Contributor Post Created with Sketch. Bear Week Begins

 

grizzlyIf you’re just waking up, chances are you’re waking up to the news that you’ve lost money.

The Greece crisis is being likened to an economic Sarajevo. The markets are sinking faster than I can type. Asian stocks began tanking hours ago. (Last I checked, the Shanghai Composite Index was down 3.7%; the Nikkei 225 down 2.4%; Hang Seng down 2.7%; Sydney’s S&P ASX-200 down 2.3%; Seoul’s Kospi … well, you get the drift. By the time I hit “publish” these numbers are sure to be down further.) The European markets opened a few hours ago and … wow. Stampede city.

Yesterday, Puerto Rico — well, I’m sure you heard:

The governor of Puerto Rico has decided that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.

Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.

For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.

Now, seems to me the world has exhausted its monetary ammunition, so what next? How bad is this going to get?

The sinking euro means I just got a raise, in effect; but this is clearly a short-term blessing. Not that I’m not counting my blessings. Believe me, I am. But obviously this personal rising tide won’t be enough to lift all boats — including mine, ultimately — so I’m not celebrating.

So, Ricochet, how’s the day going for you, financially?

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  1. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    Personally not that bad actually. I’ve been on the sidelines for several years, and therefore missed a good chunk of the bubble we have had. Things like this

    fredgraph_1

    have made me feel the whole thing has a bit of unreality to it. I hope no one takes too big a hit in the coming days, after all as we have been repeatedly told the Greek economy is too small to matter.

    • #1
    • June 29, 2015, at 2:41 AM PDT
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  2. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Kozak: we have been repeatedly told the Greek economy is too small to matter.

    We have? I’ve been exposed to different media influences here in the Eurozone, obviously, but I don’t remember hearing this. On good days, I hear, “This won’t necessarily entail an economic apocalypse.” That’s as cheery as it gets.

    • #2
    • June 29, 2015, at 2:44 AM PDT
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  3. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    Claire Berlinski, Ed.:

    Kozak: we have been repeatedly told the Greek economy is too small to matter.

    We have? I’ve been exposed to different media influences here in the Eurozone, obviously, but I don’t remember hearing this. On good days, I hear, “This won’t necessarily entail an economic apocalypse.” That’s as cheery as it gets.

    Yeah, lots of reports that the Greek economy is too small to matter, and the Eurozone has put a “fence” around it, and the market has already priced in Grexit. Then again the entire Balkans weren’t worth the bones of a single Pomeranian grenadier…

    • #3
    • June 29, 2015, at 2:56 AM PDT
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  4. Marion Evans Inactive

    Greece will likely exit the Euro, which will be bad for Greece near-term but good longer term. When that happens, the Euro will probably strengthen and hold back the European recovery.

    Puerto Rico not a big problem, relatively small amount of money.

    The bigger risks are political. Greece may move further left or join the Putin sphere. And now that we are no longer looking at Greece, how are things going Portugal, Italy, Spain? Will others exit the Euro? That would cause periphery markets to fall significantly as bond spreads widen again.

    Germany needs the Euro because it is weaker than the Mark would be. Exports are half of GDP for Germany, compared to only 30% for France, Italy, and 15% for the US.

    • #4
    • June 29, 2015, at 3:04 AM PDT
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  5. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Kozak:

    Claire Berlinski, Ed.:

    Yeah, lots of reports that the Greek economy is too small to matter, and the Eurozone has put a “fence” around it, …

    Man, not what I’ve been hearing

    What makes this especially — interesting, shall we say? — is that really, no one knows to what degree these anti-contagion measures have truly been implemented. I guess we’ll find out.

    • #5
    • June 29, 2015, at 3:04 AM PDT
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  6. Marion Evans Inactive

    Claire Berlinski, Ed.:

    Kozak:

    Claire Berlinski, Ed.:

    Yeah, lots of reports that the Greek economy is too small to matter, and the Eurozone has put a “fence” around it, …

    Man, not what I’ve been hearing

    What makes this especially — interesting, shall we say? — is that really, no one knows to what degree these anti-contagion measures have truly been implemented. I guess we’ll find out.

    Every lender will take a haircut, say get 40 cents on the dollar, and we will move on.

    • #6
    • June 29, 2015, at 3:10 AM PDT
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  7. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    This chart is also interesting. There are going to be some angry folks in Estonia and Slovakia

    greekexposure

    • #7
    • June 29, 2015, at 3:19 AM PDT
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  8. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    A little dated but I think still applies…

    • #8
    • June 29, 2015, at 3:19 AM PDT
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  9. Percival Thatcher
    Percival Joined in the first year of Ricochet Ricochet Charter Member

    How long will it take to re-institute the drachma? Six months? A year? At the end of that period, they will be ready to issue a brand new currency backed by the full faith and credit of a hard Left government with no natural resources to speak of.

    Stop laughing.

    Based on all that, they will then be able to pay off existing debt or, more likely, assume new debt to revitalize their economy with a stimulus package.

    I mean it about the laughing. You are not helping at all.

    • #9
    • June 29, 2015, at 4:48 AM PDT
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  10. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Percival:I mean it about the laughing. You are not helping at all.

    Not laughing, here. Every time I hear a European leader assure me that the risk of contagion is low as he emerges ashen-faced from an emergency meeting (and they’ve all been in emergency meetings, all morning), I have less and less confidence. I can easily see the markets spiralling into panic.

    • #10
    • June 29, 2015, at 5:08 AM PDT
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  11. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    “This is not going to be a contagious effect.” – someone on TV as markets swoon. Jean-Claude Juncker (President of the EC) speaking live now. He sounds like he’s losing it: “You shouldn’t commit suicide because you’re afraid of death.”

    Oh, man. 

    • #11
    • June 29, 2015, at 5:16 AM PDT
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  12. Nick Stuart Inactive

    Not available for free on the Internet regrettably (fellow Ricochetti, prove me wrong, please).

    If you can find it though, read C M Kornbluth’s short story Dominos that describes a similar market swoon.

    • #12
    • June 29, 2015, at 5:19 AM PDT
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  13. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Brilliant punditry abounds:

    Whether you think the exit of Greece from the eurozone will lead to the feared contagion that will infect the entire eurozone and possibly the global financial system depends largely on your personal make-up.

    Gotta put that one on my Greatest Hits of the Dismal Science list.

    • #13
    • June 29, 2015, at 5:27 AM PDT
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  14. EJHill Podcaster
    EJHill Joined in the first year of Ricochet Ricochet Charter Member

    Q. A Greek, a Portuguese and a Spaniard meet in a bar. Who picks up the tab?

    A. The German.

    • #14
    • June 29, 2015, at 5:51 AM PDT
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  15. Dave of Barsham Member

    I had promised myself a week off of news after last week but I can clearly see that my memo to the world to take a break has been completely ignored.

    • #15
    • June 29, 2015, at 5:54 AM PDT
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  16. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    EJHill:Q. A Greek, a Portuguese and a Spaniard meet in a bar. Who picks up the tab?

    A. The German.

    the dirty Nazi…..

    • #16
    • June 29, 2015, at 5:56 AM PDT
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  17. Illiniguy Member
    Illiniguy Joined in the first year of Ricochet Ricochet Charter Member

    Claire, you need to change the title, the “Bear Week” thing’s been taken.

    images

    • #17
    • June 29, 2015, at 5:57 AM PDT
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  18. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    lesserson:I had promised myself a week off of news after last week but I can clearly see that my memo to the world to take a break has been completely ignored.

    It may be easier to ignore this news Stateside, but I’d pretty much have to put in earplugs and hide under my bed to avoid it here. CRISE CRISE CRISE EN DIRECT EN DIRECT EN DIRECT everywhere. (Crisis, crisis, crisis, live, live, live … )

    • #18
    • June 29, 2015, at 5:57 AM PDT
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  19. Old Bathos Moderator

    Greek crisis has not affected my holdings:

    Canned goods–no change

    Ammo–no change

    Canned water–no change

    Gold–same weight

    Although, I am considering some upgrades to the bunker. A whole new look could be, as Justice Anthony ‘Zeitgeist Tony” Kennedy might say, FABULOUS.

    • #19
    • June 29, 2015, at 5:59 AM PDT
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  20. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    Illiniguy:Claire, you need to change the title, the “Bear Week” thing’s been taken.

    images

    Hasn’t been going to good for you guys lately.

    Go Pack Go.

    • #20
    • June 29, 2015, at 6:00 AM PDT
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  21. Dave of Barsham Member

    Claire Berlinski, Ed.:

    lesserson:I had promised myself a week off of news after last week but I can clearly see that my memo to the world to take a break has been completely ignored.

    It may be easier to ignore this news Stateside, but I’d pretty much have to put in earplugs and hide under my bed to avoid it here. CRISE CRISE CRISE EN DIRECT EN DIRECT EN DIRECT everywhere. (Crisis, crisis, crisis, live, live, live … )

    Well, we got important stuff going on over here in the States, you know? Bruce Jenner’s gonna take a film crew to his first shopping spree as Caitlyn.

    • #21
    • June 29, 2015, at 6:01 AM PDT
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  22. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    lesserson:

    Well, we got important stuff going on over here in the States, you know? Bruce Jenner’s gonna take a film crew to his first shopping spree as Caitlyn.

    This week in debt will be like last week in SCOTUS. I reckon it’s just a time zone issue — I got hit first, but you’ll be hearing about it nonstop soon enough, I bet.

    • #22
    • June 29, 2015, at 6:13 AM PDT
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  23. Aaron Miller Member
    Aaron Miller Joined in the first year of Ricochet Ricochet Charter Member

    EJHill:Q. A Greek, a Portuguese and a Spaniard meet in a bar. Who picks up the tab?

    A. The German.

    • #23
    • June 29, 2015, at 6:20 AM PDT
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  24. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Aaron Miller:

    You know, I spent a couple of years writing a book about this, but that sums it up way better. And it’s free, too. In all honesty, I have to say you can save yourself time and money and just listen to that. Dead on.

    • #24
    • June 29, 2015, at 6:34 AM PDT
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  25. Aaron Miller Member
    Aaron Miller Joined in the first year of Ricochet Ricochet Charter Member

    If the Greek economy is too small to directly affect the US or Germany, that doesn’t mean we will ultimately be unaffected. What other small national economies are invested in Greece? What other struggling economies are invested in Greece? What mid-size economies are invested in those nations? The investments don’t need to be large — just enough to be the straw that breaks the camel’s back.

    I haven’t followed this topic for many months and won’t venture a prediction. But the domino effect does not require members of equal size. The political and cultural effects (such as the rise of a dictator) might be greater than each dilemma merits. And markets are not driven by cold and objective reasoning, so the effect on American investors might be similarly exaggerated.

    • #25
    • June 29, 2015, at 6:37 AM PDT
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  26. jetstream Inactive

    It’s better to get this over with. Greece should have been cut loose when the problem first emerged. There’s going to be a pull back in the markets, but, in the end, I believe it will be modest and temporary.

    • #26
    • June 29, 2015, at 6:39 AM PDT
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  27. Front Seat Cat Member

    Two interesting articles from last week:

    http://www.dcclothesline.com/2015/06/23/its-time-to-hide-cash-under-the-mattress-bond-manager-warns-of-system-wide-collapse/

    http://alt-market.com/articles/2626-the-us-and-eu-will-collapse-regardless-of-economic-contagion

    I have learned that things can happen overnight (like 2008) when we were within days of a major meltdown and emergency measures had to be implemented within 3 days….. Entire economies can collapse fast (first person stories from people who experienced it in small countries where suddenly it was lights out) and the people in charge won’t tell you until it has happened. If you are reading these headlines, maybe get extra cash out now, stock up on essentials (Claire-cat food!!), just makes good sense in general. The stock market has been propped up for so long, and everyone I know is just trying to make ends meet. So the ones getting rich can’t be average citizens.

    • #27
    • June 29, 2015, at 6:40 AM PDT
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  28. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.

    Front Seat Cat:essentials (Claire-cat food!!)

    As it happens, I order the stuff in vast quantities. Huge savings if you order a thousand cans at a time, so my apartment is (literally) packed to the rafters with it, and yes, I do literally have rafters; I’m on the top floor of an old building. If the worst happens, there’s enough cat food here for us all to survive at least a month.

    • #28
    • June 29, 2015, at 7:16 AM PDT
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  29. Marion Evans Inactive

    Old Bathos:Greek crisis has not affected my holdings:

    Canned goods–no change

    Ammo–no change

    Canned water–no change

    Gold–same weight

    Although, I am considering some upgrades to the bunker. A whole new look could be, as Justice Anthony ‘Zeitgeist Tony” Kennedy might say, FABULOUS.

    That’s no fun. Survivalism is no fun. Better to have fun and die earlier.

    • #29
    • June 29, 2015, at 7:24 AM PDT
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  30. Kozak Member
    Kozak Joined in the first year of Ricochet Ricochet Charter Member

    Claire Berlinski, Ed.: there’s enough cat food here for us all to survive at least a month.

    Us? I hope you at least bought the Fancy Feast….

    • #30
    • June 29, 2015, at 7:43 AM PDT
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