Greek Default Concern Chases Money From Stocks

 |  Includes: AVGO, BAC, C, GS, MS, NETL, SPGI
by: Markos Kaminis
Monday was a tough day for global traders, and was especially intense in the banking sector. A bad brew of news and rumors had the group giving back significant ground. It started last week, when rumors surfaced that seemed to be positioning Germany for exit on Greece. Speculation has built around a Greek default idea, and investors are likening it to a Lehman event (and some) have stocks sinking, with the dollar muscling up and commodities mostly lower as a result.





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Prices measured at 12:10 PM ET

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Overseas activity was dictating the tone of trading. Greek Prime Minister Papandreou’s Saturday address included more promises that other Europeans and investors seem to think will prove useless. His latest flail against the will of his people is a plan to raise real estate taxes to help with debt payments to the IMF and EU. Papandreou ensures the collection of this new tax by attaching them to utility payment collections. So, unless Greeks are willing to live without water and electricity, they will pay them. However, Greeks don’t have to like it.

The global community is paying more attention to the Greek people, who protested en masse again Saturday. The Greek government is not secure, and is losing its grip further with each new austerity measure. At the same time, the rest of Europe is losing its will under amassing domestic political pressures. Germany is now openly thought to be preparing its banks for a Greek default. This is a scenario that raises speculation about European Union and euro zone unraveling. It’s a Lehman-like plot that investors are worrying about, and so European banks are in trouble as a result.



Deutsche Bank (NYSE: DB)


Societe Generale (OTC: SCGLY.PK)


Credit Agricole (OTC: CRARY.PK)


Banco Santander (NYSE: STD)


National Bank of Greece (NYSE: NBG)


Bank of Ireland (NYSE: IRE)


Allied Irish PLC (OTC: AIBYY.PK)


Lloyd’s (NYSE: LYG)


Barclays (NYSE: BCS)




Credit Suisse (NYSE: CS)




Prices measured at 12:30 PM ET

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United Kingdom banking regulators levied expensive reforms against the Kingdom’s largest institutions in order to protect taxpayers from future failures and financial bailouts. The reforms are expected to cost U.K. banks $11.12 billion annually.

U.S. banks with global exposures have not been left out of the day’s demise, with Citigroup (NYSE: C) illustrating that, down 1.5%, Goldman Sachs (NYSE: GS) down 1.7% and Morgan Stanley (NYSE: MS) off 2.8% at 12:37 PM ET Monday. Adding to the pile, Citigroup cut its forecasts for U.S. bank earnings by an average of 45% on European driven impact to global equity and credit markets.

President Obama Introduces Jobs Bill

The President followed through on his jobs speech on Monday by presenting his bill to Congress. He spoke with teachers and construction workers by his side, putting a non-political face to his message. His hope is that the American people will force his political opponents to act in favor of economic stimulus. The long-term American unemployed and the currently threatened were urged to write their Congressmen, but Nobel Economic Laureate Paul Krugman says the chances of the President finding political support are zero now. He says the Republican Party would even vote down a bill to honor motherhood today if the President proposed it. Krugman ominously compared the current period to the period of austerity that led to The Great Depression.

The National Association for Business Economics [NABE] is holding its annual meeting, and Dallas Federal Reserve President Richard Fisher discussed monetary policy in a global context. Republican candidates for president will debated again Monday evening, this time in Tampa, Florida.

Corporate Wire

In concert with CEO Brian Moynihan’s presentation at the Barclays Capital Global Financial Services Conference in New York, Bank of America (NYSE: BAC) issued a press release on its reorganization, stating that it would eliminate about 30K jobs while saving $5 billion per year by 2014. BofA had been moving counter to the market trend, but was down 0.4% at 1:00 PM ET.

McGraw-Hill (NYSE: MHP) said it would split into two companies with segments focused on global markets and textbook publishing. The company had come under pressure from shareholder activist Jana Partners LLC to do so. The transaction would likely be completed in 2012 and come about via a tax-free spin-off of the education unit.

Broadcom (Nasdaq: BRCM) agreed to buy NetLogic Microsystems (Nasdaq: NETL) for $3.7 billion in cash. NETL shareholders got a nice surprise Monday, as the $50 effective price is 57% higher than the close of trading on September 9.

The rest of the corporate news had shareholder and/or analyst days at Juniper Networks (Nasdaq: JNPR), Coca-Cola Enterprises (NYSE: CCE) and W.W. Grainger (NYSE: GWW). There were EPS reports from Brady Corp. (NYSE: BRC), Electromed (Nasdaq: ELMD), Napco Security Technologies (Nasdaq: NSSC), Optical Cable (Nasdaq: OCC), Pharmacyclics (Nasdaq: PCYC), pSivida (Nasdaq: PSDV), Streamline Health Solutions (Nasdaq: STRM), ThermoGenesis (Nasdaq: KOOL) and a few more.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.