World economy talk

**Lady Bathory** · January 26th, 2015 11:41 PM

The market is massively short the euro. A short squeeze was bound to happen.

**Lady Bathory** · January 28th, 2015 12:24 AM

Worse-than-expected durable goods orders took away the optimism of a mid-year rate hike. The Fed will release its monetary policy statement on Wednesday. The U.S. dollar is highly vulnerable with the long dollar trade extremely crowded. Any change in tone from the Fed will trigger a violent selloff.

**Monseratto** · January 28th, 2015 07:49 AM

Microsoft biggest loser...

Dow Jones suffers biggest loss since October in 'brutal day' for US markets | Business | The Guardian

The Dow Jones Industrial Average fell by more than 2%, before recovering to 1.5% down. The Nasdaq was down 1.6% and the Standard & Poor’s 500 had lost 1.3%.

Microsoft shares crashed 9.4% – its biggest one-day fall since July 2013 – after the company reported disappointing results after the markets closed on Monday. The collapse in Microsoft’s share price – down $4.40 to $42.60 – dragged tech stocks in the S&P 500 to their worst day since October.

Investors were also alerted by P&G, Caterpillar and Pfizer slashing sales and profit forecasts, signalling that 2015 US economic growth may not be as firm as expected.

**Monseratto** · January 30th, 2015 01:42 PM

Ever watch a train wreck in slow motion...

Why the Eurozone May Need to Sacrifice Greece to Save Spain
By SIMON NIXON
Jan. 28, 2015 6:35 p.m. ET

Alexis Tsipras has been prime minister of Greece for only 48 hours and has done little to back his claim of wanting to keep his country in the eurozone. With just weeks to secure a deal with Greece’s official lenders to prevent a financial collapse, almost everything he has said and done has seemed calculated to deepen the rift with Greece’s creditors.

From his decision to enter a coalition with the pro-Russia, anti-European Union, far-right Independent Greeks, to his appointment of a firebrand Marxist economics teacher as finance minister, to his refusal to back a toughening of the EU’s response to Russia’s latest support for separatists in Ukraine, to his cabinet’s pledge to reverse key reforms, his approach has suggested an appetite for confrontation rather than compromise.

Belatedly, the markets have registered the rising risk that Greece may exit the eurozone, with three-year government bond yields surging to about 17% and the shares of its top banks collapsing by more than 25% on Wednesday.

At a meeting in Brussels earlier this week, now-former Finance Minister Gikas Hardouvelis warned that the deterioration in tax revenues and the pace of bank-deposit outflows had accelerated in recent days, according to people present.

Some eurozone finance ministers and senior officials say that they are more worried about the fate of the European currency bloc now than at the height of the euro debt crisis in 2011 or 2012.

Why the Eurozone May Need to Sacrifice Greece to Save Spain - WSJ

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**Lady Bathory** · January 31st, 2015 12:35 PM

WTI is up 8.7% from Thursday's close. Brent is up 9.5%. ETFs USO and BNO is up 6.83% and 6.32% respectively. North American rig count is down 19% from a year ago. US rig count is down 13% year-over-year. Drillers have been announcing massive spending cuts as many projects become uneconomical. Prices will stablize as supply and demand dynamics come to some sort of balance. In an oversupply environment the market's job is to find a price that will destroy the oversupply.

**Monseratto** · February 1st, 2015 11:46 AM

Mass withdrawals...

And why Greek depositors are pulling their money out of banks at a record pace right now. Better to get your money out now, while you'd still get euros, than to wait and maybe get drachmas that wouldn't be worth as much.

This is how the euro ends. Yes, with a bang, actually, and a bank run. This isn't how it was supposed to, though. It wasn't supposed to end at all. The euro, Barry Eichengreen argues, is irreversible, because even talking about leaving it would set off the "mother-of-all financial crises," stopping you from doing so.

Greece really might leave the euro - The Washington Post

**Lady Bathory** · February 2nd, 2015 02:40 PM

While Grexit is possible I think they (Greece and EU authorities) will try their best to avoid it. Grexit is a lose-lose situation. The Greek economy will collapse and the entire euro project will be threatened. Doubts will be raised over whether Portugal, Spain, and even Italy could or should leave the euro. Germany benefitted the most from the monetary union. Germany's industrial output is so large that its consumers cannot support it so Germany has to export half its GDP. The EU provided Germany with a free trade zone and a common currency which supported its export addiction. If the euro project fails Germany will go back to the Deutsche Mark which will crush its economy (the value of the DM will skyrocket making German goods unaffordable). It is in Germany's best interest not to let Greece or anyone else leave. I think they will find a compromise. Either the maturity of Greek debt will be pushed further out or the face value reduced.

**Monseratto** · February 2nd, 2015 04:15 PM

"We don't want anymore austerity and aid but please help keep our banks liquid and afloat..."

Greece Asks ECB to Keep Banks Afloat as Debt Deal Sought
by Jonathan StearnsMark Deen
4:59 AM BNT
February 2, 2015

(Bloomberg) -- Greek Prime Minister Alexis Tsipras began the hunt for allies against German demands for austerity as his week-old government appealed to the European Central Bank not to shut off the money tap.
Finance Minister Yanis Varoufakis said his country won't take any more aid under its existing bailout agreement and wants a new deal with its official creditors by the end of May. While Greece tries to wring concessions on its debt and spending plans, it needs the ECB's help to keep its banks afloat, Varoufakis said at a briefing in Paris late Sunday.

"We're not going to ask for any more loans", Varoufakis said after meeting his French counterpart, Michel Sapin. "During this period, it is perfectly possible in conjunction with the ECB to establish the liquidity provisions that are necessary."

Tsipras, who issued a statement Saturday promising to stick by Greece's financial obligations, is seeking to repair damage after a rocky first week. Bond yields spiraled and banks stocks plummeted after German Chancellor Angela Merkel stonewalled his plans to ramp up spending and write down debt. The Greek leader visits Cyprus on Monday before trips to Rome, Paris and Brussels.

He's not scheduled to see Merkel, the biggest contributor to Greece's financial rescue, until a European Union summit on Feb. 12.

Merkel wants to avoid getting drawn into a direct confrontation with Tsipras and is unlikely to agree to a face-to-face meeting with him at next week's gathering of leaders, according to a German government official who asked not to be named because the discussions are private.

**Lady Bathory** · February 3rd, 2015 02:10 PM

The rally in oil prices is attributed to falling rig count.

But falling rig count doesn't necessarily mean falling oil production. Producers are getting rid of their least productive rigs while productive ones are kept working. Fundamentals are unchanged. There's still an oversupply. Rallies will likely be limited and unsustainable.

**dreamur** · February 3rd, 2015 02:29 PM

While oil prices are going down, share prices of electric car manufacturers like Tesla are going up. Is that just a coincidence?

**Lady Bathory** · February 3rd, 2015 04:51 PM

The Greek finance minister proposed a debt swap instead of a debt writedown. Bonds held by non-ECB creditors will be converted to GDP-linked bonds while bonds held by the ECB will be converted to perpetual debt.
Greece finance minister reveals plan to end debt stand-off - FT.com

Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.

The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

The guy is quite creative.

**Lady Bathory** · February 4th, 2015 05:12 PM

WTI is up more than 20% in the past 3 trading days. It's a short covering rally and will evaporate soon. The rally can be easily killed by an inventory build or a Saudi Arabia price cut.

**Monseratto** · February 5th, 2015 07:56 AM

ECB: Banks can't use Greek debt as collateral
CNBC
1 hour ago

The European Central Bank has revoked a waiver that allowed banks to use Greek government debt as collateral for loans. The ECB, in a statement late Wednesday, said it was no longer able to assume there would be a successful conclusion to the Greek government's bailout talks with its lenders. The Dow (Dow Jones Global Indexes: .DJI), which had been up 100 points just before the ECB release, quickly turned negative following the news.

ECB: Banks can't use Greek debt as collateral - Yahoo Finance

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ECB: Banks can't use Greek debt as collateral
CNBC
1 hour ago

The European Central Bank has revoked a waiver that allowed banks to use Greek government debt as collateral for loans. The ECB, in a statement late Wednesday, said it was no longer able to assume there would be a successful conclusion to the Greek government's bailout talks with its lenders. The Dow (Dow Jones Global Indexes: .DJI), which had been up 100 points just before the ECB release, quickly turned negative following the news.

http://finance.yahoo.com/news/ecb-banks-cant-greek-debt-204857744.html

**Lady Bathory** · February 5th, 2015 11:38 AM

Now Greek banks can't use Greek sovereign debt as collateral for repo transactions but there's another way for the banks to exchange Greek sovereign debt for cash by means of emergency liquidity assistance (ELA) under Eurosystem rules. Greek banks have reduced their exposure to Greek sovereign debt since 2012 anyway so they're less reliant on those securities as collateral.

**Lady Bathory** · February 5th, 2015 02:56 PM

Tired of reading tabloid-like articles about oil prices going back up to 60 or 70 dollars/barrel soon. The 20% rally over the last few days was nothing but short covering as hedge funds betting on a further slide in oil prices found themselves losing money as prices rose so they rushed to reduce their short positions driving prices up even more. A reality check from the EIA sent oil prices back down.

Crude inventories rose by 6.3 million barrels last week to 413.06 million barrels, compared with analysts' expectations for an increase of 3.5 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.5 million barrels, EIA said.

**dreamur** · February 5th, 2015 06:28 PM

There is more than enough shill out there!

**Lady Bathory** · February 14th, 2015 12:55 PM

Brent closes above $60 for the first time this year.

The rally is attributed to unexpected acceleration in eurozone economic growth, capex cuts by energy companies, falling rig count, weather-related disruption in oil exports from the Middle East. Brent-WTI spread widens to $8.50. The spread was $0 4 weeks ago. Brent pulled away from WTI as record-high stockpiles in the U.S. held back WTI. I would also attribute the rally to a weaker dollar. The rally wasn't isolated in oil as silver also made a similar move.

**Lady Bathory** · February 16th, 2015 03:18 PM

It was a tough week for the U.S. dollar which fell against most major currencies due to weaker economic data but I believe the uptrend is still intact. This week's FOMC minutes could be dollar positive as the Fed reinforces the view that the U.S. economy is ready for a rate hike.

Upside risk to oil prices as Libya's oil infrastructure is under attack.

**Lady Bathory** · February 19th, 2015 11:52 AM

Another reality check brought oil prices back down. Crude-oil shocker: API data show supply surging - MarketWatch
As i posted earlier, rallies will be limited and unsustainable.

The Fed is afraid raising rates too soon will kill the economic recovery.
Fed officials worried about hiking rates too soon: minutes | Reuters
June seems to be off the table. The risk of being premature is higher than being too late. September seems like the earliest.

**Lady Bathory** · February 20th, 2015 11:34 AM

The inability of the U.S. dollar to make new highs is supporting crude oil prices.

The long USD trade is extremely overcrowded making it ripe for a pullback.

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