whether Greek banks would be opening today, “tomorrow yes – Monday I don’t know…”
Since then, the officials channels of the ECB have been strenuously denying that he said this. Whether he said it or not – the reporting journalists were probably there while the denying EU officials certainly weren’t – is not the point. Fact is that we’re all thinking it.
I think it was the German Finance Minister, Wolfgang Schaeuble, who, in early May, warned of the risk of what he termed an accidental default by Greece. He was clearly instructing the Athens “Spliterati” to be cautious when it came to playing the brinkmanship game for too long and for believing that there is only one possible outcome.
The problem is that, should lenders back down, they will forfeit any credibility they might have vis a vis the rest of the world in general and their own voters in particular. Just at a time when they are trying to convince Vladimir “Put-me-In” Putin’s Russia that they know how to drive a hard bargain, they don’t need to be seen not to be able to take on and hold out against a little wee, bankrupt country in a matter of chronic fraud and fiscal ineptitude.
I speculated a few weeks back whether a grace period on the payments due to the IMF might carry beyond the roll-over date of extended EU loan package. That was scotched yesterday when the IMF told us that there would be no days of grace.
The IMF and the EU are playing good cop/bad cop with the ECB trying very hard not to play cop at all. The Greeks, on the other hand, are appearing in black with a mask just like cartoon robbers except that they are demanding that the cops fill their swag bag for them.
Fit for launch
Despite what you may be thinking, the world of course does not begin and end in Athens. US stock markets had a storming day on Thursday, aided in part by the dovish tone of the FOMC on Wednesday and some fairly benign inflation figures. May CPI undershot analysts’ forecasts in every division with the month over month headline reporting at 0.4% as opposed to the 0.5% consensus and the annual figure therefore coming in at zero as opposed to the predicted +0.1%.
Whether this caused or only fuelled the rally isn’t the point. What will make history is that the Nasdaq index finally topped its March 31 2000 high of 5,132.52 points with an intra-day high of 5,143.31 points and a close of 5,132.95 points. Watching this record fall was not unlike seeing Bob Beamon’s 1968 long jump record broken in 1991 by Mike Powell. That took 22 years and 316 days. The Nasdaq high stood for 14 years and 79 days. Not quite the high jump but close….
Nothing seems to be able to stand in the way of equity prices and the storming opening of Fitbit after its IPO yesterday certainly wasn’t a spoiler. Priced at US$20.00, it opened at around US$32.00 and closed at US$29.68, a gain of over 29% on the day. I don’t know how many steps that took and how many calories were burnt in the process but it was a pretty smart performance.
Sceptics can’t see the company being able to hold its lead over larger players but I guess the punt has to be that one the heavyweights will snap it up before long and with a history of paying up for clever start-ups, the techies must be assumed by investors to be lining up to do the same again.
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Alas, it is that time of the week again. All that remains is for me to wish you and yours a happy and peaceful week-end. Sunday marks the summer solstice and by Monday the days will be growing shorter again. Summer, my foot! Polar bears have taken refuge in my garden from global warming and I appear to be about to make a fortune from growing frozen peas. Perhaps as of next week holidays in Greece will be a lot cheaper and, my word, we need a bit of warmth.
