So There’s Just One More Thing About Greece

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Just when you thought it was safe to finally stop paying attention to Athens, we have a pretty important event occurring on Thursday of this week with regards to the Greek bailout.

Thursday is the day that private Greek bond holders have to agree to exchange their current bonds for longer dated bonds with lower interest rates.

This is important for two reasons:  First, unless 66% of the private bond holders agree to the voluntary swap, the entire debt renegotiation is void (and so is the Greek bailout, because the private bond holders are an integral piece to the entire package).  Second, if less than less than 75% of the private debt holders agree to the voluntary swap, that will trigger “Collective Action Causes.”

CAC’s are basically laws passed in the Greek Parliament last week that would force those private bondholders to swap their debt, voluntary or not (it would basically say they aren’t going to pay the old bonds and instead will pay them what the new bonds state) . . .

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A Quick Note on the Expiration of the ECB’s LTRO’s

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I’ve been saying for a while now that one of the most important events of the week was the expiration of the ECB’s LTRO’s that occurred Wednesday.

Like goldilocks, the demand for the 1% loans for 3 years from European banks was almost perfect at a little over 500 billion Euro’s.  It wasn’t too little (if so, the market would think that banks might need it later) and it wasn’t too much (if so, the market would think things were worse than they appear) . . .

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The Consumer Financial Protection Bureau

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The recently formed Consumer Financial Protection Bureau released an email on Wednesday that showed its intent to begin an inquiry into bank’s checking account courtesy overdraft practices.

In the announcement, the group cited a 2008 study that found just under 10 percent of bank customers incurred more than 80 percent of overdraft fees.

In what must have been a shocking discovery to them, the vast majority of those people were young customers and those with low incomes.

In fact, the number one reason for the inquiry is the fact that courtesy overdraft fees disproportionately affect those two groups, again those with low incomes and young people . . .

The above is an excerpt from the Sevens Report. To read the entire article and to receive daily commentary on all major markets and market moving economic and geo-political events, sign up today to request a free 2-week trial of the Sevens Report.

Payroll Tax Cut Date

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On Friday Congress passed an extension of the payroll tax cut, removing the prospects for another drawn out, down to the wire drama that unnerves markets.

As a rule, markets hate uncertainty, and removing uncertainty in this regard will be a net positive, as the market has come to expect these public showdowns and last minute deals . . .

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China-Canadian Trade Talks

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I briefly mentioned last week the high level trade talks that occurred between China and Canada in Beijing.  The net result of those talks, the most material and fruitful in years, was the signing of a declaration of intent to agree to a “Foreign Investment Promotion and Protection Agreement.”  (FIPA).

The lengthy name aside, it’s an important step in further Canadian/Chinese trade, as it sets a broad frame work for ensuring equitable treatment for foreign investors in both countries.  Basically, it removes a large degree of risk for Chinese or Canadian firms investing with the other country by providing a legal framework and set of laws that protect foreign investors . . .

The above is an excerpt from the Sevens Report. To read the entire article and to receive daily commentary on all major markets and market moving economic and geo-political events, sign up today to request a free 2-week trial of the Sevens Report.

 

The AAPL Effect/in /by

One of the things traders are constantly monitoring is internals of an index or market, for clues about the strength or weakness of that market beyond what the simple headline numbers say.

That is why investors and trader monitor which sectors are rising and falling, because it can give insight into the “health” of a market rally.

For instance, if you have a market rallying but defensive sectors like utilities or consumer staples are leading the rally, that’s not a good thing.  The reason is because those defensive sectors outperform when the economy isn’t growing or people aren’t confident about the direction of a market (they are both economically insensitive—people need electricity and basic consumer goods like razors regardless of whether the economy is growing or expanding) . . .

The above is an excerpt from the Sevens Report. To read the entire article and to receive daily commentary on all major markets and market moving economic and geo-political events, sign up today to request a free 2-week trial of the Sevens Report.

Preview of WASDE Report

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Grains markets were quiet on Wednesday, with all grains trading within a penny or two of flat.  This is because we get the USDA crop production report Thursday  morning, and position squaring and de-risking always occurs ahead of those reports.

Of particular importance in the report will be the size of the South American crops.  The consensus estimates . . .

The above is an excerpt from the Sevens Report. To read the entire article and to receive daily commentary on all major markets and market moving economic and geo-political events, sign up today to request a free 2-week trial of the Sevens Report.