Greece

[I'm running this commentary for a second day because of the high-minded discussion it has elicited.  Please be aware that an announcement next week concerning the latest bailout for Greece would probably generate a short-squeeze rally on Wall Street, much as it has a dozen times before.  Be that as it may, a potentially important target at 1353.00 that I'd flagged here for the E-Mini S&Ps has held thus far, the futures having spiked in the opening hour yesterday to...1352.75.  In other trading notes, a rally target for Bank of America shares was bullishly exceeded, although two more important ones remain: 13085 for the Dow -- a longstanding objective of ours;  and 119.91 for Goldman Sachs. Taken together, the prospect of simultaneous tops in so many bellwethers suggests that an important trend change could be imminent.  Click here for a free trial subscription to Rick's Picks if you'd like to keep abreast of further developments in real time. RA] The financial world is on pins and needles as "investors" await Europe’s latest, quasi-momentous decision on the fate of Greece. The Greeks themselves, no fools, were a step ahead of the politicians and bankers, rioting in the streets.  Many of them have probably imbibed enough austerity to last a lifetime. Keep tightening one’s belt a notch at a time and eventually you’re left with two bloody torso halves. Not that the bankers would mind the mess as long as they get paid. So what, actually is at stake in this latest chapter of the eurobailoutpalooza? The rescue package under discussion amounts to a piddling €130 billion, and we can’t see how it’s going to make much of a difference. Even if it’s only intended to buy a little time, a sum as meager as that may not see the Eurocrisis through

As last week ended, one might have believed Wall Street investors had just about everything wrong.  Stocks were up sharply on bullish payroll news that flatly contradicted something every American knows – i.e., that the Great Recession is still very much with us; T-bonds were getting whacked on the flimsy assumption that the economy is picking up strength; and gold and silver were under attack because, well, because all was right with the world.  Even the hacks and scribblers who bring us the news did their bit to feed Friday’s feel-good binge.  For one, there was nary a discouraging word on the Web’s main news pages about Greece and its slow-motion bankruptcy – only a story about how Europeans were working diligently to protect the homeless from a cold snap.  And the left-tilting L.A. Times, thinking wishfully, weighed in with the most fatuous story of the day:  an analysis piece saying that the payroll numbers could prove to be a turning point in Obama’s reelection year -- the day when he shifted from slight underdog to favorite. All of which led us to post a link at Rick’s Picks to some sobering counterpoint in the form of an essay, Peak Money Arrives. Here’s an excerpt to ponder lest you grow giddy over Friday’s silly headlines: “The world is running out of money. If money is credit, and credit relies on confidence, there is not enough confidence in the financial system to supply the world with the money it needs. Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust

Stocks came roaring back to end the week on an ebullient note, supposedly encouraged by the latest evidence that Europe is finally putting its financial house in order.  While the New York Times resisted the temptation to spread this drivel across the top of its weekend editions, the Wall Street Journal eagerly took the bait, offering up the following headline:  “Europe Pulls Back From Brink”.  Time for a victory lap for Europe?  Not so fast. While we’d like to think that somewhere in the nearly 800 words that followed, the four Journal reporters credited with writing this mush-up would have provided some further details of the latest “plan” to “save” Europe, no such details were forthcoming. As far as we could determine, the manic buying spree that lifted the world’s bourses on Friday took its inspiration from whatever ephemeral hopes attach to the political ousters of top leaders in Italy and Greece. Perhaps that’s why the Journal went no deeper than a single quote from some hedge-fund dorkwad  to substantiate the premise of a headline saying that Europe had “pulled back” from the brink. Here’s the quote, in case you, too, are looking for a reason to buy stocks come Monday:  “Hope for better management in Greece and Italy is causing the market to breathe a bit of a sigh of relief.” That’s it. Re-read the story a dozen times and you’ll find no further explanation. Recall that earlier in the week, the speculators and algo traders who have come to dominate the world's bourses sold the Dow Industrials down nearly 400 points in the space of a few hours,  joining in a global avalanche that caused hundreds of billions of dollars worth of valuations to evaporate. So why the sudden leap of faith on Friday?  We’ll probably never know.

[In the guest editorial below, our good friend Tom McCafferty, a veteran commodity trader and author of numerous books about trading and the markets, recalls the challenges of boot camp in sizing up America’s economic predicament.  The nation will need every ounce of strength, courage and Yankee know-how it can muster to avoid slipping into a deep economic coma, says Tom. Are we up to it?  With Europe on the brink of collapse, we may find out sooner rather than later. RA] “Get off your dead ass and onto you dying feet!” Those of you who spent your wayward youth as part of the Corps can remember your First Sergeant bellowing these words, as you ended a rest break half way through a 50-mile hike at Camp Lejeune on a hot August day.  Guess what?  Europe is about to become you new First Sergeant. Europe is headed for a major depression … like the good old days of 1929!  The Great Depression lasted over a decade in the U. S., even with all the market and job creating stimulus FDR could beg, borrow and steal from Congress.  It took World War II to get us working again.  Then, if we, our allies and even our enemies, hadn’t bombed just about every factory and storage facility in the world, leaving the U.S. with the only working factories and cargo fleet intact in the world, we still might not have gotten out of it.  The Great Depression could easily have gone on for decades and decades. If Greece thinks they deserve a 100% haircut on their precious bonds and opts out of the EU, you can bet half the banks in Europe and a few in the U. S. will tank.  This will be quickly followed by Italy, Spain, Portugal, and Ireland

The markets have opened lethargically Sunday night, although the S&P index futures are threatening to break out of a tiresome four-point range that has contained them for nearly five hours.  It’s eerily quiet, like the noiseless moment in a slasher film just before the chain-saw wielding psychopath leaps from the shadows.  Even the headlines are pregnantly subdued, a 7.2-magnitude earthquake in Turkey overshadowing all else. Other top stories-of-the-hour include the celebration in Libya of Qaddafi’s bloody, ignominious end;  the latest non-developments in the global Occupy movement; an unexpectedly kind word for Facebook founder Mark Zuckerberg from the late Steve Jobs; and -- this just in! -- a Rangers victory in game four of the World Series. If you could chart the mood of the moment, it would feature Bollinger bands so tightly constricted they almost touch. Technicians use this tool to predict explosive moves when things seem a little too calm, as they do right now. The biggest story due out sometime this week or early next will divulge the actual details of the Merkel-Sarkozy plan to save Greece -- and therefore, presumably, all of Europe. We marveled here last week at how the two leaders have brazenly sought to milk yet a few more weeks of agitated calm from a troubled world by merely drum-rolling the latest bailout scheme without providing any inkling of its design. This reminded our colleague Bill Buckler, editor of the Oz-based Privateer, of the South Sea Bubble, wherein shares were floated in “a [British] company for carrying on an undertaking of great advantage, but nobody to know what it is.” Indeed. A similar fraud, later known as the Mississippi Bubble, had been perpetrated a year earlier on French investors evidently as gullible as they were greedy. You’d think the Brits might have had second

Eerie, isn’t it, watching the U.S. stock market dog-tail the headlines stirred up by Europe’s never-ending financial crisis. The mainstream media would have us believe that whatever U.S. stocks do on a given day can be attributed to the latest news concerning Greece. In fact, the world’s newsrooms are sinking deeper and deeper into hallucination, since nothing has occurred to alter Greece’s inevitable slide toward default. Halfway into yesterday’s NYSE session, the financial headlines at Google news were telling us that stocks had fallen because of supposed uncertainties over Greece.  An hour later, when stocks rallied to end the day slightly higher, we learned that the “zigzagging” price action had been caused by a series of “conflicting headlines” concerning European debt. Merkel and Sarkozy were not to blame for this, either, since all they did was issue a joint statement that EU leaders would have a bailout plan for Greece in place by Wednesday. We can hardly wait to see what they’ve come up with. But if it triggers more riots in Athens, how are investors supposed to react?  A few months ago, rampaging torch mobs were seen as evidence that austerity measures imposed on Greece were sufficient to satisfy lenders. Now, however, lenders should fear that any futher tightening will send the country irretrievably into civil disorder and chaos. It would be naïve to think that such a spectacle would not have its effect on Occupy Wall Street. But riots? We’d bet against it, at least for the foreseeable future. The difference between Greece’s mobs and America’s emerging tent cities is that the latter are coming to austerity one small step at a time rather than having it shoved in their faces via government edict. But that is not to say that America’s descent has been imperceptibly gradual. That

So lame is Europe’s latest attempt at spin control that Americans could view it as comic relief from our own worries about the U.S. economy’s accelerating death spiral. Creating a global diversion was doubtless a goal of the exercise, which featured Sarkozy and Merkel, president and chancellor, respectively, of France and Germany, posing for the photo-op unveiling of a scheme – sorry, no details at this time –  to put Greece and the rest of the PIIGS on sound financial footing. Never mind that France itself starts to look like a financial basket case if one scrutinizes their books too closely; or that the German people, if not yet their leaders, have lost their appetite for bailing out the rest of Europe. And never mind either that, rather than describing their supposed plan, Merkel and Sarkozy have merely promised to tell us more about it in the fullness of time – reportedly at a November meeting of Euroland’s potentates, wizards and feather merchants. To their dubious credit, and perhaps owing to an understandable desire to avoid the derision of the world, the two leaders did not refer to a “secret plan” when they deliberately left it under wraps; no, they alluded merely to “a plan, ” and we can only surmise that they were fearful of raising the public’s expectations by implying that something new or unexpected was about to be tried. Better instead to maintain and nurture the low-grade cynicism with which most of us have come to regard these announcements.  That cynicism seems manageable, at least – presumably until market forces cause the whole shoddy edifice to crumble. In the meantime, Sarkozy and Merkel have bought perhaps a month’s time for the hopeless illusion that political Europe will remain united under a single currency.  Sustaining the endgame for

With Thursday's touts, I haven't gone very far out on a limb, but there's room nonetheless for a bullish play in the E-Mini S&Ps if traders remain intoxicated with the bullish "story" on Greece et al. Not that every one of them doesn't know it's going to end badly; just that each is acting as though he will be just ahead of the panic when it hits.

Ahhh, it’s those old Greek worries again!  Yesterday they were blamed for undoing a nearly 150-point rally in the Dow, although the question of what had caused the rally to begin with seemed of less concern. We’ll proffer the usual, technical explanation: Yesterday’s ups and downs were caused entirely by algorithm-driven machines with nothing more on their tiny digital brains than a bunch of zeroes and ones.  And if they had a smattering of human help, the humans undoubtedly applied the same tried-and-true tactic that has carried the day for the hedgies time and again in recent months – i.e., letting the index futures fall on thin volume, exhausting sellers overnight; then inducing a short-covering panic ahead of the opening bell. Would that Greece were driven by algorithms and polymath dervishes!  Granted, this wicked combination could send millions of Greeks into manic-depressive fits and potentially suicidal lows. But, oh, just think about those highs -- just like the ones we thrill to nearly every week on Wall Street, where even the glowering menace of a Second Great Depression evidently cannot kill the insensate ardor of buyers.  So, if 300-point Dow rallies are still possible, why hasn’t the same kind of exuberance seized the proletarian mind in Athens?  The answer, of course, is that Greece’s mood is driven not by “technical factors,” but by the grim realities of a failing economy and an economic future utterly bereft of hope.  Greek businesses cannot get bank loans to tide things over while their customers try to scrounge enough cash to redeem their IOUs. This has by now developed into a vicious cycle that can only spiral outward until it has encompassed all economic activity. In the meantime, a Europe desperate to save the euro and a transnational political confederation that had been dreamt about by