Archive - Jul 8, 2015 - Story

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.

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

Broken markets tanking....

Ignore the constant commotion at the TV studio in downtown Manhattan which once was the New York Stock Exchange (currently owned by the ICE) and is now mostly packed with actors, cheerleaders, set designers and producers, and focus on the real exchange located some 40 miles away in Mahwah, NJ (which for a few months over the winter even had a laser attached to its main microwave tower), where moments ago the scene was the following...

Gold is unchanged but stocks and bond yields are sliding post the somewhat more hawkish FOMC minutes. The USD index is falling (which suggests the minutes were more dovish) just to add some confusion...

While a skim of the FOMC Minutes suggest the committee is balanced on when (or if) to raise rates, WSJ's Jon Hilsenrath has just provided some more color confirming that "Fed officials are cautious about overseas developments but appear unalarmed," suggesting their confident economic growth forecasts point to a September rate hike (unless the whole world collapses obviously).

Since The FOMC's supposedly dovish June meeting, bonds have outperformed stocks rather notably and crude has crashed. The crucial aspect for the Minutes is the balance they struck between market turmoil overseas (dovish) and the domestic economic and housing recovery (hawkish) as to how that fits with an expectation for a 'gradual' post-September lift-off...

• *FOMC SAW CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF (dovish)
  
• *ONE MEMBER READY TO RAISE RATES IN JUNE BUT WILLING TO WAIT (dovish)
• *MANY FED OFFICIALS EXPRESSED CONCERN ABOUT GREECE AT JUNE FOMC (hawkish)
  
• *SEVERAL OFFICIALS VOICED UNCERTAINTY ABOUT CHINESE GROWTH PACE (hawkish)

With macro data having beaten expectations since then, the last best hope for stocks is that global turmoil picks up (as it has in Greece) to keep The Fed on hold (as they remain cornered to regain some ammo before the next 'event' happens). As SF Fed's Williams notes today the "safer course" for raising rates would be to start sooner and proceed gradually.

A tourist went to a cafe in Greece and sent in the following picture of a menu where the prices appear to be back in Drachma...

The reality is that financial insecurity is rising for everyone...

EURO AREA, ECB SAID TO DISCUSS GUARANTEE AS HUMANITARIAN ACTION