On Economy

 

So Far So Good in Greece

On Wednesday, U.S. stocks ended in the green. Investors bent over to pick up a few pennies in the stock market. They didn’t notice the huge steamroller headed their way. The Dow rose 138 points – or about 1% – after the mainstream media reported that “macroeconomic obstacles” in the ongoing Greek drama were being removed.

 

steamroller

 

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When the ATMs Went Dark …

There’s a time for calm, rational behavior … and a time to panic. On Tuesday, investors in U.S. stocks decided not to panic. Monday’s sell-off halted. But it did not reverse.

And it left the street with its worst half-year performance since 2010. Gain for 2015 so far? Zilch. But have we seen the top? We will have to wait to find out.

Fox News reports that Greeks are eyeing Bitcoin to protect their savings. At midnight Tuesday night, the Greek government defaulted on a €1.5-billion loan repayment to the IMF. And it has imposed a 60-euro-a-day limit on cash withdrawals.

 

50As of today, depositors reportedly only get 50 euro per day, because the banks have run out of 10s and 20s.

 

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Latest Developments

Alexis Tsipras has sent a letter to Jeroen Dijsselbloem of the euro-group (you can download the letter here, pdf), in which he requests a separate bailout from the ESM, essentially proposing that the ESM take over Greece’s liabilities for a period of two years. Unsaid, but implied, is that this would result in the referendum being recalled. More likely it is just a ploy to enhance Syriza’s chances of obtaining a “no” vote in the referendum.

 

Image via dreamstime.com

 

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Loaves and Fishes

Jonathan Bernstein over at BloombergView has just published an article entitled “Obamacare Narrows the Deficit.  Let’s Move On.”  It can be found here. To put it mildly, the argument is far from the slam dunk that Bernstein imagines.

Bernstein reports on a recent study from the Congressional Budget Office (“CBO”) entitled “Budgetary and Economic Effects of Repealing the Affordable Care Act” (the “ACA”), and which can be found here.  The report finds that, on a “static” basis [1], repealing the ACA would increase the Federal deficit by $353 billion over a 10-year projection period from 2016 to 2025.

 

26.09.09-Martin-Rowson-on-005Luxury miracle required

Cartoon by Martin Rowson

 

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Nothing to Worry About …

It was clear that stock markets would sell off and US treasuries would catch a bid on the news of the failure of negotiations between the former “troika” and Greece. What was less clear was that gold would actually fail to catch a bid, but we are putting this down to the fact that another surprise event occurred: the euro, after initially declining, actually ended the trading day slightly higher.

Some of this has to do with positioning: there were already lots of speculative shorts in the euro, and speculators added some 24,000 contract to their long position in gold futures ahead of the weekend. When a big move higher failed to make an appearance, some of these positions in gold were evidently sold again, while euro shorts welcomed an opportunity to cover on a dip caused by widely unexpected news.

 

warning-there-is-nothing-to-worry-about

 

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Capital Controls Have Arrived …

This is an “Amber Alert” day in the markets. “Greeks Line Up at Banks; ATMs Run Dry” was the headline over at the Drudge Report. Versions of it ran throughout the financial media.

Greece is the canary in the coal mine for what could one day happen to your savings. You’ll recall our prediction: In a crisis, banks will move fast to block access to your money.

First, they will limit withdrawals. Then they will either close their doors or run out of cash. That’s what’s happening in Greece right now…

 

CanaryInACoalMineWhen the canary dies, you know the air is poisoned …

Photo via forbes.com

 

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A Scary Moment in Shanghai

In a brief update on stock markets around the world, the AP informs us:

 

“Chinese stocks plunged 7 percent Friday as fears spread that a yearlong bull rally there had gotten overheated. The market is still up more than 100 percent over the past year.”

 

Overheated is the understatement of the still fairly young century in this case. Millions of retail traders have opened new stock trading accounts in recent months, most of whom reportedly know between nothing and less than nothing about the stock market. Two thirds of the new traders entering the market apprently didn’t even finish high school (see chart further below). Margin debt has soared into the stratosphere along with the number of trading accounts and stock prices.

 

china-stock-market-rallyChinese grannies day-trading during lunch

Photo credit: Reuters

 

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“We Are All Doing The Same Thing”

I recently listened to a podcast with some all-star [there are awards for everything now] “Black Box” equity trader. It was quite a “telling” interview & I thank him for his insights but I’d heard it all before. His confidence was staggering considering the general unpredictability of the future and, of course, the equity markets. He explained how he had completely converted from a generally unsuccessful, discretionary technical trading style to a purely quantitative and scientific trading mode. He seemed to be so excited that his models, according to him, were pretty much “bullet proof”. Having had more than just some tangential experience with black box modeling and trading myself I thought … you know … some people will just never learn.

 

maxresdefault

Image via iwatchapple.it

 

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Don’t Count on Your ATM Cards

Yesterday, came a report that the prime minister of Poland, Ewa Kopacz, has urged Poles traveling to Greece to take “a larger amount of cash” with them. Why? Because the situation could be “very dynamic,” she says. “Please do not count only on your ATM cards and on ATMs, but take a larger amount of cash with you.”

 

Greece-bank-run-ATM-queueQueues are forming at ATMs in Greece of late. These ATMs will keep working as long as the ECB provides ELA financing to Greek banks. Unfortunately, the latter are beginning to run out of collateral. We are guessing they are probably giving the Bank of Greece IOUs now that they are issuing themselves. Yes, the situation is “dynamic”.

Photo credit: Simela Pantzartzi / EPA

 

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For Jeb Bush, Russia Might as Well be on Neptune …

It probably is the neo-con thing to do, we’re not sure. Jeb Bush, a charter member of America’s horrendously expensive nobility, and the likely unfortunate second half of the 2016 non-choice, felt compelled to make a few remarks on Vladimir Putin in a recent speech. Or rather, what he would like to do about him:

 

Republican presidential contender Jeb Bush is warning Russia that if he becomes president, the U.S. will do more to tamp down Vladimir Putin’s aggression, especially in Ukraine and Eastern Europe, and to “isolate his corrupt leadership from his people.” But Bush did little to tip his hand on what those steps would be.”

 

Putin indicates the extent of his concern over Jeb Bush’s threats

Photo credit: Sasha Mordovets  / Getty Images

 

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