Global Business News

[Edward64]

Wanted to start a thread to talk about global business news (edited).

Lots of stuff happening. Looks like the Greek apocalypse is going to happen next week and China's market is crashing (but still up considerably overall for the year).

The possibility of a Greek apocalypse has been in the news for years now so don't think it'll be a major issue for us.

They have approx. $350B in debt and I can't help but think it'll be cool to pay off that debt (e.g. give up a couple military programs) and have Greece as our 51st state or strong proxy (okay, kidding on the state).

I'm more worried about the China bubble going up. I'm actually okay if China suffers a major and extended crash but am obviously worried about my 401K and IRA's.

Anyone with predictions on either?

[flounder]

How soon are you planning on retiring? If its more than 5 years away, then this is all just noise.

[Arles]

If it's more than 2 years, this is all noise. There's some value in international markets, but also risk. Overall, it's nothing to worry about.

[Young Drachma]

Seems like my user name might have been prescient.

[Desnudo]

I predict history repeats itself

Some stuff you should know about Greece before you lose your s***

[Edward64]

Originally Posted by Desnudo

I predict history repeats itself

Some stuff you should know about Greece before you lose your s***

Greece has been misunderstood.
10 things they’re not telling you about the Greek crisis - MarketWatch

The Greeks are in a crisis because they’re a bunch of lazy deadbeats, right?

After all, they work only 10 months of the year — and get paid for 14. They retire at 25 and lounge around in cafes drinking ouzo. They live on handouts from Germany and cheat on their taxes. The troika of the European Commission, the European Central Bank and the International Monetary Fund have tried and tried and tried to help them, but they just won’t listen. And now they’ve gone full moonbat and are refusing to pay back even a scrap of the money they’ve borrowed.

Right?

Rubbish.

Almost everything you’re being told about the Greek crisis is a load of complete nonsense.

Here’s why.

[Edward64]

... closer to home, Puerto Rico is an embarrassment.

Puerto Rico's debt is held by 20% of U.S. bond funds - Jul. 1, 2015

While the island managed to avoid default by making its big July 1 bond payments, Puerto Rico still has over $70 billion in outstanding debt to go. Governor Alejandro García Padilla has said the country won't be able to pay that all back, dubbing it a "death spiral."

"To tell you the truth, Puerto Rico is a bigger problem for American investors than Greece," Alan Valdes, director of floor trading at DME Securities told CNN. "Most American investors have little exposure to Greece at all."
:
Over 20% of bond mutual funds own Puerto Rican bonds, according to data from Morningstar (the exact numbers are 377 funds out of 1,884 United States bond mutual funds).
:
Is your bond fund invested? Puerto Rico's bonds have also been demoted to "junk" status. Many insurance firms and pensions can't hold Puerto Rican debt anymore because it has junk status. High yield bond funds invest in debt that is of poorer quality because it usually carries a higher interest rate to compensate investors for the extra risk they are taking on.

Among the funds that hold Puerto Rican debt, some of the largest are run by OppenheimerFunds and Franklin Templeton. For example, the Franklin Double Tax-Free Income Fund (FPRIX) holds nearly half of its investments in Puerto Rican bonds. The fund is down 4.5% this year and has only a 1-star rating out of 5 by Morningstar.
:
These funds are making it clear that they will pursue legal action if Puerto Rico doesn't pay.

[Solecismic]

It's sad, because this is the inevitable result of the deception Greek officials (now departed from the government) used to get access to all that money in the first place.

So, do the Greeks have to pay the price so that other governments (here and abroad) don't see that these kind of crimes work? If you make political promises based on deception, the onus is on those who believe you rather than on you?

That's a hard lesson. Greece is a tiny economy compared to most. Forgiving the loans is the only way out of this current mess (leaving the Euro and devaluing the currency will produce an inflation that will soon reduce the promised pensions to a rather worthless level).

Greece elected a government that took that approach, and it didn't work. Telling the lenders that they're bad people for wanting their money back puts them in a position where if they capitulate, they're at constant risk from other countries in the future. And there's no value in capitulation - Greece isn't really offering anything in return.

I think Greece will have a difficult time with this vote. Voting "no" means an exit from the Euro, which will hurt them far more than it will hurt their lenders. Voting "yes" means a new government and, with reforms that will further strain a difficult situation, continuing on a path while damaged even more.

Neither is an appealing route. But if you change the rules, then borrowing will become a lot more expensive overnight. Which may not be a bad thing, but it definitely will put a reign in on new development everywhere.

I think the worst thing for an economy is true unemployment - whether it's people looking for a job or people who have left the work force voluntarily. And you need investment to create jobs.

[Edward64]

Originally Posted by Solecismic

That's a hard lesson. Greece is a tiny economy compared to most. Forgiving the loans is the only way out of this current mess (leaving the Euro and devaluing the currency will produce an inflation that will soon reduce the promised pensions to a rather worthless level).

It does seem the EU wants cut-cut-cut but no investing to help the economy grow. Either way, there is more short-term pain for them.

I think if I was a Greek, I would vote no and exit the EU. I would be tired of seemingly heavy handed German influence.

[Solecismic]

Originally Posted by Edward64

It does seem the EU wants cut-cut-cut but no investing to help the economy grow. Either way, there is more short-term pain for them.

I think if I was a Greek, I would vote no and exit the EU. I would be tired of seemingly heavy handed German influence.

It depends whether you have savings or not. Greece is now in a position where they have to pick winners and losers. If they continue to drive out all business investment, this becomes a humanitarian crisis as well. It seems Tsipras has gambled everything on that being the best solution for the people loyal to his party. A bailout on a humanitarian level is better to him than no bailout at all - or capitulating to an EU that has finally run out of patience.

As for heavy-handed Germans, they're just tired of financing the Greeks. The EU was flawed to begin with - you can't try and tie a currency together without also tying together finances and budgets and pensions and taxes. At this point, dropping Greece and writing off the debt is more valuable to the EU than keeping Greece, writing off the debt, and risking other larger European countries teetering closer to the brink (Spain, Portugal, Italy) thinking they can refuse to pay their debts and remain in the EU.

[Edward64]

(Decided to change thread title to global business news vs stock market focus)

A point of view from the greek economists.

Greek economists to Stiglitz and Krugman: Butt out! - Jul. 3, 2015

Crashing out of the euro may look like a good option for Greece ... from a comfortable office in New York.

As Greeks prepare to vote Sunday in a referendum on a recent bailout proposal from Europe and the IMF, the world's top economists are taking sides.

Nobel Prize winners Paul Krugman and Joseph Stiglitz say Greece should vote "no," and if necessary be prepared to leave the euro.

Lined up against them are 246 Greek economics professors. They say a "Grexit" would be a disaster and they're urging Greeks to vote "yes."

Greek Prime Minister Alexis Tsipras is campaigning for a "no" vote, arguing that will strengthen his hand in talks on a new rescue and debt relief.

"A yes vote would mean depression almost without end," said Stiglitz in a blog post this week. "By contrast, a no vote would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands."

European leaders say "no" could hasten Greece's departure from the euro, because it would show the country will never accept bailout terms.

Stiglitz and Krugman are known for their anti-austerity views. They admit that there are huge risks with both scenarios, but argue that leaving the euro would give Greece much needed debt relief and a chance to start afresh.

That path would lead to economic doomsday for the country, according to their Greek peers.

The Greek professors published an open letter containing a stark warning against leaving the eurozone. They say it would have "disastrous economic, social, political and geopolitical consequences."

They listed several problems Greeks would have to face, starting with a sharp decline in tourism and shortages of basic goods, and leading to the collapse of public health care and defense.

[Edward64]

A survey, still too close to call I think. Good political drama this weekend.

Greek pro-bailout 'Yes' vote in referendum ahead: survey - Business Insider

Athens (AFP) - The number of Greeks planning to vote 'Yes' in this weekend's referendum in favour of accepting the latest bailout proposals is slightly higher that those opting for 'No', a survey said Friday.

According to the poll by the Alco institute on June 30 and July 1, after capital controls were introduced in Greece, 44.8 percent intend to vote 'Yes', 43.4 percent are for 'No' and 11.8 percent of respondents are undecided ahead of Sunday's referendum.

[JonInMiddleGA]

Just so I'm clear ... the motivation for not simply letting Greece fall into whatever disarray is to increase the mere possibility of recovering at least a little of the bad debt?

[BillJasper]

Originally Posted by JonInMiddleGA

Just so I'm clear ... the motivation for not simply letting Greece fall into whatever disarray is to increase the mere possibility of recovering at least a little of the bad debt?

Whichever way they go, it looks to be a hard road ahead for them.

[NobodyHere]

I hope Americans would look to Greece as an example of what can happen when your financial house is out of order.

I wish fiscal responsibility was a top priority for American voters, but of course it will be gay marriage, abortion, or gun control as usual.

[Edward64]

The greeks have spoken and it wasn't even close -- 61%-39% for No with a 63% turnout.

[Solecismic]

Can't blame them. Really, it's a good sign. They will suffer much more today, but at least there's a chance that their grandchildren won't have to suffer under the debt of their poor decisions in the last couple of decades.

[Edward64]

I'm glad the China crash is happening now. I rather get it over with and want to slow down the Chinese economy. I think most know/suspected that the Chinese government was artifically propping it up and/or lying about economy.

Unfortunately, there will be many middle-class playing with margin accounts that are going to be devastated.

China is taking 10 huge actions to save its stock market - Jul. 8, 2015

China's main stock markets are in meltdown mode. Since June 12, the Shanghai Composite has lost an unnerving 32%. The Shenzhen market, which has more tech companies and is often compared to America's Nasdaq index, is down 41% over the same period.

On Wednesday, China's Securities Finance Corporation -- known as CSF -- announced that it will lend billions to big Chinese brokerage firms so they can buy more stocks. The goal is to purchase enough shares that stock prices stop plunging.

A spokesperson for the China Securities Regulatory Commission called the bloodbath in Chinese stocks an "irrational sell-off," but some called China's markets a bubble this spring. The country's economy is also slowing. :
Buying stocks is just one effort China is taking. Here's a full rundown of the government's extraordinary efforts in recent days:

1. The government is essentially buying stock: The CSF is lending $42 billion (260 billion yuan) to 21 brokerage firms so they can purchase "blue chip" stocks. That's on top of what the $20 billion the brokerages vowed to buy over the weekend.

2. China is even buying small stocks: The CSF also pledge to buy more small and medium-sized stocks, although there was no specific amount given of how much would be spent.

3. New stimulus: A new $40 billion (250 billion yuan) plan announced Wednesday to foster growth in areas of the economy that need it most. China's economy has been slowing down.

4. More government spending: China will also speed up infrastructure spending that the government was already planning to do such as building roads and utilities.

5. Over half of China's stocks have stopped trading: China has allowed half of the companies on the stock exchange to halt trading in their shares.

6. Big shareholders can't sell for 6 months: Starting Wednesday, controlling shareholders and board members are prohibited from reducing share holdings via the secondary market for six months. China Securities Regulatory Commission promised it would "deal with them seriously" if anyone violated that rule.

7. No more IPOs (for now): China stopped any new stock listings over the weekend.

8. Central Bank slashed rates: China's central bank has cut rates to a record low in an effort to pump more money into the system.

9. Investors have a lot of leeway now on collateral: Investors now have more options to back their margin trades. Many investors speculated on stocks -- they would borrow money to buy stock because they thought the stock would go up and they would make enough money to pay back the loan and make a profit. Chinese investors can even pledge their homes as collateral, according to Bloomberg.

10. Devaluing the yuan: China's currency has fallen heavily in July against the dollar. There's speculation in the Asian press that it will slide even further. A weaker yuan makes Chinese exports to the U.S. and elsewhere cheaper, so it should help jumpstart growth.

So far, all the Herculean efforts have failed to calm the markets. According to Bespoke Investment Group, China's stock markets have now lost $3.25 trillion. To put that in perspective, that's more than the size of France's entire stock market and about 60% of Japan's market.

[PilotMan]

I'm laughing at all the Greece coverage and how intense it is. The whole thing plays out just like Union/Company negotiations and the union just told the company to fuck off and try again.

[JAG]

MARKETSShanghai seeing best back-to-back gain since 2008
10 hours ago
URL Twitter
Chinese stocks are rising sharply for a second day as investors put faith in Beijing's frenetic efforts to revive the market.

I thought the below comment in response to this was humorous:

@ObsoleteDogma: It turns out having your central bank buy stocks and telling people they can't sell makes prices go up! http://t.co/jNDODNvwf5

[Desnudo]

Originally Posted by Edward64

Greece has been misunderstood.
10 things they’re not telling you about the Greek crisis - MarketWatch

Hey you're right they should be able to pay off 350B with a 3B annual surplus that was generated by the previous administration, not the current Wiley Coyote one.

If you'd read the article it makes the point that Greece has been a money pit for thousands of years and has nothing to do with them being stereotypically lazy.

[JonInMiddleGA]

Originally Posted by Edward64

The greeks have spoken and it wasn't even close -- 61%-39% for No with a 63% turnout.

And in the end it was largely irrelevant.