When the Missles Fly, It's Time to Buy

You may have heard that Wall Street market maxim, "When the missiles fly, it's time to buy", which is often misinterpreted as the spoils of war being good for the economy.

It's actually about the market's hatred of uncertainty and whether a war is a good or bad thing for the economy/market, it's the prelude to war in which the market is uncertain of what's going to happen and therefore cannot discount events, typically resulting in the taking off of risk. Once the war begins though, uncertainty over the situation has been removed, thus the saying above.

The Greek situation has been about as uncertain as you get, but today it seems to have been ramped up even more. First yesterday's EuroGroup Finance-Ministers' meeting ended early and today once again the Greek negotiating delegation left the meeting early.

This was followed by an ultimatum from German Chancellor Angela Merkel who has been at odds with the very influential German Finance Minister, Wolfgang Schaeuble who joined Parliament as Merkel was graduating University and was leading the CDU party and bringing Merkel on as a his Secretary general before being caught up in some political trouble at which time Merkel took over. In this way, Wolfgang isn't just a Finance Minister, but a much respected member of the old guard who could lecture Merkel about what he was doing in German politick as she tried her first cigarette in high school. Thus Merkal's CDSU party has a lot of respect for Schaueble, like him or not, he's no ordinary finance minister. The rift between him and Merkel over Greece has gown recently, but has been in place since the first bailout talks and now the rift between Merkel and her own CDU party seems to be exerting pressure on her as she probably was the best friend Greece had during all of this.

Today Merkel said that the Greeks would need to come to an arrangement/deal before the market opens Monday.

Since then, Eurogrpup president,  Dijsselbloem has upped the ante by canceling the head's of state summit scheduled fro today and tomorrow, citing insufficient progress made on the Greek deal and gave the Greeks/Eurogroup until Saturday to come up with a final resolution/deal.

Today hasn't been a good day for Greece and pressure continues to be watched up. The ECB has been bailing out Greek banks on a daily basis since last week when the Greek Central bank's weekly request for ELA (Emergency Lending Assistance) funds which is money the ECB alots to usually sound banks to avoid a crisis bank run/capital controls situation, went from weekly requests to day to day requests with a lot of pressure from ECB governing members to either severely curtail or completely halt all ELA assistance as they see it as making Greek banks look stronger than they are, but it's really a political ploy to increase pressure on the Greek government to give in to Troika/IMF demands. The ECB/Draghi has been reluctant to halt ELA assistance, although severely curtailing requested amounts as the ECB doesn't want (or Draghi doesn't want) the ECB to be tagged as a political entity, which is FAR outside their mandate, but at the same time there's a good case to be made for cutting funds and there are few rules and a lot of wiggle room to essentially do whatever they want. Most pressure is coming from the German Central bank as well as the Irish Finance Minister, both calling for an and to ELA assistance which would=game over for Greece.

If that weren't enough,  the ECB has come out and made the threat today of halting ELA assistance, effectively crushing the Greek financial sector/banks as the ECB has more money lent to the Greek financial system than they have deposits or collateral.

And now the word is Donald Tusk, the President of the European Council that sets direction to political matters, etc. told Greek PM that the "Game is over", to which Tsipras replied, "This isn't a game".

With the EU leaders summit cancelled last minute, deadlines set for Monday before the market open and now moved up to Saturday and the ECB threatening to cut off the only source of funds that fills ATM's and cash drawers as money continues to flow out of Greece at the rate of around a billion Euros a day,  it seems the EU is counting on the Greek political inexperience to give in under  crushing last minute pressure , however even if that happens, there's no guarantee, in fact it's highly unlikely that any accepted measure by Tsipras would pass Greek parliament and with the June 30th IMF payment deadline fast approaching, I suspect it's probably too late to call for snap elections or a referendum in Greece to get the political actors in place that would accept a deal. Then the same deal would have to be ratified through all of the relevant EU member countries' parliaments as well and Germany in particular, despite Merkel, seems to be quite unwilling to pass any measures as made clear earlier this week with a hint when saying they would not vote on the accepted deal that lasted a few hours before the IMF chimed in and refused it, until Greece passes it.

And with that, the market is facing major uncertainty and thus not in a risk on mood whatsoever which just so happens to align with out Week Ahead forecast of early week price strength reversing and moving to a stage 4 downtrend.

That's a quick gathering of where things stand.