Article / 12 July 2015 at 23:25 GMT

The Macro Take: Another new line in the sand for Greece

Global Macro Strategist / Saxo Bank Group - Singapore Hub
  • I come bearing Greeks, no seriously let me in … I meant Gifts … 
  • Greece has three days – until July 15 – to approve the package put forth by the Eurogroup before any cheques get signed  
  • When the noise gets a little too much in the near term, it pays to take a step back and see where the world is most likely to be in six months  


Live from the Asia Pacific! 

A very good morning to everyone and wishing you all a positive, uplifting and, most importantly, a profitable week.


So the latest on Greece and the Eurozone is actually a lot better than what it could have been: an outright rejection and ejection of Greece. That seems to be off the table for now, but one must always remember anything is possible both in life and in the markets.

While no deal was struck over the weekend, the Eurogroup understands that this is the point of maximum leverage on its part – i.e. once the Greeks start getting the money, anything goes. So it has put the ball back in Greece’s court, which has until July 15 for its parliament and government to approve the package before any cheques get signed. 

This includes measures to be taken on labour reforms, VAT, taxes and some privatisation initiatives. The whole point here is that Prime Minister Alexis Tsipras has about as much credibility as Donald Trump’s hair being real, let alone “The Donald” becoming president of Mexico. 

Bear in mind it has now been over two weeks that banks and markets have been closed in Greece. There is a Greek ETF in the US called GREK. At $11.32 it was up 4% last week – so pressure increases with each hour for Tsipras and the Greek parliament.

Package deal ... Greece has until July 15 to vote through new measures. Photo: iStock

If we get a resolution ...

We seem to have a deal, yay! This seemed to be the sentiment in the massive Eurozone equities lift-off over Thursday and Friday. Tsipras will either go down in the history books as a Magician, Madman or the luckiest son of a gun to have ever run for office. To be honest, that’s probably going to be the case regardless whether we have a deal or not.

So a deal for Greece or impending evidence of a deal coming through, then yay – it's risk-on. I’ve covered how to trade this extensively over the past few weeks, but top trades based on Friday’s close that come to mind would be: 
1. Long USDJPY in size (opened sub 121.99 in Asia this morning, from Friday’s close of 122.4) and long JP equities 
2. Long CH and HK equities 
3. Long EZ equities, Spain and Portugal probably have the most upside to highs this year… but a lot more liquidity in the Men-In-Black index FTSE MIB, DAX, CAC and of course EuroStoxx 
4. Now you can “safely” short treasuries, as we should go back to focusing on the upcoming Fed hike that most people have forgotten about.

If we do not get a resolution ...

If later on in this week or next, we have some kind of fallout and rejection of the agreement – i.e. Tsipras walks or they summon the 28. Yay, we’ve come to an outcome at the very least! 

Tactical near term will be massive risk-off, which will turn into a great buying opportunity as the European Central Bank and most likely other central banks will be ready to act. In a scenario like this the immediate knee-jerk reactions should be: 
1. Short USDJPY in size (we could get to sub 120) 
2. Short US, JP futures 
3. Long 10 yr US treasuries and core EZ names 
4. Short the high beta crap that rallied towards the end of last week, versus long low beta high yielding blue chips.

Have your “go to moves” ready people! “Chance” favours the prepared mind. If you are long going into this week – for now it makes sense, but watch the headlines out of Greece/EZ and if you get another +3-5% pop in EZ equities with still no firm out-take, I’d get light on the holdings … or even better pick up on some laggards like JP equities (down over 4% last week).   

End of 2015 KVP's macro Santa wishlist

Where are we at the end of the year?

Dear Santa, KVP has been a very good boy, after a tumultuous 1H15, I thought it was worth sending you my Christmas list super early. Being a Macro man, it’s a little extensive, but then again I’ve been super good and trying hard to get better. 

On Greece

Please just make it stop, one way or another…

On equities

We’ll close at new highs by year end, taking out the 5178 high on July 12. Take it from me Santa, I would not short the Chinese government, not even with your portfolio (Does Santa have a portfolio or are you just 100% invested in reindeer?). Did you know that less than 10% of China’s population own equities?

Also the government is sitting on plus $4 trillion of reserves, with a mandate and will of seeing the deregulation, liberalisation and opening of the Chinese government coming to fruition.
I wonder if they’ll institute something akin to the 401K plan of the US, where I think +50% of the population has equity – or maybe even something like Australia’s superannuation fund, where something like +80% of the population has equity. Where would the SHCOMP be then? Hmmm…

SHComp, 3878, +4.5% WK, +20% YTD


Source: Bloomberg

As I think USDJPY is going to the moon, with JP equities strapped into the passenger seats. How about above 1750?
Also Santa, please give Japanese Prime Minister Shinzo Abe a wake-up call and let him know that he is wasting very valuable and rapidly depreciating political capital on his military/constitutional focus (article 9). All his efforts should be firmly on the much-needed structural reforms, he has an increasingly shrinking window of opportunity and the LDP’s popularity is falling.
Getting more women into the work force – implementation of childcare facilities, tax incentives for women, maternity and paternity programs, more immigrants that can help in the home place – is the easiest out of a number of difficult levers to move. Abe the clock is ticking.
Then again, the less Abe does, the more the Bank of Japan has to do, hmmmm....
Topix, 1584, -4.2% WK, +12.5% YTD

Source: Bloomberg

As either way you cut it, post Greece we just want to get back to the ECB yield compression trade and yes, they will have to continue on another round of QE in later 2016. EZ equities at new highs by the end of the year.

If the US with a much nimbler and proactive economy, one monetary policy and one fiscal policy had to go through three rounds of QE. The EZ with “kind’a” one monetary policy but 20 fiscal policies, not to mention a history of arriving late to the party and being the antithesis of nimble, has no way in hell of only being able to get by with one dose of QE.

Euro Stoxx at 3529, +2.5% WK, +12.2% YTD

Source: Bloomberg


I’ve not really looked at commodities for a while Santa, so let me save "wishes" from this asset class for 2016. I have to admit, some of them look absolutely killed (Gold is defunct Viagra, every time it gets the opportunity to rise to the occasion, it disappoints) and if I had to spend some time on them it would be on the soft commodities side. Asia protein trade anyone?


EURUSD is just being plain silly Santa, closing close to the week’s high of 1.1216. Let me get it at sub 1.05, new lows as the Fed hikes in September. Actually Santa, let's break parity; we don’t need to close the year below – we’ll be at 80-90 cents by end of 2016 – but let's just break it, it will be fun.

EURUSD, 1.1162 +43bp WK, -7.7% YTD

Source: Bloomberg

Santa, if I can only tell you how stubborn the AUDUSD cross has been – let the first Fed hike take US 10yr govies to +3.0% and be the final nail in the coffin on the yield mismatch – currently its only 55bp. AUDUSD is at 70 cents by year end and low to mid 60s by the end of next year. Also Santa, let’s throw in another RBA cut in 2H15 – just to be on the safe side.

AUDUSD, 0.7497 -1.0% WK, -9.0% YTD

Source: Bloomberg

It's looking like 130 by 2015 and while we are at it 140/150 by E-2016. Santa, you should have some of your elves get on the USDJPY/JP equities rocket ship – we are going to the moon. Just be cautious of Abe and ice cream trucks. Also note volatility is quite low; let's reverse this Santa – post Fed hike of course.

USDJPY, 122.88 Flat WK, +2.7% YTD

Source: Bloomberg

Fixed income

Let's get to +3.0% post the first Fed hike. To be honest Santa that’s not asking much; we were at over +3.0% at the start of 2014 with not a Fed hike in sight. Let's up the ante a little to 3.25%. EZ 10yr govies – tighter post the Greece drama, with Italy, Spain and eventually Portugal to get sub 2.0%.

US 10yrs, 2.40%, range this year 1.64% to 2.48%


Source: Bloomberg


Keep that structural move higher globally, but now that one way or another we seem to be done with Greece, let it fall off in the US. Structurally volatility should be higher in the MOVE and VIX by E-2015, not to mention across a range of currencies.

Potential 'INILs'

So not to get too bogged down in details, here are a range of thoughts that I will highlight in greater detail later in the week – time willing. I will try to go through quite a few charts and review/preview price actions across different asset classes.

It's more just potential trade ideas that I think are worth some work on and on a portfolio context could also make some interesting INILs (Invest-Now-Investigate Later & yes, that’s from Soros). Note these have a risk-on skew… if Greece breaks at any point, hit the 180 degrees and double down button (From long to short).

Basically if I was PM, at say Hindsight Capital … feet up … earl grey tea on hand … FT open on the desk … bloomie loaded up … my analysts better give me this list first thing every Monday morning on where we should be looking to money.

Airlines & oil; Not sure all the airlines have bounced as much as they should have, given this big pullback we’ve had in oil over the last two weeks (over -10%). Of interest are some of the bombed names from last week, such as Cathay (293 HK) and Singapore Airlines (SIA) –3.8% and 3.5% and these are low beta names.

US names (AAL, DAL, UAL) had a healthy pop last week, but tactically the charts and momentum seem to still be on their side – jump on? QAN at +4% for the week, seems a little too potent for me. But I would have thoughts China Eastern (670) and China Southern (1055) both -0.98% and +0.85% would be interesting this week. 

Baidu and Tencent – especially the former seems to have a lot more upside from last week.

Greek equities ETF in the US. Get ahead of the line as Greece equities and banks should still be closed on Monday. Then they will be up what +20-30% by the end of the week? Interesting to note the ETF ticked up very strongly on Thursday and Friday. There may be some European ETF versions, just not sure how liquid they are.

GREK $11.26, +3.8% WK, -16% YTD, -48% 1YR

Source: Bloomberg

Reflections, rants and other stuff

Investment bank Houlihan Lokey Discloses Plans for IPO
US M&A specialist house, Houlihan Lokey files for IPO given the merger bonanza we’ve been seeing in the US – will this mark a top in the market? (i.e. as Glencore did for commodities).

Glencore’s May 19, 2011 IPO was a near perfect top of the commodity index post GFC ...we’ve fallen by -40% since then … with the stock down close to -50% since its listing.

Source: Bloomberg. Create your own charts with SaxoTrader; click here to learn more.

On Yellen’s speech Saturday. They will hike in 2015 people, yet 50% of you will not believe it until after they hike. I am telling you, there is a whole generation of sunshine traders and portfolio managers out there – people who never had to make money in a yield rising environment.

“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalising monetary policy.” – Yellen

If you get surprised when the Fed raises rates later this year, you might as well join the camp of people who still kept deposits in Greece as we entered the inflection point.

Books…I looooove books

Currently going through phenomenal behavioural economics a-book by Richard Thaler called: Misbehaving: The Making of Behavioural Economics. It's funny, well-constructed and packed with numerous interesting studies and takeaways. 

When I grow up I want to be Soros and also do a PHD in behavioural economics crossed with something cool like computer programming, neuroscience or physics. 

Next book is a must to re-read once a year, it’s a classic by Charles Mackay: Extraordinary Popular Delusions and the Madness of Crowds. Makes you wonder if you bought the China distribution rights and translated it into Mandarin how many copies you could sell – I bet you that’s an asymmetrical trade as well. Anyone read any interesting trading/investing/economic books lately?

JP equites and technical analysis

Please see these two outtakes from our very own Kim “The Chart” Larsson on Kyushu Electric (9508) and Softbank (9984). Much obliged Kim-son.  

Key macro data points to watch over next week: July 13-19

Central banks: speakers/other

  • Fed speakers – George (15), Yellen (15), Williams (16), Mester (16), Yellen (17), Fischer (17) 
  • Other speakers – BoE’s Carney (14)  


  •  ID 7.5%e 7.5%p (14), BoJ (15), BoC 0.50%e 0.75%p (15), ECB -0.20%e -0.20%p (9)   

Meetings next week: July 20-26 (Minutes galore week)

  • RBA minutes (21), BoJ minutes (21), BoE minutes (22), RBNZ 3.0%e, 3.25%p (23), TU 7.5%p (23), SA 5.75%e, 5.75%p (23), NG 13.0%e, 13.0%p (24)   

Economic data flash: China Q2 GDP and inflation-themed week

  • China: New Loans, Trade data, June growth data (RS, IP, FAI), 2Q GDP YoY 6.8%e 7.0%p  
  • Japan: IP, Tertiary index  
  • Australia: Consumer confidence data, RBA FX trans
  • New Zealand: Q2 inflation YoY +0.30%e +0.1%p, Food prices, House prices, Manf. PMI 51.5p
  •  UK: CPI, PPI, Job data  
  • Eurozone: IP, ZEW survey, Trade balance, CPI 
  •  US: Retail sales, PPI, Empire manf., IP, Capacity utilisation, CPI  
  • Canada: Manf. Sales, CPI  
Source: Bloomberg and Saxo Capital Markets 

Lastly, life is very similar to investing/trading, you end up with what you put up with – so set your standards high, focus on the process and a profitable trading/investing to you all. Be successful and don’t forget to enjoy the journey. The effective use of our time is the most valuable commodity we have.

– Edited by Gayle Bryant

Kay Van-Petersen (KVP) is Asia Macro Strategist at Saxo Bank, the home of social trading. In addition to, please follow him on twitter @KVP_Macro. 


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