With markets trading at “elevated” levels, things could turn around quickly and surprise many investors.
The inverted vol panic has made people very confident of this market not moving anywhere. The set up is showing similarities with the action we saw late last year. Back then we had the VIX sold down aggressively, markets tried pushing resistance levels, and out of nowhere, everything corrected very fast.Are we facing a similar set up here?
Some charts worth considering below.
Guest Post by John Redwood.
The more I read about the economic disaster in Greece, the more I wish they would let them out of the currency straight jacket that is part of the problem.
Greece has five main economic troubles. Its government has borrowed too much in the past, and wishes to carry on borrowing too much. The economy is declining year after year, as austerity bites with no currency depreciation or easier money to offer some relief. The balance of payments remain out of balance and difficult to finance, as Greece is not competitive with the more successful north of the Euro zone. Greece is mired in high unemployment, increasing its deficit and depressing its tax revenues. The banking system is weak. People afraid of the future are taking money out of Greece to put it into safer havens, doing more damage to activity in Greece.
This week will be extremely important for the future of Greece. The World is awaiting the deal, whatever it proves to be. Meanwhile the country is falling further into poverty as the economy continues sliding into the abyss. Let’s decide something on Greece, so we can move on to Portugal. From Ekathimerini;
Greek Prime Minister Lucas Papademos plans on Tuesday to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout.
While Papademos and the party chiefs already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors. European leaders raised pressure on meeting the conditions of the 130 billion-euro ($171 billion) rescue, with German Chancellor Angela Merkel saying “time is running out.”
European officials are insisting any new Greek bail-out programme specifically earmark funds to pay off remaining holders of Greek debt, giving lenders the freedom to withhold aid to Athens without risking a messy default that could reignite panic in financial markets, http://ftalphaville.ft.com/thecut/2012/02/07/870661/greece-bail-out-funds-could-be-split/
Investigators in a world-wide probe of how interbank lending rates are set are focusing on a small number of traders suspected of trying to influence other bank employees to manipulate the rates, says the WSJ, http://ftalphaville.ft.com/thecut/2012/02/07/870971/interbank-rate-investigation-narrows/
Vacancy rates on the worst British high streets could hit 50 per cent within three years, as half of all high street leases are due to expire by 2015, says the FT. Research by Jones Lang LaSalle, the property consultancy, http://ftalphaville.ft.com/thecut/2012/02/07/870981/high-street-vacancy-rates-could-hit-50/
HFT rules the broken market. If you still disbelief, please review what has happened over the past years. The exchanges will tell you HFT is providing liquidity, enhancing trading, but unfortunately, this is a great fallacy. Volumes have been diminishing over the past years, liquidity is drying up, and the broken market is becoming even more broken. Wonder if Eugene Fama has seen this chart? Perfect information, rational investors, yeah right. Must see action, continue. Courtesy Nanex via Zero Hedge.
While Greece is receiving all the attention, Sarkozy is desperately trying to improve his chances of winning the elections. Merkel too, also in France. The question is, what would a non Sarkozy France mean for Germany? Merkel is doing everything it takes to obtain the merkozy relationship. From Spiegel.
It looked almost as if it could have been a wedding when German Chancellor Angela Merkel and French President Nicolas Sarkozy walked into the conference hall of the European Council building in Brussels last Monday. They nodded at each other and exchanged pecks on the cheek, the other heads of state and government moved aside.
The two, of course, were not in Brussels to be betrothed. Rather, they were the main characters at yet another European Union summit. This time, they were seeking support for their fiscal pact, which together they had hammered out in the hopes that it could contribute to saving the EU and its common currency.
The Greek drama continues. We are still surprised people think the country will be saved. Beside the economic problems, the debt, no growth etc, there is a much bigger problem. The mentality of the Southern Europeans is the biggest enemy of reaching The agreement. People can not agree on sharing a parabolic antena, how do you expect to reach a deal on the future of the country. The blame game is on, and soon, the biggest enemy will be the creditors. Now, the country is blackmailed into war. Video with Eva Kaili, a Greek member of parliament below.
Guest Post by Macro Story.
To say the past two months have been surreal is an understatement. While some will simply say we are in a new bull market and the economy is expanding I would argue something else. Earnings alone simply do not support this stair step climb in equity. Some say the central banks are behind this move and will not let the markets drop until the election.
Sorry but that is too tin foil hat for me. If the central banks were so powerful how could they not hold the markets up in 2008? What finally brought down the global financial system were stock prices for those institutions trading at near zero in some cases. The banks were in essence shut out of the capital markets and therefore a “semi nationalization” was needed to replenish capital levels depleted by falling asset prices.