Keep Your Eyes on Greek CDS . . .

Below we’ve charted the CDS (Credit Default Swap) spread on Greek 5-year government bonds, which begs the question . . . are things getting worse in Greece?  CDS spreads for Greek government debt have blown out to levels not seen since February, when sovereign debt defaults concerns were most vocal.  While the market and headlines are now focused on Goldman Sachs and the financial sector, Greek CDS spreads are signaling ongoing sovereign debt issues.  And as we stated on our Sovereign Debt Call last month, history tells us that Greece is typically a leading and not lagging indicator.

 

The Ecofin Summit from April 16-17 of Eurozone finance ministers and central bankers in Madrid ended without substantial agreements on problems facing the European economy as a result of the Greek debt crisis.  While partially to blame was the distraction from the Icelandic volcano, the reality is that no real resolutions were reached regarding Greece.  While the Greek Prime Minister’s austerity measures appear aggressive, including a 10 percent cut in social spending, a two-year increase in the retirement age, and the elimination of public sector jobs and two months of wages for public service workers, the market is signaling, as outlined in the chart below, that they are not enough.

 

Greek has to borrow an estimated 12BN Euros in March and 32.5BN in Euros through the duration of the year.  Two years ago Greece was borrowing at ~4.5%, versus its current market rate of 7.37%.  The dramatically increased interest rate is obviously offsetting much of the gains expected from the austerity measures.

 

We highlighted sovereign debt issues as a key reason to be negative on equities heading into May, and will be keeping CDS spreads for Greece and its PIIGish brethren front and center.

 

Daryl G. Jones

Managing Director

 

Keep Your Eyes on Greek CDS . . . - Greece CDS


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more