Germany likes hippies, no haircuts for Greeks

Greece preps to hear its fate on a bridge loan from EU officials Friday so it can open banks on Monday.

The vote is not a given since the IMF has come out and said that Greek debt levels are unsustainable and that a substantial haircut is needed on the principal amount owed.

It’s Greece’s best last chance to get out from under the burden of a decades-long vassal existence within the euro zone. Unfortunately, it will probably not work out well for Athens, since the Germans are staunchly against a haircut, fearing the rest of southern Europe will come knocking should the haircut be allowed.

Despite this drama, this is the first weekend in a month or so where there is not a vote of measure being voted on in Greece or Brussels.

So let’s take it in and have a good weekend.


Greeks freak, but pay the vig

So the Greek Parliament has agreed to put the country on an unsustainable economic course that will make it a vassal state of the euro zone.

But the Trioka will accept the vote to pile on at least 7 billion euro to immediately pay the banks money owed. Wonderful news for all Greeks.

This should take Greece out of crisis mode until September at the latest. We’ll see.

Now we can turn our attention to the next two global flash points: China and the US.

China’s slowing growth — even “official government numbers” — has large investors dumping their ADR shares out of the country.

Despite the central government plowing funds into market to prop up share prices and barring large institutions from selling or shorting for the next 3 months to 6 months.

In the US we will get the first read on Q2 GDP in two weeks. This number looks to be borderline zero as retail sales are still bottoming out and exports are hurt by strong dollar.

As Wall Street lowers its forecasts each week — consensus is not near zero, because of the cheerleading factor of bolstering the economy — it is in the 2.5% to 2.9% range.

A negative number would give economists reason to put the US into a recession (two negative GDP quarters in a row), although like a Greece default, that official announcement will not come anytime soon.

So let’s see what the next two months bring us. As I said earlier, late September and October should be interesting times.

September's Gold-en surprise

September’s gold price movement has been a study in contrary trends.

While gold reached $1,900 on the 2nd and has cascaded downward $243 to Friday’s close at $1,657 on the spot market.

While European banks from Germany, France and Belgium are teetering on Greek default concerns the liquidity trap from overnight lending in dollars has been the main driver, US hedge funds have also been big sellers especially this week.

Hedge funds threw out many babies with the bath water this week due to covering margin calls on leveraged bets. Gold is a case in point, but Apple and Google also suffered sell-offs.

Given the fall in gold prices, late Friday’s 23 percent rise in margin requirements by the CME does not make sense, unless we have something afoot for Sunday into Monday.

There is a strong possibility of a major market moving event very soon. Why else would you dramatically raise margin requirements on all precious metal including silver and platinum?

Is there a Greek default or a European bank being nationalized? Perhaps, lord knows there are many candidates from Dexia, SocGen to Morgan Stanley.

I am giving fair warning that tomorrow or Monday may see soaring volatility  and therefore a need to suppress gold prices. This volatility will not be an outright liquidity squeeze so there in lies the need to squash gold and silver.