Greece Is Fixed? - Bond Yields Crash To Lowest Since 2006

For the first time since 2006, Greek 10Y sovereign bond yields have plunged below 4.00%.

The last few weeks have seen a veritable rush to grab that yield as GGBs plunged from 5.50% on Dec 4th to 3.98% today!!

Of course, this "signal" from the bond market is being heralded as proof that the worst is over and everything is awesome in Greece again - hooray.

It"s Not!

Over 40% of youth (under 25) are still unemployed, suicide rates remains extremely elevated, emigration among the smart and young is prevalent, and of course there is the immigrant crisis that Greece appears to have become the main bearer of.

As The Guardian reports, a study by the DiaNeosis thinktank found that 15% of the population, or 1,647,703 people, in 2015 earned below the extreme poverty threshold. In 2009 that number did not exceed 2.2%. The net wealth of Greek households fell by a precipitous 40% in the same period, according to the Bank of Greece. Unemployment, austerity’s most pernicious effect, hovers around 22%, by far the highest in the EU, despite a 5% drop in the last two years.

Faith in government claims that the country has turned the corner – based on a massively manipulated bond market – is in short supply.

“Greeks can’t see any light at the end of any tunnel,” said Christodoulaki, shaking her head in disbelief. “They won’t believe anything at this point until they see it for real in front of their eyes.”

For those affected hardest by Greece’s bankruptcy ordeal, the Syriza government has been praised for providing food vouchers and rental subsidies, free school meals and hospital care for some 2.5 million uninsured.

“For the poorest of the poor Syriza has been good,” said Mourtidou.

 

“But it has not done what the vast majority hoped and that is very dangerous. Tsipras had a calming effect when he came along. There isn’t another Tsipras to promise us the world and now I fear the earth could be trembling under our feet. The next choice could be the far right.”

It is a common concern. Greeks have responded to loss with fortitude and resilience but a mood of uncertainty prevails. Amid the rage and disappointment many worry the power of loss could assume other more menacing forms.

“Uncertainty is the new normality,” psychology professor Fotini Tsalikoglou noted. “It could manifest itself in apathy, violence, more uncertainty, we just don’t know.”

Forget Tulips & Bitcoin - Here's The Real Bubble

While the broader market for Swiss stocks has risen modestly this year, one "entity" has outperformed its peers by such a staggering margin, it has left bamboozled market experts struggling for an explanation.

And that company is…the Swiss National Bank.

The price of a share in Swiss National Bank in August rose above 3,000 francs ($3,143) for the first time, more than double the level of a year ago, and up 50% since mid-July, as the Financial Times noted in a story about its performance.

Shares of the SNB trade like any other company listed on the Swiss stock exchange, though because of their price liquidity is somewhat thinner. The Swiss cantons together own 45% of the SNB while 15% is owned by cantonal banks and the remaining 40% by private individuals or companies. The Swiss Federal Government owns no shares.

Given the SNB’s holdings – it has demonstrated a voracious appetite for Apple stock and currently holds more than $80 billion in US stocks – the shareholder-backed hedge fund is also having one hell of a year. Perhaps it’s understandable that shareholders see these gains as a driver of value.

And of course, the FT has a few theories about what’s been driving the bank’s astounding gains.

One is that, because of the bank’s stellar P&L, it will almost certainly make a dividend payment this year (it has occasionally failed to do so, like in 2015). Dividend payments are fixed by law at a maximum of 15 Swiss franc per share.

If paid in full, that would amount to a yield of 50 basis points – far superior to the minus 15 basis-point yield on the country’s 10-year bond.

Another is that some German investing newsletter issued what amounts to a “buy” call:

“German investor newsletter Actien Börse encouraged a buying spurt after likening the shares in July to ultra-rare “Blue Mauritius” 19th century postage stamps. Trading in the 100,000 SNB shares is thin, so even modest buying or selling leads to significant price swings.”

Of course, these arguments seem specious: Investors could still probably lock in higher yields by buying Treasurys and hedging their exposure, as one example. And the influence of that newsletter sounds like it’s being overstated.

However, the FT hints at one possible driver that’s probably closer to the truth: Private investors are trying to front-run a possible share buyback by the central bank. As the FT notes, the SNB wouldn’t be the first central bank to buy back its shares.

“Another theory is that investors are speculating they might be bought out. Central bank buybacks have happened before. In the early 2000s, the Basel-based Bank for International Settlements — which acts as a bank to central banks — bought out its private shareholders so it could focus on its public service functions, rather than the interests of financial investors.”

Regardless of their motives, the stock’s gains are almost definitely being driven by private shareholders. As we reported last year during a smaller bout of appreciation in the SNB"s stock, it’s unlikely that a canton or a cantonal bank would buy the shares en masse because their ownership has been carved in stone for many years.

And as the FT notes…

Harder to explain, however, is why the price of SNB shares has risen so steeply this summer.

“Institutional investors do not invest in them, so there is no demand for analysis or coverage,” says Andreas Venditti, bank analyst at Vontobel in Zurich. “Since the impact of even small financial market moves on its financials is so huge, it would be difficult to do a reliable earnings estimate.”

The alternative is that a private investor is quietly buying up all the stock available. The single largest private shareholder is a German national called Theo Siegert, a German business leader and professor at Munich University. He owns 6.7% of the Bank, more than any Swiss canton except Bern. Still, if the buyer was Siegert, he would have to file a new report as a large shareholder once he crosses a 10% threshold.

While buybacks are unlikely, and a leveraged buyout of the central bank woud be impossible - though it"d make for an interesting case study - there’s only one probable conclusion left: The SNB is pushing global stock prices up, in the process creating the next bubble. And now private traders are gobbling up shares of the bank itself, adding a dangerous feedback loop to the equation.

The SNB isn’t the only central bank that trades publicly. Both the Bank of Japan and the Bank of Greece are publicly traded, as is the Bank of Belgium; but when it comes to massive wealth-multiplying asset purchases, the BOJ is the real master.

And we all know how that turned out. 

Anarchists Raid Bank Of Greece In Downtown Athens

Security measures in the building of the Bank of Greece in downtown Athens are not as good as they should be.

As KeepTalkingGreece reports, a crowd of anarchists from the well-known group Ruvikonas entered the Bank of Greece on Wednesday afternoon.

Some 20 people entered the Bank of Greece from a side entrance at 1:40 pm, threw leaflets and fled.

The Bank personnel tried to hide under the desks and behind counters, media reported.

Some of the leaflets read:

“Bank of Greece is the doorman of the Memoranda”

Police squads arrived at the Bank, detained several people in the surrounding area. The detainees are – or meanwhile were – to be set free as they are not in connection with the raid.

Greece: A Democracy In Crisis

Authored by Maria Polizoidou,

• The Greek people have just about reached the limits of their strength. The economic situation is tragic. Illegal immigration is out of control, criminality increases day by day. The political system is steeped in corruption and the media have stopped being the communication channel between citizens and the political system. The Greek media are functioning as the praetorian guard of the euro; they favor the massive admission of Muslim populations into Greece and they fiercely attack every voice that disagrees with them.


• Bishop Ambrossios is urging people to revolt. He characterizes the illegal Muslim immigrants entering the country as conquerors. He also says that Christianity is under attack in Greece, while Islam is being daily reinforced. He says that Greek Orthodox churches are being desecrated, robbed and burned by Muslim immigrants while the state just sits by and looks on.


• Prime Minister Alexis Tsipras does not fully control his political party; his biggest problem is his cabinet.

When a political system is corrupt, when the media only put out propaganda and not information, when oligarchs control public life, when the political system seems repeatedly directed against the interests of its own people, when a political system ignores the constitution and the will of the majority but draws its legitimacy once every four years through elections, then, although it may be called "democratic", it is a democracy of junk. It is not the people"s democracy anymore; instead, it belongs to the elites.

If Greeks do not take back their homeland, wrote journalist Makis Andronopoulos on January 3, 2017, the guns may well have the last word. Andronopoulos wrote that he came to this conclusion after polls showed the detachment of the political system from the Greek people and their tragic way of life.

The director of the newspaper Kathimerini, Alexis Papahelas, wrote on January 29, 2017 that the people are exhausted, that democracy still does not have solution to the problems of citizens and that the situation in Greece reminded him of 2012, when the old political system was wiped out.

Bishop Ambrossios is urging people to revolt. He characterizes the illegal Muslim immigrants entering the country, as conquerors. He also says that Christianity is under attack in Greece while Islam is being daily reinforced. He says that Greek Orthodox churches are being desecrated, robbed and burned by Muslim immigrants while the state just sits by and looks.

Members of the governing coalition say that Germany wants to bring down the Greek government and bring the New Democracy party to power. The leader of New Democracy, Kyriakos Mitsotakis, is the most obedient and tenacious follower of the German policy in Greece.

The Greek parliament has eight political parties, but if one excludes the Greek Communist party and the Golden Dawn party that have their own anti-establishment agenda, the remaining parties express exactly the same policies: All of them are enthusiasts of the eurozone and the European Union; they support open borders and globalization, and have no respect for Greece"s religious or cultural roots.

The Greeks, for the last seven years, have been requesting: strict measures against illegal immigration; mass deportations of illegal immigrants; parliamentary independence from supranational organizations; accountability from their leaders; transparency in political life; security and economic liberalization from their lenders; combating corruption and protecting the country"s national identity. These requests, however, have been rejected for decades by the system -- with no debate. When those who make these requests are characterized as nationalists and racists and are socially stigmatized instead of being heard, such requests can burst outside the democratic framework. When a supposed democracy and the media do not allow people space to express these opinions and become part of the democratic process, citizens will ask to be heard by other means.

The Greek people have just about reached the limits of their strength. The economic situation is tragic. Illegal immigration is out of control, criminality increases day by day. The political system is steeped in corruption and the media have stopped being the communication channel between citizens and the political system. The Greek media are functioning as the praetorian guard of the euro; they favor the massive admission of Muslim populations into Greece and they fiercely attack every voice that opposes their own.

The country is rotting inside the EU and the eurozone. The Greek people have crashed economically. Greek cities, because of massive illegal immigration, look less like cities in Europe and more like cities in Afghanistan. Banks have begun the mass-confiscation of residences. The people are on the verge of revolt.

The Financial and Industrial Research Foundation, in its latest report, stated that the per capita income of Greek citizens has declined to the level of year 2000.

According to the Bank of Greece, the wealth of Greek households decreased by 37.5% between 2000 and 2015.

The European Bank for Reconstruction and Development (EBRD), in a report, characterizes the Greek people as the unhappiest in the EU. Unemployment is more than 25%, the highest in the eurozone.

Scandals in Greece have been coming to the surface one after another. The Novartis pharmaceutical company, for example -- in one of the largest scandals in Greece -- was found to be giving money to politicians, government officials, journalists, publishers and doctors so that the public hospitals would use Novartis"s products. According to the media, those involved are a former prime minister of Greece, who is currently the EU Immigration Commissioner), Dimitris Avramopoulos, and several former ministers.

In addition, the German company Siemens is also alleged to have been bribing Greek politicians to win public contracts. The case is now being heard in court. The Siemens scandal may also end up having a huge impact on the political system.

According to the accusations of May Zanni, Deputy Secretary for Strategic Planning and Communication (from the New Democracy party), Greece"s opposition leader, Kyriakos Mitsotakis, and his family seem to have huge dealings with the German company.

In fairness, the current government is working hard so that corruption and mismanagement cases are heard in court.

Also in fairness, Prime Minister Alexis Tsipras is not a man with bad intentions and tries, within the limits the lenders leave, to negotiate as hard as he can for his country. He knows very well that Greece, to survive, should withdraw from the euro and the European Union. He also knows, as do the Greek people, that Greek history, Greek values and Greek geopolitics always lie close to the naval powers, the USA and Great Britain. Greece has never been able to join the European continental powers.

But a powerless prime minister, even if he wants to lead his country towards salvation, away from the European Union, cannot do it. Tsipras does not fully control his political party; his biggest problem is his cabinet. SYRIZA is a political party that relates politically and ideologically to the US Democratic Party. So, he is committed to follow the US Democratic Party"s policies about the European Union, the eurozone and globalization. Perhaps now, with the Trump Administration, at least some of these problems will be able to be addressed.

The media"s favorite target, meanwhile, is President Trump and the orderly, peaceful -- truly democratic -- political revolution that brought his presidency about.

Poverty, criminality, corruption, illegal immigration and the delegitimization of the political system are the dots which, if one connects them, point to Article 48 of the Greek constitution. This article, which determines when the government can suspend the constitutional rights of citizens, can be activated when the state is under siege from internal or domestic enemies.

With more taxes in the offing, with more pension and salary cuts, and with Turkey sending more immigrants to Greece, there is no way for Greece to be governed without the government declaring martial law to enforce its policies on the population. There are several ways this can happen.

One possible scenario is that the Germans will force Tsipras to resign and go to elections. If that happens, the opposition parties will win the elections, but in order to deal with the rage of the left and the Greek people -- who will have to pay even more taxes, as the Germans asked -- the Greek government will have to declare a state of emergency.

One possible scenario is that the Germans will force Greek Prime Minister Alexis Tsipras to resign and go to elections. Pictured: German Chancellor Angela Merkel meets with Tsipras, on December 16, 2016. (Image source: phoenix vor Ort video screenshot)

Another scenario is that the EU will push Tsipras to co-operate with the opposition parties in order to create a broad government coalition that will enforce all the new taxes and pension cuts. In such an event, the Golden Dawn party and the Greek Communist party, along with rebellious citizens, will declare themselves against the entire political system, and take their fight not to the parliament but to the streets.