No, this is not a Crash.
Yes, the market will open down.
Yes, Europe is looking Grim.
But some simple truths about Greece and the global economy may set your mind at rest.
1. Greece is in a world of hurt. Banking is limiting people’s withdrawals from the financial system to only a few Euros per day.
2. The Greek problems have hit markets around the world, but presumably you’ve discounted the problem in your own accounts.
So, no, I don’t expect the Greeks breaking with the EU will hurt anyone in the US except those chasing yields with high bond promises/lies. Greece will have to liquidate decades of free lunches, pretty much all at once. That’ll be an owie.
Bond holders will scream bloody murder about how they need to be made whole. But the truth – for the idiots at the helm who seem to have forgotten basic accounting – is that interest has two components: rent of money which is basically the borrowing cost and risk of default which the bondies (who have come to believe they are deities) can’t seem to remember how that works.
Bondies argue everyone else should buy their free lunch.
As a sage reader posted in the overnight comments section:
People need to be reminded that the Greek shut down of the Banking and stock market is nothing new. The US did that in 1914 (shut down the stock market from August to December), and shut down ALL banking for a week with a bank holiday in March, 1933.Only a fool would believe it would never happen here again, or that everything is contained in Europe, or wherever.
Ah…reminders, is it?
Well here’s one to bear (or bull_) in mind this morning: Crashes don’t happen at the top.
Yeah, sounds idiotic to mention a little detail like this, but remember just a few trading sessions back, the NASDAQ was hitting new Post-2000 highs.
A REAL crash occurs when a market has moved down to a critical support level, like my much discussed 2,040 level on the S&P and the even bigger support zone (e.g. more critical) down at 1,740.
If the market was opening this morning close to either one of those, we might seriously entertain the crash hypothesis. But it’s not. Case closed.
For now, the number of bears is high enough that the market seems likely to decline only far enough to kill a bunch of bears and then resume the upward march.
Yes, other economic problems are out there – like Puerto Rico having a $72-billion debt problem. But, again, there are two aspects to the interest that gets paid to the bondies. R&R – rent and risk. Which is the second reason we don’t get too worked up.
So the moment you will see us breaking a sweat over things economic will be when the service economy bubble begins to break, when layoffs go up dramatically, and when prospects are much more negative.
A Big BUT…
This is a fine time to mention that in the study of economics (and virtually ALL of the social sciences) we have seen a slamming of the role of race.
We see this every time there’s a shooting and the perp and vic are of different races. But there’s an important analytic angle to be considered.
And that is that certain races may have a predisposition to behave in certain ways due to how history has rolled out (and in some cases over) different nations and nationalities. My deflationist friend Jas Jain, for example, shared this:
“The Nazi View of the Greeks—Half-breeds That Are Untrustworthy!
I am reading the memoirs of Alfred Rosenberg, a highly educated upper middle-class German born in the Russian Empire, in Latvia, who witnessed the Bolshevik Revolution firsthand as a youth. He moved to Munich in his twenties and was the first editor of the Nazi Party magazine/paper and very close to Hitler in early years. Later, he was less in favor, but not out of favor, with the Fuehrer.
In those years there was a clear recognition of the “tragedy of Hellenism,” i.e., severe degradation of the Aryans of the classical Greece with bad behavior and habits observable among Greeks in modern times. Untrustworthiness, relative to Northern Europeans, being one of the characteristics of the Greeks. His explanation was intermingling with the middle-easterners for a very long period and producing half-breeds that have lost the values of their Aryan ancestors.
He does talk about the probable racial problems to develop in America and his forecast was that in a couple of centuries Americans would have the same fate as Greeks.
Well, the German govt and the EU is learning firsthand about the dishonesty of the Greek govt. Greeks are unfit to be in the Euro zone and should be kicked out. They should have been kicked out years ago. Cultures matter! America is busy developing a very bad culture under the leftist political leadership.”
That said, while I do NOT endorse the idea that there is a racial component to the Greek crisis, there is, however, evidence that when cultures evolve from a monoculture to something else (as Greece has) then unintended consequences result.
My academic concern is that we have become so overwhelmingly self-censored by the mainstream media that to even ask a question or do research earns one the label of racist and this is across a wide area of inquiry.
Problem is self-censorship is like trying to derive some of the operating principles of physics without wanting to use one term in particular (mass, for example) simply because it is a society-wide article of faith that we can’t discuss that concept because that would make us masscists.
And this leads us to what? I mean besides delusion?
Well, the markets are going down. The world is being led around by the bondies who don’t want to lose even a cent, and we can look at the history of Greece as a fine example of what happens when human migration destroys any sense of national self-identity. Why, toss in a bunch of opportunistic free-lunchers to lead the parade, and the bitter end becomes inevitable.
Still, while the bondies pull all the strings at the top, I’m pretty sure some paper-over scheme will emerge, just as soon as the bears all climb on the “Train to the End of the World.”
That should be derailed, the bears slaughtered, and the bulls then run this puppy up to a new peak in coming months because a combination of Iran, Greece, the Rest of Europe and God-knows-what-else will finally let some real air out of this bubble.
But it still feels too early in the game because Denial is a mighty force and Bondies are crooks of the highest order.
They are likely to find a way to make everyone in Europe pay, yet.
More Down Tomorrow?
We can see a couple of other bumps in the road this week, though, so the bears might get at least a taste of the financial smack early on: Tomorrow’s report will be a two-parter with a look at the Case Shiller/S&P, ADP, CoreLogic, and whoever else shows up Housing Data.
ADP and Challenger job cuts are out Wednesday morning for our Peoplenomics.com readers and then Thursday we get the jobs report for June.
I would draw your attention to the idea that government can seem to get their poop in a group and have the jobs data on the second business day of the month when there’s a big-ass Federal holiday on tap. But the rest of the time? (Sniff, snifff…smell something?)
Don’t forget the markets will be closed on Friday due to the celebration for the Country That Used to Be… I don’t what what it is we’re living in now, but…oh, don’t make me go there. Banks open, though.
And if you don’t believe this is the Country That Used To Be, go read how some Americans have signed a petition to ban the flying of Old Glory and replace it with the corporate pyramid.
We have really, totally flipped.
History, With a Side of Denial
The ISIS Caliphate (which we’ve labeled the global caliphate) is now a year old. And some media, like NBC are trying to make like the Caliphate is running into headwinds.
Yet, Islamic fundamentalism/terrorism is doing much betters than the report leads to believe. Especially when you look at the mess in Tunisia and such.
It’s sort of like looking around your house and saying “No trouble in the guest bathroom” while there’s a mass murder in the kitchen, drug overdoses in the rec room, and the whole house is on fire.
Gotta take a broader view of things, I’m afraid. But don’t let us spoil the feel-good, huh?
No Iran Deal
Looks like the AP has, in heads-up fashion, figured out what we were forecasting months back: The Iran nuke deal deadline would come and go with no deal in sight.
The Don says we look like beggars, but I’d have chosen a different phrase…frigging idiots led by socialists comes to mind.
Especially when we are likely to elect an amnesiac politician as our next presitrix. (if that’s a word).
We didn’t bring our ViseGrips on this trip, but I will be picking up a small hammer today. Pinching myself ain’t cuttin’ it.