Week End Blog – GREFERENDUM!

Grexit, Graccident, Grexhaustion, Grimbo, Greferendum, it’s all just Gridiculous! In a desperate attempt to force a deal, I guess, Greek Prime Minister Tsipras called for a referendum, in which the Greek people get to decide if they accept the deal Greece’s creditors offered earlier. That in itself is pretty remarkable, since it assumes the Greek can fully comprehend the question that is submitted to them. As months and months of fruitless negotiations have gone by I think this is a bit too much to ask. More interestingly, though, is that the referendum is about a proposal that does not exist anymore. Greece failed to pay the IMF and the Eurogroup has officially rejected a Greek request to extend the bailout programme beyond June 30th. Below is the letter of rejection sent by president of the Eurogroup, Jeroen Dijsselbloem.

And so, the Greek tragedy continues. It has been five years, in which mentions about Greek debt deals have, almost continuously, made the headlines.

Looking back on the Greek crisis produces some interesting stuff. Below is a quote from Tsipras back in 2013, ‘promising’ that his party, Syriza, has no intention to make Greece leave the Eurozone. And here we are in 2015, with a Sunday referendum that could exactly lead to that event. Politicians…

Hence, this weekend will be all about ‘NAI’ (‘YES’) and ‘OXI’ (‘NO’). At least the betting agencies will have a splendid time the coming days.

Based on recent poll data it’s too close to call. The latest survey, sponsored by Bloomberg, shows that ‘Yes’ and ‘NO’ are in a tight race and we probably have to wait until Monday to know anything at all. And even then, we probably don’t know all that much. Politics…

What we do know, however, is that if Greece stays in the Eurozone the problem is not solved any time soon. In a rather awkward timed press release the IMF demonstrated that Greece is going to need another EUR 50 billion or so. And that’s on top of plain vanilla debt relief!

But where do you get EUR 52 billion these days? As said before, Greek tragedies tend to drag on for a long time, and this one is no exception.

If Greece votes NO and if that leads to an Eurozone exit, it will default. But, as history shows, that is much less uncommon than you might think. Greece spends roughly half of its time in default.

A ‘NO’ would also mean a total collapse at first. So forget about the base year, here. All lines in the graphs below will go down, and fast.

That’s 9 charts on Greece alone. Let’s get this Week End Blog going. Some real drama is going on in China these days. What once looked like a rally from heaven, has turned in a correction from hell. Chinese stock markets are down sharply in recent weeks. And the volatility is just massive. On July 3rd the index plunged 6% and recorded an 8% intraday move.

On July 2nd, Chinese equities closed down 3.5% and recorded an intraday move of 7%.

On July 1st, Chinese equities slumped 4% with an intraday move of 6%. And so on, and so on. Short-term realized volatility skyrocketed to 69%. Yes that is 69%. Even bitcoin is less volatile these days.

While Greece and China are on another planet, strange things keep happening elsewhere as well. Sweden took investors by surprise as its central bank lowered the repo rate to -0.35%. Some central banks are still looking for that lower bound, obviously.

Far less spectacular, but not less important, nonfarm payrolls in the US increased by 223K in June, very close to consensus. Unemployment (5.3%) is at the lowest level in seven years. First quarter growth, notoriously weak in recent years, will again be an outlier.

Congratulations! You have reached the end of the Week End Blog. Weekend is here. As this is likely a very hot weekend (at least in Europe) here is a chart showing that we are in a multi-decade heat wave.

Thank you for reading the Week End Blog. Enjoy your weekend!

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