Mystery Economic Theater 2015

[R.D. Silverman]

Originally Posted by ewmayer

o Europe is blowing itself apart over Greece - and nobody seems able to stop it - Telegraph

If the subhead of that piece about Mr. Tsipras is true, it's a 'WTF?' of the highest order.

o Nuland's Nemesis: Will Greece Be Destroyed to Save Her From Russia, Like Ukraine? | naked capitalism


o But Greece aside, as I've noted here on several occasions in the past few years, my top candidate for a true economic-world-shaking black swan is China, which has blown multiple interlocking bubbles - in their property markets, their huge shadow banking sector, and most recently, their local sharemarkets (I was dumbfounded at the government pulling out all the stops in terms of promoting the recent market bubble, apparently in a misguided attempt to distract from the ongoing real-economic slowdown there) - during the past decade. Well, the latter bubble, which peaked just last month, is now in what appears to be full-on crash mode. Here is the latest on this morning's fun (local time) courtesy of the Sydney Morning Herald:

Chinese share market: Stocks plunge, half of listed stocks suspended from trading

Is it still a market if selling is banned? Suggestion: keep a ban on selling, but allow buying. /sarc

The NYSE just halted trading at 11:30 AM owing to a 'technical glitch'

It would not surprise me if this were deliberately manufactured.

[xilman]

Originally Posted by R.D. Silverman

The NYSE just halted trading at 11:30 AM owing to a 'technical glitch'

It would not surprise me if this were deliberately manufactured.

According to the Beeb

"The Nasdaq index reported no technical issues and said it continues to trade NYSE-listed stocks."

Of far greater importance than NY at present, IMAO, is what's happening in Shanghai

[ewmayer]

Originally Posted by xilman

Of far greater importance than NY at present, IMAO, is what's happening in Shanghai

Note an important detail regarding 'hidden leverage' (a prominent feature in more or less all of China's massive shadow lending sector) described in this Guardian piece (bolds mine):

Within ten minutes of trading, more than 1,000 shares across China’s two stock markets had dropped by the daily limited of 10% and had their shares automatically suspended. About 1,400 companies, or more than half of those listed – filed for a trading halt in an attempt to prevent further losses.

Christopher Balding, a professor of economics at Peking University said that while it was not possible to know exactly why so many companies had suspended trading, a large number were doing so because they had used their own stock as collateral for loans and they want to “lock in the value for the collateral”.

Balding said: “I don’t see it getting better. There is not going to be a turn around within the next week or two.”

“It probably has a long way to go. Margin loans basically rose much faster and they are not falling nearly as fast, margin debt is not falling nearly as fast as the market is falling. What that is telling us is that there is a lot of stock that needs to be sold that hasn’t been sold yet.”

In other words, this goes far beyong the crazy leverage put on by the late-arriving retail suckers.

And here is NC's overnight take (Yves posted this at 3am her local - NYC - time; the 'hat tip EM' above the Sydney Morning Herald piece is me), which brings together multiple perspectives and has some good reader comments, as usual for that site:

Chinese Stock Market Rout Continues; Trading Halted in Over Half of Listed Stocks | naked capitalism

[ewmayer]

o Followup to Bob's note re. the NYSE shutdown:

The NYSE shutdown prompts irrepressible, apocalyptic glee: "In Zuccotti Park, Goldman Sachs boys build a squatters city out of Hermes gift boxes" | Salon.com

o Greek PM Tsipras has basically offered to capitulate - but will pissed-off lenders and the Eurocrats who carry water for them take him up on it? (Once it is fully known what "it" entails, that is):

Greece Told to Submit Proposal By Thursday, Complete Deal By Sunday, or ECB Shoots Its Banks and Forces Grexit (Updated: Greece Requests Three Year Bailout) | naked capitalism

In particular I recommend reading the discussion sparked by Robert Dudek's 'which is preferable?' question to Yves, which includes a wonderful bit of local color from Greek expat Alex Morfesis re. 'what happened to my great-grandfather's land on Ithaki'.

Originally Posted by jasonp

'Papadopoulos' is an extremely common greek name, on par with 'Smith' in the US.

Jason, I am aware of the Smithian aspects of your surname - I made that 'relative of yours?' query more or less as clickbait. Since it worked - heard from your Greek relatives in the past few years about life on the ground there?

Just over an hour until the China mah-jongg parlors markets open ... Australia and Japan already down sharply.

[ewmayer]

o Greecefire update: So after setting a surprise referendum on whether to continue in more-austerity/depression-deepens/next-bailout-of-foreign-banks/later-rise-repeat mode last Sunday, a referendum sure to piss off the creditors and which he apparently did not expect to go the way it did (= "enough!"), Greek PM Tsipras has decded to simply ignore the overwhelming referendum result and submit a new going-begging proposal to the Troika, on even worse terms than were on offer pre-referendum:

As MacroBusiness sums up:

This is basically the same proposal as that was just rejected by the Greek people in the referendum…This makes absolutely no sense. The Tsipras Government has just:

o renegotiated itself into the same position it was in two months ago;
o set massively false expectations with the Greek public;
o destroyed the Greek banking system, and
o destroyed what was left of Greek political capital in EU.

If this deal gets through the Greek Parliament, and it could given everyone other than the ruling party and Golden Dawn are in favour of austerity, then Greece has just destroyed itself to no purpose.

Our observations:

The proposal is indeed worse than the one rejected in the referendum last Sunday.

And latest developments indicate that a significant subset of the EU nations - which would need to unanimously approve any such debt-slavery bailout deal - is even against the latest "total and utter capitulation" offer, causing people who have been reading the dynamics correctly (not including my old standby Mish, who claimed this was the Syriza stratagem all along and was in the self-deluding "Tsipras and Varoufakis are game-theoretic maestros who know that Greece in fact has the Grexit-threat trump card in the negotiations and have played the Germany and the EU like a fiddle" camp) over the past year to predict thusly: A Grexit Looks Almost Inescapable. Long-term that was certainly true, but engaging in multiyear planning for it and doing it somewhat-on-non-disastrous economic/financial terms versus a catastrophic "we have no plan for this" are very different things.

o Meanwhile, in a different crazypants-financial part of the globe, desperate measures (6-month share-sale bans, threatening short sellers with arrest, margin increases in place of what would have been a tsunami of margin calls) by the authorities and the well-known psychology of bear markets following crazy asset-price booms sparked a week-ending 2-day rally in China's casinos ... will see what the coming week brings in the way of last-gasp can-kicking ploys. Maybe the China central bank should simply print enough money to buy up the entire market, while sternly warning the gamblers to 'behave better from now on'.

================

Update: Did a quick check of the Asian markets before hitting the sack, and here is the current headline article of the online Sydney Morning Herald business section:

Greece debt crisis: Eurozone clinches deal with Greece after all-night haggle:

However the tough conditions imposed by international lenders led by Germany could bring down Prime Minister Alexis Tsipras' leftist government and cause an outcry in Greece. Even before the final terms were known, his labour minister went on state television to denounce the terms.
...
EU officials said Mr Tsipras finally accepted a compromise on German-led demands for the sequestration of Greek state assets to be sold off to pay down debt. The terms of the agreement were not immediately known.

The Greek leader also dropped resistance to a full role for the International Monetary Fund in a proposed €86 billion ($95.78 billion) bailout, which German Chancellor Angela Merkel has declared essential to win parliamentary backing in Berlin.
...
However, in a sign of how hard it may be for Mr Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

Many more caveats noted in the article - gonna be a busy week, no matter how this plays out.

[science_man_88]

I joined a market simulator, and a US game was my first one. Man do the markets suck, good thing they allow short sales.

[ewmayer]

Originally Posted by science_man_88

I joined a market simulator, and a US game was my first one. Man do the markets suck, good thing they allow short sales.

Not when the SHTF, they don't - e.g. China now, and most major US/EU markets also banned shorting of 'selected financial shares' during acute phases of the late, great GFC. And anyway, for all but the non-expert (which more or less translates to 'those with insider info'), options are a sucker's bet even in non-manipulated markets, which no longer exist. In the current completely-rigged-global-casino environment, good luck with that. If you took anything away from this thread series over its history, it should be that when it comes to markets, governments and central banks are in the business of

[a] rigging them for the insiders;
[b] making said insiders' bad bets money-good when their greed causes them to blow things up;
[c] sticking the rabble and the retail investor with the cost.

If you weren't around here during 2008-2009, feel free to peruse our thread archives, and pay attention when the next SHTF event [already made inevitable by the above actors] occurs - Greece and China now, rest of world soon enough.

[science_man_88]

Originally Posted by ewmayer

Not when the SHTF, they don't - e.g. China now, and most major US/EU markets also banned shorting of 'selected financial shares' during acute phases of the late, great GFC. And anyway, for all but the non-expert (which more or less translates to 'those with insider info'), options are a sucker's bet even in non-manipulated markets, which no longer exist. In the current completely-rigged-global-casino environment, good luck with that. If you took anything away from this thread series over its history, it should be that when it comes to markets, governments and central banks are in the business of

[a] rigging them for the insiders;
[b] making said insiders' bad bets money-good when their greed causes them to blow things up;
[c] sticking the rabble and the retail investor with the cost.

If you weren't around here during 2008-2009, feel free to peruse our thread archives, and pay attention when the next SHTF event [already made inevitable by the above actors] occurs - Greece and China now, rest of world soon enough.

I've read a few posts of the older threads. my dad says I'm doing good, even in bad US markets in the game I play (20 minutes delay more for larger investments). though the markets are going down and dragging my average daily compounding rate down with them if I could continue to keep that rate (7.48% compounding daily) as is I'll be in the million dollar range in 15 market days from now ( assuming I don't start playing Canada as well of course which starts at a meager 10,000 CAD), with the start of 250,000 USD ( virtual currency) only back on Monday. I risked 300,000 at the open today and only ended up losing around 5,000, by the end of the day (most from the open, I decreased my investing when I saw nothing good, and know how to short sale a bit, not everything is allowed in the simulation). I've annoyed my family enough with investing that one suggested a simulator ( I have over 80 investment term definitions bookmarked at last check).

[science_man_88]

okay yeah the markets suck Oil down, loonie at an 11 year low, lost 2% today in simulations of both US and Canadian markets ( stopped losses by decreased investment) loonie forecast by one analyst to go as low as 55 cents US ( not sure of the time scale). low yield crops , farmers selling off beef cattle to decrease feed needs. edit: okay some of my losses were because of forgetting to calculate the fees part of it. Oh, and I lose the most off the open.

[ewmayer]

Been a while since I linked to a piece by Ambrose Evans-Pritchard at the Telegraph, but he has a good one on China's bubble, bubble, toil and trouble (note also Michael Pettis link in the article):

Capital exodus from China reaches $800bn as crisis deepens: China is reverting to credit stimulus after attempts to engineer a stock market boom failed horribly. The day of reckoning is delayed again

[ewmayer]

Excellent summary of the key aspects - many un-or-underreported by the MSM - of the Greek situation and how the new Syriza government grossly mishandled it by NC's Yves Smith, but via Pando and intended for the wider audience Pando reaches:

Pando: Naked Capitalism: “We are in the business of making trouble”

[If you don't have time to read it now but want to save for later, download it now for later offline reading, because it's going to disappear behind a paywall in the next 24 hours.]

I note Ames mentions the pseudonymous aspect of 'Yves Smith', but he missed the economic-paradise-lost quip embedded in said pseudonym! To paraphrase the title of a popular book on punctuation, "Ames, Shoots and Misses". :)