People pissing on the stairs, you know they just don't care
I can't take the smell, I can't take the noise
Got no money to move out, I guess I got no choice"
Broken glass is everywhere, tear gas permeates the air, and riot police are backing away from protestors with bigger and longer sticks. Those are the scenes pouring out of Greece this week as that nation rapidly disintegrates into the antithesis of a civilized nation. The birthplace of modern democracy seems to be sliding closer to hysteria associated with the worst medieval times since the enlightened period that birthed philosophy, mathematics, science, and medicine. Watching the descendents of Plato, Archimedes, Aristotle, and Hippocrates descend into this hell is a lesson for all, and one Americans should pay heed to.
Now Greeks that never did the math as they were featherbedding benefits to the point where disaster became inevitable are philosophically opposed to taking medicine that is the only scientific way to fix their problem. The best case scenario still leads to ruin because Greece doesn't have a way to truly grow its economy and it has the worst education ratings among other developed nations. The country isn't disciplined enough or smart enough right now to be a real player in a 21st century economy. Its innovations in metals and warfare are faded memories. Sure, if the nation bounds together like city-states did in the past to concentrate on the true enemy then the current future path doesn't have to be written in stone.
But, the true enemy today is within. Its complacency, sloth, greed, frustration, fear, and anger...lots of anger.
A piece in the New York Times yesterday noted the incredible increase in violent crimes in Athens. Titled "Violent Crime Soars in Athens", the article pointed out remarkable one-year stats from 2009 to 2010:
* Street robberies up 100%.
* Taxi driver robberies up almost 400%.
* Homicides up 50%.
This is primarily an Athens phenomenon, with the blame being placed on a rising population of illegal immigrants, desperation among drug addicts, and increased organized crime. Of course, all of these factors are against the backdrop of an economy that's sinking into the Mediterranean. According to the piece, the city has effectively been split in half, with better neighborhoods and tourist attractions existing in a kind of tranquility while the rest of the capital is a sewer of drugs, sex, and filth. I guess hiding the stuff from visitors and others works until it inevitably bleeds throughout the entire country. This was a fear before the 2004 Summer Olympics in Athens too, remember the huge increase in spending that many countries feared they would have to spend on private security?
It's not unlike the mountain of debt and pension obligations that seems to have come out of nowhere to threaten the nation. One thing in the article that was most disturbing is the rising physical attacks on migrants. There is no doubt anger at crimes committed by illegal immigrants should be protested, but if the piece is right what we could be seeing is another form of denial... the deadliest form of denial. The economic crisis is homegrown, and comes with lax attitudes about law and responsibly. (On the flip side, a restaurant owner explained that warring gangs of Asians and Africans was a result of "neglect of the state" and not the gang members fault.) I'm not sure about Greek immigration laws, but it seems like a serious problem.
It's time to police the borders, but also time to make sure the nation's failures aren't projected onto migrant workers. But, just how deeply mired are Greeks in the art of delusion? People are rioting because they think German workers should pay for their lavish lifestyles. The notion is that the government is at fault for gangs and illegal immigrants killing each other. This is the perfect atmosphere for a nut to rally the self-pitied to do something dangerous and stupid. More dangerous than not being able to borrow money for a couple of decades would be the indiscriminate killing of people, citizens or non-citizens. Of course, who knows what the government will look like after today.
Prime Minister Papandreou is revamping the government today. The rumor yesterday was he would step down, but I don't think he's going that far. The first and biggest step to reality and solvency is ditching socialism.
Fear in the Air
For the past several weeks I talked about the drift being more associated with confusion, frustration, anger and lack of catalyst, but not about panic. Sure, there was fear but not so palpable that it could dry up the ice water running through the most seasoned veins. That might be changing. There wasn't classic capitulation because volume wasn't there but you can smell panic in the air. The VIX index came to life in a big way. (The VIX measures option activity and is widely considered the best way to measure complacency and fear in the equity market.) In addition to the VIX spike trading volume was 17% higher than the daily average. Some people hit the panic button yesterday.
Now I will say I'm not sure how people make money with the VIX and its reputation as a predictor of future behavior doesn't seem to be on point. I know brilliant people that make big money with the VIX; however, it seems to work after the fact. Be that as it may the VIX exploded higher yesterday reaching levels last seen in March. The index made a moon shot to about 60 in October 2008 and in June of last year spiked above 34. So, from a historic context the current level doesn't seem too bad but it was the first determined move in the VIX since this slow drift began almost seven weeks ago.
I want to say don't panic even if we need classic capitulation (read mass hysteria) to turn this thing around.
It looks like something will happen with Greece this weekend, and it's my hunch they get the money from someone or some entity. Right now, word is the IMF is ready to write a check even without further resolution on additional austerity. In the meantime, there is slight relief to equity futures from a decline in initial jobless claims to 414,000; it's the 10 consecutive week above 400K, but better than some expected. There is a ton of merger action this morning, not giant deals, but in my mind better signs for the economy and stock market than the Pandora (NYSE:P) IPO.
Housing starts showed signs of life, rising by 3.5% month to month, annually adjusted. The 560,000 unit result came in above the 547,000 consensus estimate. Construction is still at very low levels, but at least it's a start.