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Aftermath of Greek Vote Seems Predictable

By Rick Ackerman Posted on June 18, 2012, 12:18 am EDT Last Updated June 18, 2012, 8:16 am EDT

[The following was written a day before Greece’s election. Although the outcome seems unlikely to live up to its cliffhanger billing, it’ll be interesting to see how U.S. markets react when index futures begin to trade Sunday evening. Our guess is that the institutional provocateurs who control the markets will use the outcome, whatever it be, to short-squeeze the bejeezus out of stocks. If they do, you should be ready to sell this last-gasp bear rally short. Click here to join us as we attempt to pick the Summer of 2012’s exact top. RA]

As the weekend approached, the outcome of Sunday’s election in Greece was being touted by the news media as “a cliffhanger,” a “Lehman moment, and “too close to call.”  But does anyone actually believe the ultimate outcome is in doubt? The drumbeat reminds us of the sensationalized news coverage that froths up every time America’s do-nothing Congress approaches a budget deadline. Greeks have been rioting in the streets for the better part of a year, and so it seems likely that even if they vote to stay in the EU, they will struggle in vain to fulfill the terms of future bailouts. Under the circumstances, political sentiment will continue to shift left, ultimately giving the radical Syriza party effective control of the nation’s political and economic machinery. A Marxist takeover of a deadbeat nation that owes everyone would be bad news for Europe, but it is predictable that
stock markets around the world will turn riotously bullish no matter what the outcome. Bad new is good news on Wall Street these days, and good news — i.e., a vote on Sunday to retain the status quo — would be even better. Our hunch is that even if a military junta were to seize control of Greece’s government, it wouldn’t matter one iota to the speculators who goose, diddle, jockey, juggle and criminally rig the markets. Stocks will soar on Monday regardless, and the op-ed pages will nod approvingly, noting that now, at least, the trains will run on time. Or some such.

Lunatic Fringe

Keep in mind that the champion of Greek’s radical left, Syriza, really does represent the lunatic fringe. Their idea of fixing the country’s economy would start by having the bankrupt government hire 150,000 new employees instead of eliminating 150,000, as budget cutters, including some socialists, have proposed. Meanwhile, among the 17 nations in the Euro so-called Union, Germany in particular has reason to be scared to death while Wall Street parties.  The Germans have plenty of skin in the game, after all, and if Greece were someday to walk away from the table as seems likely, inspiring like-minded Spaniards and Italians to follow suit, the financial consequences for Germany would be dire. For now, though, a tight-fisted Merkel is being made to walk the plank, and you can hardly blame her for taking mincing steps.  She has the support of German voters to buck her up, but Germany could eventually find itself flanked on all sides by rioters looking for a scapegoat. (And wouldn’t that be ironic, given that there are so few Jews left in German banking circles.).

We await the results of this weekend’s supposed “cliffhanger” much as we might the arrival of the #17 bus.  Leftist radicals are destined to take over sooner or later, and there’s not much Germany or anyone else can do about it. In the meantime, party on, Wall Street!

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  • Cam Fitzgerald June 29, 2012, 9:54 am

    Thank you for your enlightening comments, Mark.
    You and Mario are both idiots.

  • Cam Fitzgerald June 19, 2012, 8:36 am

    Well girls, this is it. Seems Rick wants me to be more respectful of the delicate sensitivities of some of the weaker commenters. I told him I thought he should just write those wimps back and tell them to grow up and grow a set. But I doubt he will do it. So now I have to be good. Free speech and all has been compromised by the cry-babies who want no objections to their thin agenda (my opinion) and who want no objections even when they offer a version of events totally at odds with what good investors know to be the truth. Worse has happened, I suppose. What can I really do though other than register my lack of faith and confidence in the works they ply? I can only hope Rick acts with more integrity than some of the feeble critics of mine who prefer muzzling to honest discourse. If he will be deleting comments that object to the nonsense that he reprints on his site then he might also consider deleting all of them in the thread. But, like I say, there is more than a little irony in being shut down by the complaints of a self appointed expert on communications who lives in China. (Oops, was that too much information?).

    • mario cavolo June 19, 2012, 12:50 pm

      You insult this forum, you insult Rick, you insult me.
      You embarass yourself.

      You are now in my book persona non grata.

      Oh, last nail in your coffin…150 million families, 90% of them DO own their homes, Tsinghua University Report, confirming nothing more than a society where the rule for EVERY family, EVERY marriage is that you own your home, which is something that all of us who have lived here for more than ten years already obviously do know, not absurd at all, you insulting, disrespectful, arrogant dipshit.

    • Mark Uzick June 19, 2012, 4:15 pm

      Cam, none of us are perfect, but at least most of us try to to be civil.

      Sometimes you seem polite, personable, occasionally insightful and, when you’re behaving yourself, interesting to read, but other times you seem like a different person – like you have a secondary personality, that’s out of control, whose primary objective in life is to get others’ goats. I don’t see any reason why Rick should allow you to turn his blog into another Yahoo Finance message board.

      I don’t think anyone’s goat is harder to get than mine, (Many have tried and failed.) yet you’ve managed to get me to call you a derogatory name (Paul Krugman) for making some of the most exasperating arguments that characterized everything I actually said to fit some “progressive” cliche straw-man arguments against Classical Liberalism, but, even then, I’m comparatively constrained.

      Mario is more sensitive than me; and if you harass him with continuous comments that completely ignore points that he’s made, he will become angrier than is good for his self-dignity.

      There’s no justification for you to do this to anyone, let alone someone who, out of generosity and friendship, makes such a great effort to enlighten us with his unique insights and perspective. You don’t have to agree with everything he says – you don’t have to make a battle out of it or make cheap shots, implying that his opinions are motivated by fear of retaliation – just show some respect for a different point of view. You may find a lot of things to agree with him about – certainly a lot of facts to learn, no matter how you interpret them.

  • mava June 19, 2012, 4:11 am

    Gary, I am going to dig myself out now and enter the warm and inviting world.

    Things are so bad, in fact, there is mostly no point in commenting. Commenting on news these days is much like commenting on someone’s death. So what that so and so died? It has been clear from the moment he was born. The predictability with which the sheep marching towards their own destruction is awe inspiring.

    I am amused with your cheerfulness. “Yes the banks got a free pass, but there was no other solution unless you wanted a 30’s style run.” Seriously? You believe there is a tooth ferry? You believe that no one ever needs to pay for anything? After all, there is no other solution! “Real deflationary forces are keeping it down.” Where is the deflation? You might just as well summon the real “force”. Why not. Say: “The force is with us!” There. Feels good, isn’t it?

    Nothing, I repeat, nothing at all has been done to repair the damage. More wrong things had been done since. If we are O.K. now, then what was the point worrying about anything at all in the beginning of this crisis? Just keep this in mind, next time you’re in accident, just slam your car couple more times into the same thing, then say to yourself “in my book, this car is marked looking good”. Problem fixed.

    If we can ignore the broken leg, and fix it by just running ahead and pretending it isn’t broken, then we should redefine “broken leg” as “a leg that no longer required”.

    Seriously, reading your posts makes my day. But, when I am done laughing, I dig deeper down. Because this sort of negation of truth happens only when things are broken in such a horrible way that many just remain in denial.

  • John Jay June 18, 2012, 11:57 pm

    Gary,
    Yes, we might just be on the right track at long last! Since the US Congress can’t seem to get AG Holder or DS Panetta to answer to them, they did the next best thing.
    They dragged the dangerous Roger Clemens into the dock and spent millions only to see him Not Guilty on all counts! Maybe now Holder and Panetta will realize Congress is not fooling around! No, really.

    • Steve June 19, 2012, 12:54 am

      Let me see if I understand the Facts. The current democracy operates as a private business established by democracy law all under the Executive who legislated a corporate executive legislative body and a legislative administrative court system for all the hu’man corporations who volunteer to FEE ! Did I miss something here?

    • Steve June 19, 2012, 12:57 am

      For facts try; The state of Georgia v. Stanton sec. of War 73 U.S. 50 (1867), and every influence of government is via the Commerce Clause, yes ? As in the great pitcher’s complaint would state . . . did violate the interstate commerce clause by injecting drugs transported from x to y in violation of. . .

  • bc June 18, 2012, 9:08 pm

    The problem is that legalizing fraudulent accounting by suspension of mark to market GAAP, shoveling reserves into the big banks by the $trillions and letting them play the spread to treasuries, deficit spending 40% of our national budget as stimulus, and holding short term rates at zero are all temporary measures. Three years of “temporary” measures is pushing the definition of temporary pretty hard. Breakdown of trust between counter-parties is how this will end badly. The process of trust breaking down is rolling right along now in Europe. Not coming here soon? Really?

    • gary leibowitz June 18, 2012, 10:48 pm

      Yes the banks got a free pass, but there was no other solution unless you wanted a 30’s style run. Deficit spending is a huge drag, but if we can implement a balanced give back from the top tier and cut domestic/military spending it can be reduced significantly. The yields are not artifical. Real deflationary forces are keeping it down. In fact if we do not show signs of a domestic economic resurgence rates will go even lower. To the last pint, breakdown of trust. That is a big unknown. Everything will fall apart quickly if that was to occur. In actuality Spain’s 7 percent bond yields is acceptable given the risk. No breakdown yet.

      In fact given that everyone is in the same swamp there isn’t many choices other than total abandonment. I don’t see that happening yet. Domestic confidence is actually strengthening, and the worrisome housing market is on the right track. Personal cutbacks on debt is a big part of the solution.

      Too little too late? I believe so, but it does delay the end game.

  • bc June 18, 2012, 7:54 pm

    The only meaningful news out of Europe is that Germany is finally saying, “No Mas.” to the PIIGS. This is ignored by our news media as a non event, even though markets are moving swiftly to destroy Spain’s financial sector. This will lead to massive counter-party losses which will soon find their way here to our FIRE sector. In addition, we are beginning the second leg down in U.S. GDP. Yes, we are entering another recession with terrible macro numbers on the way in. Sing “The Sun Will Come Out Tomorrow” at the top of your lungs, Gary. Me? I’ve got my rain gear on.

    • gary leibowitz June 18, 2012, 8:32 pm

      Second leg down? If the last 3 years was the first leg down than I suppose thats good news. Housing is definitely a positive going forward after 3 years of trying to find a bottom. Paying down debt, very low morgage rates, banks beginning to lend again, consumer comfort level getting better, commodity prices took big hit, the EU is going the path of the U.S. That means kicking the can further down the road. I see no chance of a dramatic drop anytime soon.

      The problem is not the high level of debt. The problem is setting a new agenda for real change and time to implement them. Slow and steady with a new political will to keep spending down.

      Our first test comes January. I believe that will set the stage for our immediate future.

      Don’t get me wrong, I think too many cross-current issues will eventually derail this process. I just don’t see it as a sudden event, nor at this immediate junction.

    • Steve June 19, 2012, 12:50 am

      Gary, will you dance the naked jig like Rick for being wrong ?

  • John Jay June 18, 2012, 6:49 pm

    With modern production techniques it takes fewer and fewer humans to produce all the manufactured goods the world needs. I did a little research and the total number of people employed to build all the large commercial aircraft is about 350,000 people. That includes Boeing, Airbus, GE Aviation, Pratt + Whitney, and Rolls Royce. You can double or triple that number to account for sub-contractors. So about one million people can supply the world with all the jet airliners they need. I guess about 3 billion people are likely to use those aircraft out of the 7 billion on earth.
    The ratios are likely the same for automobiles and electronic goods. Even China has plans to replace millions of workers with industrial robots. And look what the internet has done to the USPS etc. The struggle to provide real jobs not connected to a government dole is only going to intensify in the future.
    Ever increasing debt has been masking that situation for decades. Now the world is running into reality at long last.

    • mario cavolo June 19, 2012, 12:41 pm

      a huge point JJ, how to balance robots against the needs to employ hundreds of millions in China is a daunting issue, Cheers, Mario

  • Bradley June 18, 2012, 5:04 pm

    I’d love to see the hubris exhibited here followed up by some humility every once in a while.

    Never was so little owed by so many to so few…

  • gary leibowitz June 18, 2012, 3:12 pm

    The pessimists among us would have Greek fall into a military junta. Even the very left wing Syriza leader Alexis Tsipras backtracked on his pledge to leave the Union. It looks like the civilization that sparked democratic rule around the world wasn’t willing to give up on itself. Now to the details. Looks like a new less severe set of rules will be enacted. It is obvious that a drastic reversal of socialist policies will bring us all down. The big question is, is it too late? Have we gone beyond the ability to mend and heal? The pessimist in me has always concluded that a worldwide debt implosion was inevitable. I still believe that is the case.

    Since we were the catalyst that created this contagion I think it is not for us to judge. The creation of the mortgage derivative boondoggle was ours to claim credit for. We have not even dealt with the consequences of our home grown mess like they have overseas. Austerity has not been seen here these past 3 years. Let us not judge others until we are tested ourselves. Unfortunately I believe we will be tested.

    The currency bet from last week was a smart one. Wish I had gone that route. Now to Spain. This reminds me of another reality TV show. The stakes are now countries instead of individuals. Who will survive to the end?

    • Rick Ackerman June 18, 2012, 5:00 pm

      All will “survive,” Gary — but all of Europe will be impoverished as the region falls into an economic Dark Age. Incidentally, the business about the military junta was intended as an extreme example and clearly not my expectation.

    • gary leibowitz June 18, 2012, 5:06 pm

      http://www.bloomberg.com/news/2012-06-18/biggest-stocks-beat-s-p-500-most-in-13-years-as-valuations-fall.html

      As I have been arguing all along, the US stock market’s performance and expectations are just fine. In fact we are under a 13 P/E for the SP500. August should be the longest we hold out for this correction to end. After that it should explode on the upside. Call it one last relief rally, or just a blowoff but it seems very likely to happen. The EU will concede to allow countries more latitude on spending.

      After all the current news and events, does anyone still expect a “surprise” plunge anytime soon?

      What will it take for the markets to stay depressed or fall hard? For the next 9 months I can’t think of one thing. There will be no defaults, no exiting from the EU, and no ultimatums.

    • gary leibowitz June 18, 2012, 5:12 pm

      Yes I realize that, but you are feeding the fires of other more extreme doomsters. As for “impoverished” I sadly agree. It will be a global event. How we come out of this will test Democracy at its core. I hope the world is strong enough to weather the storm without fear and isolationism putting us back into a 50’s style nuclear tension.

    • Steve June 19, 2012, 12:47 am

      Gary, isn’t P/E of 3 more like what happens at the bottom historically?

  • John Jay June 18, 2012, 5:59 am

    It is almost 98 years since the “Guns of August” in 1914.
    Things are spinning out of control in Europe just like they did 98 years ago. Only this time the war is economic, not military. Same list of characters: Germany, France, Italy, England, and a supporting cast of smaller nations. Except Russia is sitting it out this time around. And they are lobbing debt back and forth instead of millions of rounds of artillery shells.
    However, the concern over plebeian economic casualties is about the same as the attitude in WWI that resulted in the ossuary at Verdun being piled high with canon fodder.
    Back in 1914, the Royal Cousins, the King, the Kaiser, and the Czar blundered into WWI without a clue as to what the final consequences would be to the old order in Europe. We could be watching the last chapter in that long book of European history. Perhaps Asia in general, and China in particular will play the role of the United States in 1914, and fill the power vacuum.
    That depends on how much longer Field Marshal Bernanke can bluff the rest of the world with imaginary bond auctions. We are watching history unfold!
    And, as the old saw goes, it doesn’t repeat, but it does rhyme!

  • mario June 18, 2012, 3:40 am

    I had mentioned to Rick that a strong indicator, the ny summation index is now way oversold indicating a bullish run on the horizon, being an election year, with oil prices staying low, with commodities prices easing, with China,s most recent import export stats coming in surprisingly well, can we say these positive underpinnings give the masters of the universe an allotment of space and time to continue their financial shenanigans? Let’s watch the markets complete this rally, head back down to test S&P1270’s again , maybe to 1220s, then head back up into the election?

    Cheers, Mario

    • mario June 18, 2012, 11:26 am

      Cam, you went so far as to blatantly call me a liar in a reply to a lady named Jenny’s post also stupidly criticizing me. You very much need to get off my ass.

    • Cam Fitzgerald June 18, 2012, 5:55 pm

      I have never called you a liar, Mario but have been responding to you slinging insults at me and constantly mocking. You cannot end every post by saying “cheers” and adding a happy face while sticking it to me. So lets call a truce then.

  • RichardB June 18, 2012, 3:34 am

    I was more interested in what happened in France than Greece this weekend since I think that is a bigger impact.

    So far it looks like Germany is left all alone holding the bag when cries of a new 120 billion Euro “growth plan” from their biggest supporter from the number 4 economy going completely socialist. Their debt to GDP ratio is over 200%$ as I recall! I swear you can’t write a novel with this many twists and turns. Truth is really stranger than fiction.

  • Seawolf June 18, 2012, 2:31 am

    It’s not the voting that matters, its the counting. Rick, you neglected to mention that no matter which way the voting went the PM’s would get slammed.

    • Rick Ackerman June 18, 2012, 8:29 am

      This is the sort of neglectfulness that paying subscribers would not be aware of, Seawolf, since my intermediate-term outlook for bullion has been bearish for a while. Click here for a free peek behind the subscriber wall.

  • SD1 June 18, 2012, 12:41 am

    The charts were predictable. They told us to hold off going all-in on shorting the market. The news (whether it be the mainstream media or perma bear websites) is there for the behind-the-times fundamentalists.


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