Savvy Participants ‘Playing It Safe’ In Here
$JPM, $GS
Thanks to the Greek referendum that resulted in a majority “No” vote, the Big Q’s now are: does this Greece-EU-IMF standoff continue, and which side wins the contest?
What we know now is the there can be no good outcome for Greece or the EU.
For Greece, it probably will be about what happens the days after tomorrow.
Tuesday, there is another EU extraordinary crisis meeting that has been called by the German Chancellor Angela Merkel and the French President Francoise Hollande.
Participants should pay attention as Tuesday’s eEurozone Summit could mean:
1. the start of negotiations for a new bailout package for Greece, or
2. the Eurozone policy makers could signal their agreement to the ECB for cutting its Emergency Lending Assistance (ELA) program, which irrevocably would mean Grexit and Greek banks being obliged to bail-in, similar to what happened in Cyprus, with haircuts on the amounts of deposits above 8.000 Euros of 30%. That according to Financial Times Saturday.
Monday Greece’s Minister of Finance Mr. Yanis Varoufakis announced on his personal web page: “… Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today … And I shall wear the creditors’ loathing with pride…”
If Greece gains EU concessions for ditching X’ing Mr. Varoufakis, then Greece’s Finance Minister’s nearly impossible behavior was a clever “game theory” played by him together as well as by Mr. Tsipras.
Germany’s Finance Minister Wolfgang Schaeuble was quoted Saturday saying,“Greece is a member of the Eurozone. There is no doubt about that. Whether with the euro or temporarily without it: only the Greeks can answer this question. And it is clear that we will not leave the Greek people in the lurch.”
What is clear now is markets do not seem to like the Greek referendum results as the yield of the 2-yr Greek sovereign spiking to 47%.
Also, Greece’s 10-yr yield jumped briefly to above 17%, which was its highest yield since Y 2012.
JP Morgan (NYSE:JPM), Goldman Sachs (NYSE:GS),and other important global banks now consider a Grexit as the most probable outcome that awaits Greece.
So, savvy participants prefer to play it safe and remain extremely cautious in here, because what happens next to Greece is an unanswered question, and markets do not like uncertainty.
Stay tuned…
HeffX-LTN
Paul Ebeling
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