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  • How Will The Greek Drama End? [View article]

    The Greece issue, by virtue or poor handling by EU politicians and by result of the need for new Greek elections, remains unresolved and uncertain. That's all the traders need to know. Hysteria can rule the day, and the traders know it.

    The EU would be far better off with an immediate Greek default because, then, it would become quickly obvious that it's an immaterial event to world economic affairs, uncertainty would be resolved, and everybody could get back to fundamentals, which are not bad at all, especially in the U.S. By allowing the Greek affair to fester, they are endangering the health and strength of the whole body, the EU, in a vain attempt to salvage a dead frost-bitten limb.

    If in the ensuring weeks/months confidence in the EU's leadership to take any kind of decisive action erodes sufficiently, while they wait on Greece, then, it may prove too late to bolster other more important areas, like Spain, especially if the traders go to work on these countries in the interim. If Greece, through its own internal ambivalence is unable to fully subscribe to EU mandates, then excise them, now, and put together an overwhelming and immediate plan to bolster the finances and economies of Spain, Portugal, and Italy, as required.

    Time is not an ally in this matter, not when the traders know they have open-field running while Greece dithers over elections. Sometimes, one just has to make choices, simple as that, as imperfect as they may be.
    May 17, 2012. 04:43 PM | 1 Like Like |Link to Comment
  • As expected, Facebook (FB) prices at $38 (top of its range) and will trade Friday, with the highest valuation of any company on record at IPO time. Trading in the stock will begin at 11 a.m. Eastern Time.  [View news story]
    Just a guess, but I wouldn't be surprised if it falls faster than those two lead balls Galileo dropped from the Leaning Tower of Pisa.
    May 17, 2012. 04:28 PM | 4 Likes Like |Link to Comment
  • How Will The Greek Drama End? [View article]

    Not exactly.

    When your economy is export driven, then a weaker currency is truly beneficial. And, as they are not the reserve currency, money doesn't flow back to Europe by other means, so if exports stagnate, they're toast. They're not doing us a favor with a lower euro; they're helping themselves.

    Same story for Japan. A huge net exporter that's become moribund due to vastly overvalued currency, which has just allowed other Asian countries to eat their lunch. In effect, the rest of the world really has been subsidizing Japan through maintenance of overvalued exchange rates, which allow them to import at undeservedly-low prices.
    May 17, 2012. 12:26 PM | Likes Like |Link to Comment
  • How Will The Greek Drama End? [View article]

    Concur with almost all you say. Notwithstanding, even with all of man's and government's foibles, things would work much better with a strong dollar and weak euro than with the reverse. Even within a fiat-currency system, the premise that a weak dollar from the reserve-currency holder is beneficial is, in fact, misguided and shortsighted.

    People --and you see it repeated here in SA -- mistakenly think higher interest rates will be death. On the contrary, you'll see the economy fly if rates are allowed to rise.
    May 17, 2012. 12:17 PM | 1 Like Like |Link to Comment
  • Shale rock formations containing liquid hydrocarbons as well as natural gas could have a "significant" impact on world energy supplies but it is too early to say for sure, a senior Royal Dutch Shell (RDS.A, RDS.B) exec says. Producers such as Shell with big North American investments are increasingly switching their focus to liquid-rich shales in the wake of the shale gas boom.  [View news story]
    The impact will be less than imagined because the preponderance of those resources are in the U.S., and the Left will suppress their exploitation and development.
    May 17, 2012. 11:28 AM | Likes Like |Link to Comment
  • How Will The Greek Drama End? [View article]

    The very best thing that could happen to Europe is for the grossly-overvalued euro to decline, providing lots of stimulus to their export-denominated economy.

    I've been contending for a long while that a weak dollar and strong euro is completely stupid, especially when the U.S. possesses the world's reserve currency. Everybody foams at the mouth about "trade balances," but they mean next to nothing to a country with the reserve currency. Balance of payments is everything.

    The U.S., as possessor of the reserve currency and seen as the world's safest place to invest, constantly attracts currency back to itself from all corners of the globe. If the U.S. doesn't recirculate that currency in the form of investments and imported purchases, liquidity starts to pile up on corporate and bank balance sheets, exactly what we've seen. This reduces monetary velocity, suppressing the global economy.

    By having a weak dollar, this circulation of currency is even more impaired because the exports of foreign countries fall, as their currencies are seen as too expensive, and our imports decline for the same reason. Nonetheless money continues flowing into the U.S. because of the initial reasons I outlined, so we get a funds-flow imbalance that reduces effective money supplies.

    If the U.S. dollar strengthens, and corresponding foreign currencies -- whose nations are much more dependent on exports -- decline, then, we'll see an improvement in everybody's economies.
    May 17, 2012. 11:03 AM | 1 Like Like |Link to Comment
  • How Will The Greek Drama End? [View article]
    That approach would not work in Greece because its facility if totally dependent on some intermediate institution, like banks, accepting the scrip and issuing real money (euros) in their stead on the assumption that the scrip will be made good in real money by the issuer. In Greece, not only is it questionable that scrip would be accepted by any banks, the banks, themselves, don't have the liquidity to convert them to genuine currency.
    May 17, 2012. 10:15 AM | 2 Likes Like |Link to Comment
  • Initial Jobless Claims: 370K vs. 371K consensus (prior week revised to 372K from 370K). Continuing claims -29K to 3.26M.  [View news story]

    Notwithstanding my irritation-provoked comment to begin this thread, my own feeling, often expressed, is that economies are driven by the circumstances and spending behavior of the people with jobs and/or money, so I honestly pay little attention to employment numbers, which I consider a huge lagging indicator. When, employment really gets heated up and the unemployment rate drops significantly, it will probably be time to sell, not buy.

    I pay scrupulous attention to corporate revenues and profits, foremost, and secondarily to industry trade data. If these keep expanding, all is well; if they reverse, then it's time to reallocate.
    May 17, 2012. 09:08 AM | 1 Like Like |Link to Comment
  • Initial Jobless Claims: 370K vs. 371K consensus (prior week revised to 372K from 370K). Continuing claims -29K to 3.26M.  [View news story]

    Sorry, but that line of reasoning doesn't apply to initial claims.
    May 17, 2012. 08:54 AM | 3 Likes Like |Link to Comment
  • "What we're seeing in the eurozone is a slow-motion bank run," says Mike Riddell of peripheral (and even France) deposit flight that's made headlines this week, but has been going on for 2 years. The flight remains small in percentage terms vs. say, the U.K.'s Northern Rock which lost 5% of its deposits in a day and faced queues around the block.  [View news story]
    Money moves in and out of various global currencies every day, all year, all the time, trending one way or another, so I guess the world is engaged in a "bank run" continuously.
    May 17, 2012. 08:53 AM | Likes Like |Link to Comment
  • Initial Jobless Claims: 370K vs. 371K consensus (prior week revised to 372K from 370K). Continuing claims -29K to 3.26M.  [View news story]

    I'm not making any politcal statement, and I loathe Obama, but the data is just the data. It irritates me when headline writers write misleading and erroneous headlines, regardless of what side of the issue I find myself.
    May 17, 2012. 08:51 AM | 4 Likes Like |Link to Comment
  • Initial Jobless Claims: 370K vs. 371K consensus (prior week revised to 372K from 370K). Continuing claims -29K to 3.26M.  [View news story]
    No, initial claims are not "trending" higher. The moving average, which smooths out sampling error, continues to move lower.
    May 17, 2012. 08:43 AM | 3 Likes Like |Link to Comment
  • Fitch's estimate of $566B in additional capital needs for the world's largest banks is likely to create a tradeoff for the lenders. A better capitalization ratio could lead to lower risk premiums, but more capital means ROE will suffer, maybe by more than 20%, thus reducing the bank's ability to attract investment.  [View news story]
    The politically-populist preoccupation with having banks hold massive reserves, while simultaneously not making any investments not approved by a government school marm, will, if enforced, simply maintain years of stagnant global economic growth. Economies simply cannot grow without both robust and active banks, and that includes some risk.

    We seem to live in an age where making everything 100% "safe" is life's goal, without regard to other unintended consequences. I suggest we simply accelerate directly to the logical endpoint: you are confined by law to your bed, where you huddle under the covers and receive your daily government-approved sterilized meal.
    May 17, 2012. 08:29 AM | 1 Like Like |Link to Comment
  • Fed Governor Elizabeth Duke says that while the housing market is slowly mending, it's still in need of a lot of help. Any sustainable housing recovery depends on more action from Congress and federal regulators to stabilize the U.S. mortgage market. What can they do? They can start by loosening lending standards by banks and mortgage lenders, Duke says. That will go a long way towards attracting buyers back to the market.  [View news story]

    There's a huge difference between having contractual liability to the party to whom you are contracted -- as an appraiser, the banks -- and having tort liability to third parties -- purchasers and sellers. Like it or not, this is having a chilling effect on appraisal values which is now downwardly distorting values, just as the old flipping frenzy was upwardly distorting them.

    The only thing this political nicety did was reward the tort lawyers, Washington's most powerful political group.

    Completely agree with you on consequences for nonpayment of mortgages for buyers. The banks are and have been trying relentlessly to accelerate foreclosures, but politicians smell votes in giving away yet more billions to undeserving foolish borrowers, rather than properly addressing systemic issues and properly observing contract law.
    May 17, 2012. 08:12 AM | Likes Like |Link to Comment
  • How Will The Greek Drama End? [View article]
    Well, at least it's better than Europe's old version of "normal" politics, which included tanks and dive bombers.
    May 17, 2012. 08:04 AM | 6 Likes Like |Link to Comment