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Asia market indices took big hits today. Declines of 2% were commonplace. Hong Kong is down over 3%. As Europe opens up, the trend is down as well. The German DAX is the big loser so far, down over 4% in early trading.
I would expect similar losses for the U.S. on Monday.
Some of China’s biggest state firms were found to have falsified revenue and profits, while some state lenders doled out loans to unqualified borrowers, the nation’s auditor said amid an intensifying crackdown on corruption.
I was tempted to say "just noise." But yikes. Looks like a real mess over in Greece. My sympathies are with the small people who can't withdraw their pension money. Always seems to be the ones least able to afford it that get hurt.
And selling accelerated into the close, which is not a positive indicator. It appears as though China action at the open will drive sentiment. Greece may be largely baked in at this point.
LOL. Honestly, if they do get another deal and they kick the can again on Greece, it's honestly once again confirming that they will do anything to maintain status quo, whether it's sane or not. If Greece manages another deal, we'll just have this conversation again in a matter of 6-12 months.
I get the feeling that anything right-wing conservatives don't like earns the name "entitlement" and carries the connotation of therefore being undeserved.
It started with Social Security. Is now being applied to pensions, both public and private. Soon it will apply to salaried workers. At that point we'll dispense with said and turn over all labor to machines.
I assume the indispensable corporate leaders, hedge fund managers and managerial class will continue to be very well compensated for their contributions to society.
@hank: you are referring to the pejorative definition of "entitlement" rather than the Webster definition: "a government program providing benefits to members of a specified group."
I am an unapologetic fiscal conservative, and clearly we, as a nation, cannot afford all the current government "entitlements." And if unrealistic and unsustainable entitlements were made by an unholy alliance between elected officials and government unions/representatives (i.e., Illinois, CA et al.), these are merely promises which were made which cannot be kept. And with time, these promises will and should be broken. How about a retired SoCal lifeguard receiving $108K/year for the rest of his life with COLA increases ! Check out Transparent CA Pensions.
By the way, "right-wing conservatives" is a micro-aggression, and like everybody today, I am deeply offended by pretty much everything ! And I will create a hashtag just to show how offended I am ! Just kidding. I have respect and fear the wrath of God and my wife. Nobody else.
Noise? YES--- maybe it's the canary in the coal mine! You guys need to brush up on your birding skills.
One way or another, Greece is a gonner. But is it such an outlier? People speculate it will be forced from the EU, and after a decade (or two) or woe on the drachma it will be able to put things back together and reapply for membership. But, given the condition of other peripheral EU countries now, will there even be an EU to which it can reapply? [think of a Europe with multiple Venezuelas--- wouldn't that be a sight across the pond?]
If the EU falls apart, will that be the trigger for a "global reset," because all this borrowing from the future has to come due, just like it is for Greece. Will it be resolved by hyperinflation, or by a domino chain of defaults? And what might that do to our thoughtful, carefully-crafted portfolios on which we spend an inordinate amount of time?
Germany is the big kahuna. Along with France, they will do everything they can to preserve the euro currency, so it is very unlikely the EU will fall apart on currency.
Without getting confrontational - since I'm here to learn - may I suggest that the U.S. is NOT close to becoming another Greece?
The Dollar: The U.S. Dollar has steadily appreciated vs other world curriencies on the world stage for years now, reflecting world-wide investor confidence. Likely, were we anywhere near the dire straits of Greece or Pureto Rico the opposite would be the case. Our currency would be nearing worthless status.
Interest Rates: Admittedly, low rates have been somewhat artificially induced by Fed policy, but they also reflect worldwide investor confidence in the worth of our currency and, more importantly, a strong belief that price inflation (in Dollar terms) will remain low or moderate. Actually, there is some reason to fear that deflation is more of a threat than inflation. This is not the hallmark of a badly over-extended debt-laden currency. To me, it appears quite the opposite.
In a Nutshell: The perception of the U.S. monetary system as reflected in Dollar valuation and low interest rates is anything but dire. I'm, too, a fiscal conservative when it comes to running a household budget, saving for the future and investing prudently. I'm not sure the same type of behavior would be required or even desirable were I a mega-billion dollar economy with a huge and growing asset base (in infrastructure, real estate, a standing military, etc.) and a printing press of my own cranking out paper currency that has earned the respect of governments and investors around the globe.
Please do tell where this analysis is flawed. As said, I hope to learn from the discussion.
@hank The analysis of entitlements and other expenditures in the U.S. as a percentage of GDP ignores household net worth, which is vast. And that net worth is after all household debt is subtracted. So the idea that the U.S. can't afford to pay its bills just by looking at GDP is misguided.
"Admittedly, low rates have been somewhat artificially induced by Fed policy,"
Somewhat?
"Likely, were we anywhere near the dire straits of Greece or Pureto Rico the opposite would be the case. Our currency would be nearing worthless status. "
I don't think our currency would be worthless and I don't think we're in dire shape as a whole. However, I do think that there are potential crises that aren't really being talked about yet, probably to some degree because there is such a strong desire not to rattle the status quo.
I mean, Illinois is not exactly in great shape (http://www.chicagotribune.com/news/opinion/chapman/ct-illinois-debt-pension-rauner-illinois-california-perspec-0208-jm-20150206-column.html). Cheery Citibank ads about Detroit's return aside, Michigan probably not in good shape, either. California's problematic and if the water situation there is longer-lasting, then it could get worse. "California has a similar problem. Despite the enactment of a modest pension reform bill in 2012, the state controller reported last year that state and local public pension systems now have unfunded liabilities totaling $198 billion — up 30-fold since 2003."
Are states as bad as Puerto Rico? Looking at the surface, probably not, but if one looked deeper, they probably wouldn't like what they saw. Are problem states going to have some issues with higher rates? Probably. If one of these states pulled a Puerto Rico and one morning said we're not going to pay, the potential domino effect would be severe. How the Puerto Rico situation is handled may also have negative effects.
Would that surprise me if it happened? Not at all. We're not Greece, but our lawmakers absolutely lack the slightest bit of fiscal discipline.
Could things get better for these states? Sure. Any of them want to make any sort of difficult decisions? No? Well, then probably not - none of these situations like Illinois have gotten better in the last few years so why would I think they'll get any better in the next few? Suddenly lawmakers will find fiscal religion? I don't think so. We live in a world where lawmakers spend in good times and bad and figure that the next person elected will figure out how to make the math work and actually pay for it all. ----------- Funny thing, just as I'm writing this what pops up on Marketwatch: http://www.marketwatch.com/story/these-lurking-debts-may-turn-us-cities-states-into-greece-2015-06-30
"When Chicago Public Schools announced on June 24 that it would borrow $1 billion to make a $600 million-plus pension payment due June 30 an eerie feeling spread across bond investors and taxpayers alike.
It was the same feeling that gripped investors when Moody’s Investors Service downgraded Chicago’s credit rating to junk based almost entirely on the city’s pension problems.
The fear was that elevated pension costs, in cities like Chicago, might push these public entities into insolvency, wiping out much of the holdings of municipal-bond investors.
Once a sleepy corner of the municipal bond market — often not even properly reflected on cities’ balance sheets — public pensions have recently turned into the biggest headache for taxpayers and municipal-bond investors, threatening to bring down the finances of U.S. cities and states.
In some places, like Puerto Rico, Illinois, New Jersey and Chicago, entire balance sheets of cities or states hang in the balance.
Detroit, as well as three Californian cities — Vallejo, Stockton and San Bernardino — had to declare bankruptcy because of their overwhelming pension costs." -------------- "The Dollar: The U.S. Dollar has steadily appreciated vs other world curriencies on the world stage for years now, reflecting world-wide investor confidence."
Best house in a bad neighborhood. Additionally, we did QE and the dollar was lower. Now Europe and others are doing QE and the dollar has ramped. Beggar-thy-neighbor, only polite enough to take turns. If you look at the dollar index it certainly has not steadily appreciated for years now - it's been wandering in a lower range for years and only in the second half of last year did it begin a move higher.
Are we Greece? No. Could a series of potential crises that show no sign of solving themselves have a domino effect and cause a larger problem? Sure, absolutely.
You know, the funny thing is, why are we even having this conversation? I thought debt didn't matter. No? That was all just complete nonsense? Oh, okay.
I was not suggesting the US is anywhere near Greece, but we have serious structural issues that keep getting kicked down the road and if go unaddressed could put us in Greece-like position. When that would happen, I don't know, but it does concern me.
OK, so no other country is exactly like Greece, but there are a lot of countries -- including the USA -- that are have adopted the "Grecian Formula" of too much government spending relative to GDP:
Contrary to what too many politicians of both parties believe, a larger government with more government spending is not the answer to what ails our economy and society.
Comments
http://www.bloomberg.com/news/articles/2015-06-29/tsipras-says-european-leaders-won-t-dare-kick-greece-out-of-euro
http://seekingalpha.com/news/2605345-greece-threatens-to-sue-europe
http://www.telegraph.co.uk/finance/economics/11707092/Greece-threatens-top-court-action-to-block-Grexit.html
Greece is trying to avoid pain. Unfortunately for them, it's too late for that.
It started with Social Security. Is now being applied to pensions, both public and private. Soon it will apply to salaried workers. At that point we'll dispense with said and turn over all labor to machines.
I assume the indispensable corporate leaders, hedge fund managers and managerial class will continue to be very well compensated for their contributions to society.
End of rant.
I am an unapologetic fiscal conservative, and clearly we, as a nation, cannot afford all the current government "entitlements." And if unrealistic and unsustainable entitlements were made by an unholy alliance between elected officials and government unions/representatives (i.e., Illinois, CA et al.), these are merely promises which were made which cannot be kept. And with time, these promises will and should be broken. How about a retired SoCal lifeguard receiving $108K/year for the rest of his life with COLA increases ! Check out Transparent CA Pensions.
By the way, "right-wing conservatives" is a micro-aggression, and like everybody today, I am deeply offended by pretty much everything ! And I will create a hashtag just to show how offended I am ! Just kidding. I have respect and fear the wrath of God and my wife. Nobody else.
Kevin
One way or another, Greece is a gonner. But is it such an outlier? People speculate it will be forced from the EU, and after a decade (or two) or woe on the drachma it will be able to put things back together and reapply for membership. But, given the condition of other peripheral EU countries now, will there even be an EU to which it can reapply? [think of a Europe with multiple Venezuelas--- wouldn't that be a sight across the pond?]
If the EU falls apart, will that be the trigger for a "global reset," because all this borrowing from the future has to come due, just like it is for Greece. Will it be resolved by hyperinflation, or by a domino chain of defaults? And what might that do to our thoughtful, carefully-crafted portfolios on which we spend an inordinate amount of time?
Regards,
Ted
https://research.stlouisfed.org/fred2/series/TNWBSHNO
https://cooklaw.co/blog/current-historical-federal-estate-tax-structure-exemptions-rates
The Dollar: The U.S. Dollar has steadily appreciated vs other world curriencies on the world stage for years now, reflecting world-wide investor confidence. Likely, were we anywhere near the dire straits of Greece or Pureto Rico the opposite would be the case. Our currency would be nearing worthless status.
Interest Rates: Admittedly, low rates have been somewhat artificially induced by Fed policy, but they also reflect worldwide investor confidence in the worth of our currency and, more importantly, a strong belief that price inflation (in Dollar terms) will remain low or moderate. Actually, there is some reason to fear that deflation is more of a threat than inflation. This is not the hallmark of a badly over-extended debt-laden currency. To me, it appears quite the opposite.
In a Nutshell: The perception of the U.S. monetary system as reflected in Dollar valuation and low interest rates is anything but dire. I'm, too, a fiscal conservative when it comes to running a household budget, saving for the future and investing prudently. I'm not sure the same type of behavior would be required or even desirable were I a mega-billion dollar economy with a huge and growing asset base (in infrastructure, real estate, a standing military, etc.) and a printing press of my own cranking out paper currency that has earned the respect of governments and investors around the globe.
Please do tell where this analysis is flawed. As said, I hope to learn from the discussion.
Somewhat?
"Likely, were we anywhere near the dire straits of Greece or Pureto Rico the opposite would be the case. Our currency would be nearing worthless status. "
I don't think our currency would be worthless and I don't think we're in dire shape as a whole. However, I do think that there are potential crises that aren't really being talked about yet, probably to some degree because there is such a strong desire not to rattle the status quo.
I mean, Illinois is not exactly in great shape (http://www.chicagotribune.com/news/opinion/chapman/ct-illinois-debt-pension-rauner-illinois-california-perspec-0208-jm-20150206-column.html). Cheery Citibank ads about Detroit's return aside, Michigan probably not in good shape, either. California's problematic and if the water situation there is longer-lasting, then it could get worse. "California has a similar problem. Despite the enactment of a modest pension reform bill in 2012, the state controller reported last year that state and local public pension systems now have unfunded liabilities totaling $198 billion — up 30-fold since 2003."
After the fracking boom turned to a bust, how are the Dakotas doing? New Jersey ain't great (http://www.bloomberg.com/news/articles/2015-05-22/christie-pension-albatross-has-investors-dumping-new-jersey-debt).
Are states as bad as Puerto Rico? Looking at the surface, probably not, but if one looked deeper, they probably wouldn't like what they saw. Are problem states going to have some issues with higher rates? Probably. If one of these states pulled a Puerto Rico and one morning said we're not going to pay, the potential domino effect would be severe. How the Puerto Rico situation is handled may also have negative effects.
Would that surprise me if it happened? Not at all. We're not Greece, but our lawmakers absolutely lack the slightest bit of fiscal discipline.
Could things get better for these states? Sure. Any of them want to make any sort of difficult decisions? No? Well, then probably not - none of these situations like Illinois have gotten better in the last few years so why would I think they'll get any better in the next few? Suddenly lawmakers will find fiscal religion? I don't think so. We live in a world where lawmakers spend in good times and bad and figure that the next person elected will figure out how to make the math work and actually pay for it all.
-----------
Funny thing, just as I'm writing this what pops up on Marketwatch:
http://www.marketwatch.com/story/these-lurking-debts-may-turn-us-cities-states-into-greece-2015-06-30
"When Chicago Public Schools announced on June 24 that it would borrow $1 billion to make a $600 million-plus pension payment due June 30 an eerie feeling spread across bond investors and taxpayers alike.
It was the same feeling that gripped investors when Moody’s Investors Service downgraded Chicago’s credit rating to junk based almost entirely on the city’s pension problems.
The fear was that elevated pension costs, in cities like Chicago, might push these public entities into insolvency, wiping out much of the holdings of municipal-bond investors.
Once a sleepy corner of the municipal bond market — often not even properly reflected on cities’ balance sheets — public pensions have recently turned into the biggest headache for taxpayers and municipal-bond investors, threatening to bring down the finances of U.S. cities and states.
In some places, like Puerto Rico, Illinois, New Jersey and Chicago, entire balance sheets of cities or states hang in the balance.
Detroit, as well as three Californian cities — Vallejo, Stockton and San Bernardino — had to declare bankruptcy because of their overwhelming pension costs."
--------------
"The Dollar: The U.S. Dollar has steadily appreciated vs other world curriencies on the world stage for years now, reflecting world-wide investor confidence."
Best house in a bad neighborhood. Additionally, we did QE and the dollar was lower. Now Europe and others are doing QE and the dollar has ramped. Beggar-thy-neighbor, only polite enough to take turns. If you look at the dollar index it certainly has not steadily appreciated for years now - it's been wandering in a lower range for years and only in the second half of last year did it begin a move higher.
Are we Greece? No. Could a series of potential crises that show no sign of solving themselves have a domino effect and cause a larger problem? Sure, absolutely.
You know, the funny thing is, why are we even having this conversation? I thought debt didn't matter. No? That was all just complete nonsense? Oh, okay.
http://www.marketwatch.com/story/obama-says-markets-have-properly-factored-in-greece-risks-2015-06-30?link=MW_home_latest_news
World Debt Comparison
Contrary to what too many politicians of both parties believe, a larger government with more government spending is not the answer to what ails our economy and society.
Kevin
https://stats.oecd.org/Index.aspx?DataSetCode=SOCX_AGG
https://research.stlouisfed.org/fred2/series/TNWBSHNO
Kevin