Archive - Jul 2015

We all know one thing that Greece, Cyprus, and Puerto Rico have in common – severe financial problems. There is something else that they have in common – a high proportion of their energy use is from oil. Most people don’t understand that our world economy runs on cheap energy.

History does not repeat itself, but it often rhymes. This could not be truer for crisis investing. Between China’s stock market and the debt troubles of Greece and Puerto Rico, it is clear that we could be entering a time of potential financial crisis. Every situation is unique, but generally the types of asset classes that protect investors in times of crisis are not necessarily the same as those during a bull run. Therefore, it’s worth taking a look at five previous periods of distress to see the returns of conventional and alternative asset classes.

Need a Quick Break From It All?

You might be tempted to suspect that the inevitable unwind of a completely unsustainable margin mania is to blame for the brutal selling that has cost Chinese shares some $3.5 trillion in market value over the last three weeks. But you’d be wrong, according to several Chinese newspapers. 

Don't spend too much time wondering why, it just does...over and over and over

Modern Greece is legendary for its absurd public benefits. This modern-day version of ‘xenia’ is an insane, easily abused system that’s brought Greece to bankruptcy. Upon return from his adventures, Odysseus responded by killing every one of 108 men who milked the system. The Greek government is certainly set on doing the same. But since they can’t identify any single perpetrator, they’re going after the entire nation.

Did Bill Gross learn a lesson about second guessing himself after missing out on the great Bund battering he predicted in April? According to Bloomberg, the answer is “no."

We see the result of 150 years of European socialism playing out in grand style in Greece today. The producing countries are beginning to realize that they have been robbed by the EU’s socialist guarantee that no nation will be allowed to default on its bonds. Greece merely accepted this guarantee at face value and spent itself into national bankruptcy. Other EU nations are not far behind. It’s time to give free market capitalism and sound money a chance: it’s worked every time it’s been tried.

At this point the EPS accounting fudgery is so ridiculous, even 5-year-olds get it.

China stocks have fallen by as much as -30% over the past three weeks.  What would Janet Yellen do if the S&P 500 Index was falling by -30% in similarly short order?

Once upon a time, the NYSE was the world's most important exchange and judging by the commotion over its historical trading halt when it was offline for just under 4 hours, one would think it still is. Unfortunately for the NYSE and its new owners, the ICE, it isn't, and as the following market share chart from Nanex shows, the NYSE whose share of the total NMS is shown in red, may well have stayed closed and few would even notice.

IMF'S LAGARDE SAYS DEBT RESTRUCTURING NEEDED IN GREECE
IMF'S LAGARDE SAYS FUND REMAINS 'FULLY ENGAGED' WITH GREECE
IMF'S LAGARDE SAYS IMF CANNOT GIVE GREECE SPECIAL TREATMENT

Markets have begun seizing up as sellers overwhelm the system. The China Securities Regulatory Commission, has described market participants as being “irrationally” driven by “panic sentiment” despite there having been no rational basis for the run up in Chinese markets before they peaked last month.