Stocks & Equities
The seemingly never ending “Greek Crisis” has certainly garnered the world’s attention over the last couple of weeks. And while market volatility has certainly increased as of late, it is important that we step back and look at the markets objectively. As I stated very early last week, as Greece defaulted on their debt payment to the IMF:
“if we step back from the media’s messaging and take a look at the market, a significantly different picture begins to emerge. The chart below is a monthly chart of the S&P 500 index.”
“When put into some perspective the recent “decline” is much less dramatic. Importantly, the markets continue to maintain the longer-term “bullish trend” which has been the hallmark of the market’s accelerated advance since the onset of “QE3” in December of 2012.
Importantly, for investors, the TREND of the market remains positively biased for now. Regardless of your personal bias (bullish or bearish,) as it relates to the economy or markets, the positively sloping market trend requires portfolios to remain tilted toward equity (risk) based exposure.
However, and importantly, where investors inherently go wrong is the extrapolation of the current condition indefinitely into the future. As shown in the chart below, there are internal dynamics that suggest that current “environment” for carrying excess “risk” is deteriorating.”
“The market, on multiple levels, has reached points that have existed only at previous major market peaks. Furthermore, the internal dynamics are issuing very similar warnings, in terms of momentum, deviation, and relative strength, as to what was seen just prior to major turning points previously. While this does NOT mean that the market is on the verge of immediate mean-reverting correction, it does suggest that future market returns are likely to be far less robust than what has been seen previously.”
….. read more HERE
Greece Roundup
- A “yes” vote in favor of servitude has now reached a slight majority according to some Greece referendum polls. How accurate the polls are is an issue.
- Yanis Varoufakis, Greece’s finance minister, said he would resign if Greeks voted Yes in Sunday’s referendum on the country’s bailout. “I will not sign another extend and pretend agreement”, said Varoufakis.
- Greece to run out of essential food and medicine within days and banks down to last €500 million.
- Daily allowance of cash from ATMs has dropped from €60 to €50.
- Three quarters of business leaders think Greece will be forced to leave the eurozone in the next 12 months.
Vote for Servitude Takes Slight Lead
Reuters reports ‘Yes’ Camp Takes Slim Lead in Greek Bailout Referendum Poll
Supporters of Greece’s bailout terms have taken a wafer-thin opinion poll lead over the ‘No’ vote backed by the leftist government, 48 hours before a referendum that may determine the country’s future in the euro zone.
The poll by the respected ALCO institute, published in the Ethnos newspaper on Friday, put the ‘Yes’ camp on 44.8 percent against 43.4 percent for the ‘No’ vote. But the lead was well within the pollster’s 3.1 percentage point margin of error, with 11.8 percent saying they are still undecided.
Given a volatile public mood and a string of recent election results that ran counter to opinion poll predictions, the result is in effect completely open.
Credit ratings agency Fitch said the banks were already effectively bust and would go to the wall within days unless the European Central Bank increases emergency liquidity assistance to help them cope with a wave of withdrawals.
There has been little time for campaigning but Tsipras is due to address a mass rally of ‘No’ supporters in Athens’ central Syntagma Square outside parliament on Friday evening, while ‘Yes’ campaigners plan a rally at the old Olympic Stadium.
Greek Banks Down to Last €500 Million
The Telegraph reports Greece to Run Out of Essential Food and Medicine Within Days and Banks Down to Last €500m
Greece is sliding into a full-blown national crisis as the final cash reserves of the banking system evaporate by the hour and swathes of industry start to shut down, precipitating the near disintegration of the ruling coalition.
The daily allowance of cash from many ATMs has already dropped from €60 to €50, purportedly because €20 notes are running out. Large numbers are empty. The financial contagion is spreading fast as petrol stations and small businesses stop accepting credit cards.
Constantine Michalos, head of the Hellenic Chambers of Commerce, said lenders are simply running out of money. “We are reliably informed that the cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour,” he said.
Dwindling Food and Medical Supplies
Also consider Food and Medicine Shortages for British Tourists in Greece ‘Within Days’.
British holidaymakers in Greece will be unable to buy food or medicine within days if a deal is not reached to reopen the banks, the head of a leading business body has warned.
Constantine Michalos, president of Athens Chamber of Commerce, said there could be “shortages on the shelves” by early next week and tourists could be left without “basics”.
Mr Michalos warned that shops will begin to close on Friday and not reopen because they are unable to import products due to the bank closures. He said the bank closures had limited the ability of shops to import new stocks because Greece is currently frozen out of a cross-Europe system of money transactions.
IMF Says Greece Needs Another €60 Billion Bailout
Finally, please consider Greece Needs €60bn in New Aid, Says IMF.
Greece needs more than €60bn in new financial help over the next three years and faces decades under a daunting mountain of debt that will make it vulnerable to future crises, the International Monetary Fund has warned.
In a new analysis that lays out Greece’s economic dilemma in stark terms, the IMF on Thursday called for Europe to grant the country “comprehensive” debt relief, arguing for the doubling of the maturities on its debts from 20 to 40 years.
The fund’s assessment is likely to provide succour to the Syriza-led government which is campaigning for a No vote in a referendum on Sunday. But the IMF also blamed it for the country’s deteriorating situation.
What’s It All About?
The old bailout agreement is off the table. The creditors pulled it when Tsipras announced a referendum.
Greece has already been bailed out to the tune of €180 billion or so. However, Greece needs yet another €60 billion “bailout”.
Total eurozone exposure to Greece, counting Target2 liabilities, may top €250 billion depending on how much cash has been pulled from Greek banks in the past two weeks.
Greece cannot possibly pay back €250-€310 billion, and it won’t. Merkel understands this. For political reasons, she cannot say that.
With sentiment in Germany and the other creditor nations against another bailout the only point of a “yes” vote is one of revenge. The creditors will topple Tsipras and likely install another Troika puppet.
That is what the referendum is really about.
A vote either way will not fix a damn thing. A “yes” vote is without a doubt a vote for extend-and-pretend servitude, but a “no” vote without reforms is equally useless.
The question at hand is: Who is the master and who is the slave?
We could have and should have been in this position four or more years ago, with only €60-€80 billion at risk. Bailing out the bondholders cost that much.
Regardless of the outcome, it appears to me the business leaders are correct. About 75% of them think Greece will be forced to leave the eurozone in the next 12 months unless Russia quickly comes to Greece’s aid.
Stranded in Limbo
This all has sort of a surreal nature to me reporting from Iceland where Liz and I are on vacation. Just this morning, Liz overheard a conversation from two Greek citizens speaking in English.
They felt lucky to be able to get on a plane for their vacation, but they are also worried about being stranded here.
If there is no money for jet fuel or critical services, we could easily see vacationers stranded in Greece. And if Greek airports get shut down, Greek citizens could be stranded abroad.
Though it might yet drag on for weeks, months or even years, Greece’s drama can end in one of only two ways: Continued austerity which consigns its most vulnerable 50% to an endless “capital D” Depression, or some form of temporary dictatorship complete with capital controls and wealth confiscation — and a then “capital D” Depression. Either way, some of today’s Greek kids might grow up without ever holding a job in a legitimate business. For more details, see Greece’s hideous choice: More austerity or collapse.
But Greece was never the main story. At best (worst?) it’s an illustration writ small of what’s really coming, as the eurozone’s bigger weak economies travel the same road. Italy, Spain, and Portugal will soon need (more accurately demand) a Greek-style bailout, though with a twist: There isn’t enough money available anywhere to bail out economies of that size sufficiently to allow them to remain in the common currency union NOR to manage the debt writedowns that would instantly hit the major European banks if those countries withdraw from the euro. So whatever Greece does, the real crisis is on its way. Here’s a good Zero Hedge analysis of what comes next.
To understand this convergence of inevitable and imminent, put yourself in the shoes of an Italian with a local bank account. You’re seeing the footage of Greeks queuing up around the block only to be greeted with “No Money” signs when they finally reach the ATM. And you’re drawing the right conclusion: Get your money out of the local bank and under your mattress, into a tin can buried in the back yard, or into a Swiss franc account even at the cost of a negative interest rate. Later, when Italy has left the eurozone and returned to a much-devalued lira, those euros/francs will be worth twice as much as they are today.
Or buy gold just in case Italy gets bailed out with a trillion newly-created euros, causing that currency’s value to plunge. Just don’t leave it in the local bank to be confiscated by the government.
All it will take is a few tens of thousands of like-minded Italians, Spaniards and Portuguese to crash their local banking systems. But why would it be only that many? Why would anyone with money in those banks, even if they’re far more optimistic than our hypothetical Italian, not empty their accounts just to avoid the turmoil caused by the pessimists?
Richard Russell thinks that Failed Western Central Planners Are Now Trapped And Desperate
Gary Savage thinks that the Gold Bugs Index ($HUI) this bear market could fall much further if it breaks the 2008 low. Up to 1/3 its present level. Read the comments on his chart. Click on the chart or HERE for a larger view.
Przemyslaw Radomski wrote this article after the HUI broke its low: Trading Alert: Gold Stocks Break Below 2008 Low – very good charts and analysis in this article – MT Ed.
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