Consumer Spending Juiced by Inflation

The Personal Income and Outlays Report was published Friday for the month of February, and was received welcomingly by the market. It offered news of a jump in consumer spending, and any sign of such a gain for our consumer driven economy is sure to spur enthusiastic response. Still, I warn investors and economy watchers to temper their enthusiasm, as the day’s pill contains poison.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Consumer Spending Juiced

The monthly Personal Income & Outlays Report for February highlighted a 0.8% jump in personal outlays, or Personal Consumption Expenditures (PCE). The spending increase surpassed the prior month’s revised gain of 0.4% (hiked from the +0.2% initially reported). Indeed, it was welcomed good news, exceeding the economists’ consensus forecast for a 0.6% rise. The strong tally was at the very top of the economists’ range in fact, which spanned from 0.2% to 0.8%, according to Bloomberg. However, there is a fly in the ointment.

The gain in consumer spending was juiced, you see, by an unsavory ingredient. The unnatural driver was found in prices, as the PCE Price Index reflected in its 0.3% creep higher. Therefore, Real PCE, adjusted for price changes, rose at a lesser 0.5%. Obviously, the key driver of price rise today is found in petroleum and distillates, due to Iranian related concerns. NYMEX Crude Oil Futures for the nearest term contract now sit steadily above $100, specifically at $103.57 at the hour of scribbling here on March 30, 2012. A look at the iPath S&P GSCI Crude Oil TR Index ETN (NYSE: OIL) chart for February tells the story. The petroleum price driven security traded 8.9% higher through the month. A similar gain is seen in the Teucrium WTI Crude Oil ETF (NYSE: CRUD).

The Core PCE Price Index, which weeds out food and energy prices, rose just 0.1%, so true inflation concerns were tempered Friday. However, you’ll want to read an article we have planned to follow this report, addressing what we expect will be a rise in real inflation.

February’s data showed consumer spending increased 4.1% on a year-over-year basis, which matched the January’s gain. The yearly data should be smoothed and not vary between months, except for when special factors come to play (like 9/11). The PCE Price Index was up 2.3% on a yearly comparison, which is not very concerning. The Fed will likewise find little to worry about in the Core PCE yearly change, which measured at +1.9% in February. The Federal Reserve is said to favor PCE Price Index as a measure of inflation, and so the data point is worthy of your regular inspection.

February’s report showed Personal Income rose 0.2% month-to-month, and was up 3.2% on a yearly comparison. The yearly change was down sharply from January’s 3.5% change, though I suspect bonus payments add some noise to the data, though remain worth inspection. Unfortunately, Real Disposable Income, adjusted for price changes, fell by 0.1% in February. The Personal Savings Rate also declined in the month, to 3.7% of disposable income, versus 4.3% in January.

In conclusion, I’m not as enthused by the report as the market seemed to be Friday. A couple hours ahead of the close of trading, the SPDR S&P 500 (NYSE: SPY) was up about a half point, making up ground for what had been a poor week. The Consumer Discretionary Select Sector SPDR (NYSE: XLY) was up a bit more, as should be expected. However, the SPDR S&P Retail (NYSE: XRT) was down fractionally.

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Who Loves You, Baby? Evokes the Great Telly Savalas

Feeling nostalgic for ‘70’s glam and cool, sexy Greek guys? Hurry down to the Soho Playhouse where Tom DiMenna is brilliantly channeling Telly Savalas, the macho Greek with the growly voice in Who Loves You, Baby?.

Celebrating Telly Savalas

“Who loves you, baby?” was a famous Savalas line from TV’S popular Kojak. Written by Hunter Nelson, and developed over a three-year period, the show takes the premise that sex and romance were for real in the ‘70’s. It’s ironic, touching and hilarious. With his shaved head and brown eyes (so Telly-like), DiMenna introduces himself as a “legitimate, card carrying sex symbol,” and admonishes: “Put the porno away. Wear a silk shirt. Learn about life.”

Set in a bar/lounge at the Soho Playhouse, Alex Leonard plays cocktail music that gets you in the mood. For an hour plus, you’re in a never-never Telly world. DiMenna captures the quality that made Savalas special. He himself seemed to spoof his macho self. A good guy, Telly created special intimacy with his audience. “Greeks don’t threaten. They utter prophecies,” says DiMenna/Savalas. We particularly appreciated comic-noir lines like: “Have you ever fallen in love and had a baby by a gal you met by the cigarette machine?”

The actor puffs on an electronic cigarette, drinks a Tequilla Sunrise (the lollipop that Savalas used in an attempt to break the smoking habit comes out later), and points to the current lack of alpha males like himself on the small screen. Telly was Kojak, a no-nonsense Greek cop. And as DiMenna points out --who do we have now? David Caruso of CSI. The actor/comic says: “The fish are disappearing. Your whiskey’s watered down. What’s missing is guys like me.”

During the production, brother George arrives for a loving reunion, and the two break into a Zorbas dance. Savalas himself would probably have approved of DiMenna’s rendition of You've Lost That Loving Feeling.

I met the real Telly back then, having a Scotch/Rocks in the Westbury Hotel Bar on Madison Avenue after lunch, and creating his own party by bringing his drink out to the sidewalk. A charmer, he dazzled me and my eight-year-old nephew Nicholas who loved him as Kojak.

Savalas played the title character in Kojak, a cop show set in New York, airing from October, 1973 to March 1978 on ABC TV. Kojak’s Greek-American heritage, shared by Savalas, was prominently featured in the series. Initially, the character was Polish but the actor rechristened the character, and it worked. Telly’s brother, George, appeared as a character on the show (a brother playing a brother).

In 1999, TV Guide ranked Theo Kojak Number 18 on its 50 Greatest TV Characters of All Time list.

DiMenna, 32, an Italian-American became addicted to Savalas watching old clips from his TV shows. Three years ago, he teamed up with Hunter Nelson to create the comedic tour de force. “What started out as a comedy show became a celebration of ‘70’s charisma,” says DiMenna. The actor, a graduate of the University of Pennsylvania, where he played quarterback on the football team, also spent a year in Italy playing with the Bologna Warriors. Growing up in Connecticut, his mother, a cabaret singer, frequently brought him into New York, often to “Don’t Tell Mama,” home of classic cabaret.

DiMenna has worked with the Second City in Chicago, done improv, and performed Shakespeare in London. Who Loves You Baby played last summer at New York’s Fringe Festival.

Taylor Negron directs the “surreal retro-lounge act.” Our Chief Editor at Wall Street Greek talks of a welcoming Negron, accompanying "The Greek" for a bite after the show. Markos Kaminis described Negron as “a candid and engaging man who earned his fame as a film actor and comedian, but with depth that is perhaps better explained by the man’s artwork and skill with the written word.”

The show’s on every Wednesday, Thursday and Friday at 8 p.m. through April, 2012 at The Huron Club, Soho Playhouse, 15 Vandam Street (off Sixth Ave). The theater is easy to reach, three blocks from the Houston Street (1 train) and Spring Street (C & E) subway stops. Contact: TellySavalasLive.com and get tickets here.

Other critics have weighed in on the show:

“You will not see a funnier play than Who Loves You Baby?! As Savalas, Tom DiMenna is hilarious and cool like Telly.” New York Theater Com.

“Who Loves You Baby? is hilarious. Tom DiMenna is front and center as a dead ringer for Savalas. It’s a brilliantly breezily bombastic performance.” Nitelife Exchange.

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Appraising the Real Estate Market

After a week’s worth of new data, the market is finally reassessing real estate. Up until now, and excluding my own steadfast voice uttering disagreement, the great majority of real estate market enthusiasts and housing longs have been declaring that this would be the year for recovery. The chart of the SPDR Series Trust SPDR Homebuilders (NYSE: XHB), which represents a pool of homebuilder stocks, concurs, rising 70% from its October 3, 2011 trough through the March 23, 2012 close (adjusted for splits and dividends).

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Real Estate

They said this spring selling season would be the one to spur a real estate recovery; they were wrong. On Friday, New Home Sales were reported running at a slower pace in February than they did in January. The U.S. Department of Housing and Urban Development (HUD) reported that the annual pace of new home sales slipped to a seasonally adjusted rate of 313K. That was short of economists’ expectations, which were set at 325K based on Bloomberg’s survey. It was also under January’s revised lower rate of 318K, cut from the 321K pace initially reported. Most importantly, it shows no sign of new life in new housing.

Just two days earlier, Existing Home Sales, or the sales of used homes, also hit the skids. The National Association of Realtors (NAR) reported that Existing Home Sales fell to an annual pace of 4.59 million in February, down from the revised January rate of 4.63 million. Sure, the decline was modest, and the reported month was within winter (not spring), but several other reports seem to show an unenthused real estate environment.

Housing Starts were reported for the month of February last week as well. I like to look at single-family starts, because the overall number includes multi-family projects, and I believe a renter nation is not a healthy nation. HUD reported that starts of new single-family homes fell to a rate of 457K in February; that’s 9.9% under the revised January figure of 507K. Maybe it’s just me, but such a significant decline doesn’t seem like good news to these weary eyes. Now, the eternal optimists who are long housing or work in the industry will again note the month in question and the fact that the pace of Building Permits for single-family projects improved 4.9%, to 472K in February.

If you are still unsure about where housing is trending, you might study the survey of the homebuilders themselves, which was also reported last week. The National Association of Home Builders (NAHB) reported that its Housing Market Index, which measures the mood of builders, was unchanged in March, leaving it in depressed territory. The NAHB/Wells Fargo Housing Market Index (HMI) stuck at a mark of 28, after February was revised down a point. The index also proved deflating to economists, who after buying into the idea of sector recovery, set their consensus view up at 30 for the month. I should also remind the reader, that 50 delineates between a positive and negative mood. At the current level, builders remain mostly deeply depressed.

If you still need convincing, take a gander at the latest FHFA House Price Index, which in an improving environment, should be expected to reflect price increases. Rather, the report for January showed no change month-to-month, and a 0.8% decrease in prices for the trailing twelve months against the prior year comparable. Adding insult to injury, the December level was adjusted lower, providing an easier bar to hurdle in January.

The stocks of home builders reflected the environment more accurately last week than they had through the capital flow driven run since October of last year. The XHB was down 1.3% on the week, but the shares of some builders saw more severe damage. K.B. Home (NYSE: KBH) was down 8.5% Friday alone and was off 19% on the week after reporting disappointing data. Even industry stalwart Toll Brothers (NYSE: TOL) shed 4.5% last week. It seems the market is finally paying attention to data and economic developments, and heeding my long ignored warnings.

Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

President of the United States of America

Oh! It was a most special night for the entire Greek American Community in early December of 2012. One of theirs had finally made it to the top of the ladder. After Dukakis and Tsongas – the third time was the charm for an American of Greek descent. This time it was for a favored son of the great State of New York.

The First Greek-American President of the USA

Anybody who was anybody in the Hellenic American world had packed the grand ballroom of New York City’s Waldorf Astoria. Red, white and blue bunting was the backdrop for this noisy and festive occasion. Each table was adorned with American and Greek flags. They contrasted sharply with the cassocks of the clergy, black tie outfits of the men, and muted yet very chic evening gowns of the ladies.

At the head table was the First Lady to be – Anastasia Papp with her four boys and one daughter and the First Mother to be – Eleftheria Papachristopoulos. Eleftheria was wearing her signature Majorca pearls complimenting a royal purple gown. The Archbishop of America was at the next table with all the Metropolitans of the nation in attendance. The officers of the AHEPA, Order of Saint Andrew, National Board of Philoptochos, (the Friends of the Poor Society), various political and fraternal organizations, dignitaries from Greece, and of course the top Greek American contributors from the Independent Party formed the inner circle.

All these high powered personalities were promised a preview of president – elect John Papp’s inaugural address. There was this tremendous electric buzz of excitement and anticipation in the air, and more smiles here than at a crocodile convention; more pounding of the back than could be expected for the winning team at the upcoming Super Bowl in January of 2013. Throughout the hall the repetitive shouts of “we did it, we finally did it,” was the mantra of the night. To be sure, those who had done the least were strutting around the ballroom most.

Every eye was riveted to the podium as Papp’s national campaign manager Robert Sweeney stood center stage as the band struck up the folk song that had become the campaign anthem – This Land is Your Land. Stretching his arms out wide and displaying the universal V for victory with two fingers of each hand, Sweeney quieted the gathering.

“Dear friends and supporters, this great day has finally arrived. A son of immigrant parents has proven that the American dream is attainable to one and all.” Mr. Sweeney smiled proudly as he continued; “President – elect John Papp doesn’t want or need a long introduction. He is determined to thank each and every one of you personally after a few brief remarks. So, without further ado I give you – your President and mine!”

A standing ovation greeted John Papp as he took over the podium with a firm handshake to Bob Sweeney. Norman Rockwell couldn’t have painted a more idealized portrait of a President. His sharply defined face and hair graying at the temples along with his piercing blue eyes were intimidating and announced that here was a man accustomed to getting his way. John Papp surveyed the room until he was satisfied that all eyes were focused on him. He coughed several times to clear his throat before speaking.

“It has been a long and often difficult road to the White House, my dear friends. Who could have possibly thought that an American of Greek descent, born in the working class section of Flatbush, Brooklyn and raised along with two brothers by a young widowed mother could not only ascribe but achieve the highest elected office in the land?” There was the unbelievable silence of a large gathering of people with Greek blood in them being completely quiet as John Papp bowed his head as if in prayer before continuing. “It was my dearest mother, who ever since I could remember as a little boy telling me that I would grow up to become the President of the United States of America someday. Countless times throughout my four terms as Congressman and two terms as the Governor of New York, I have implored mom to explain how she knew with bedrock faith that this politician would eventually work in the Oval Office. Her reply never wavered – “at right the time I will reveal to you just how a mother knows her son’s destiny.”

“Well mom, you love the church, you love the Philoptochos. You love all the organizations that help Greek Americans.” In a voice mixed with pride and exasperation he finished. “I invited them all here tonight so that I could thank you for all you have done for me and so you could finally tell me just how you always knew I would become President of the United States of America.”

Anastasia looked at her mother - in - law and said, “Mama, you have got to go up there; he’s not asking for me. I can accept that the umbilical cord can be cut, but never severed; so go. I’m just as eager as he is to find out the answer to the question.”

“Anastasia, is my hair okay?”

“Mama, there’s not a gray hair out of place.”

Eleftheria Papachristopoulos rose with great difficulty, leaning on her silver handled cane. She silently thought, “Ha, yes all my hair is gray and if truth be known it wasn’t my son William the doctor or Thomas the computer magnate that had anything to do with it. It was Johnnie, all by himself that has given me trouble ever since he was a toddler.”

As she slowly made her way to the stage she mused about Johnnie’s latest antic. During the last months of the campaign, he started to relate to the crowds that because his family was so poor that as a kid William would buy a penny candy and suck on it for a while; then it was Thomas’s turn, and Johnnie would be the one to finish it. Pshaw! That was baloney; sure Johnnie had to wear hand me downs from his brothers but he always was neat and clean and there was always good food on the table. Johnnie had explained to her that the electorate expected a politician to embellish on their record or life experience. That didn’t sit well with Eleftheria, neither did his shortening of the family name so as not to sound too ethnic. “What was wrong with Papachristopoulos anyway?” She grumbled to herself. She didn’t notice the approving glances of the audience and the resounding ovation they gave her as she ever so slowly made her way to her son. She reflected more on Johnnie’s actions that made him so different from his brothers even at an early age.

Mr. Costas, the Sunday school teacher approached her after Church one day and said that he would try to speak loud and directly for Johnnie’s benefit because of his hearing problem. That had puzzled her until she found the transistor radio with the earplug in his room. He had poor Mr. Costas fooled into thinking he was wearing a hearing aid; actually Johnnie was listening to rock n’ roll music during Sunday school lessons.

Another time, Johnnie asked her to alter a pair of new pants. Johnnie was standing on the kitchen table as she worked on the woolen slacks. William happened by and remarked that he had a pair of pants just like them. Johnnie then asked her to hurry the task. Five minutes after he left for a date, William ran out of the bedroom with murder in his heart. They were the pants that he had paid for from his after school job at the drugstore.

When Johnnie was seventeen, Mr. Russo, the greengrocer threatened him with bodily harm because he suspected Johnnie of having relations with his daughter Anna Maria. Eleftheria felt it was true because Mr. Russo said that his daughter claimed that Johnnie would tell her that he burned for her like an Easter Candle, and that sounded just like him.

The only way out of that mess was for her to enlist Johnnie into the Army. He served during the height of the Vietnam War. She came to know the worry of the many times that she hadn’t heard from him for weeks on end and fearing the worst. Eventually, he did come home with a chest full of medals, and a permanent limp.

The passing of years have not changed her youngest son. Last month at her eighty-fifth birthday celebration Johnnie presented her with a gift box from Tiffany’s (NYSE: TIF). Johnnie with his usual fanfare elicited oohs and ahs from all the family members in attendance before placing it in her hands. Eleftheria wasn’t totally surprised to open the elegantly wrapped gift to discover not jewelry but three Milky Way candy bars. Everyone enjoyed a good laugh.

Eleftheria refused help for the steps to the stage. When she finally embraced her son, it was the classic picture of mother and child. The soon to be 45th President of America laid one hand on his mother’s shoulder, and with the other signaled the gathering to silence. When the proverbial pin dropping could be heard, he earnestly spoke.

“Mother, please finally reveal how you always knew I would one day become President of the United States!”

Eleftheria Papachristopoulos, with the sweetest haloed countenance extended her two hands and as if presenting and weighing the most precious of gifts replied clearly for all to hear. “It was the heft of your soiled diapers.” Turning to the audience but still smiling endearingly, she announced, “I now give you back the President – but always my child – my Johnnie.”

President – elect John Papp managed the frozen smile of a politician as he received a vigorous tug to his earlobe. He watched in silent awe as his mother left the stage triumphantly. Eleftheria practically skipped down the stairs as the cheering now mixed with laughter resumed even louder than before.

Editor's Note: This article should interest National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Global X FTSE Greece 20 ETF (NYSE: GREK).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Euro Land is Doomed - Achilles Heel of Globalization

One of the classic landmarks of the Great Depression was the tendency to protect local and national markets from competition. This protectionist behavior resulted in retaliatory actions escalating the issues and resulting in poorer economics for all. The sovereign leaders of Europe are publicly attempting to keep the markets open to free trade, which will facilitate the economies of all and support the struggling peripheral countries. The heads of the 17 Euro nations are working to keep the debt from imploding and destroying the European Union; with each positive announcement, stock markets around the world rise in anticipation of a lasting solution; privately, things may be different.

Relevant tickers: NYSE: DB, NYSE: STD, Nasdaq: ITUB, NYSE: UBS, NYSE: WBK, NYSE: LYG, NYSE: BCS, NYSE: CS, NYSE: AIB, NYSE: BLX, NYSE: NBG, NYSE: RY, NYSE: BFR, NYSE: IRE, NYSE: BMO, NYSE: CM, NYSE: ING, NYSE: C, NYSE: GREK, NYSE: VGK.

The Achilles Heel of Globalization

All entities work first on their own behalf, and then for the benefit of others. As much as a private citizen may want a strong European Union and the benefits of association, the fact remains that all will be pro-active in assuring the survivability of their own market, their own business, and their own personal welfare. The possibility of peripheral nations exiting the European Union and the complications that action would entail will eventually be the end of globalization.

Major manufacturers depend on their suppliers to provide the ingredients for production; an unreliable supplier or a supplier that is perceived to be possibly unreliable will be replaced. The natural tendency is to bring the supporting plants to the home country or use businesses within their own country, thus mitigating any disruptions. The industrial giants of Germany and France and general economics will cause the downfall of their weaker neighbors, unraveling the work of the central governments. Greece, Spain, Portugal, and Italy are at tremendous risk; the global banks, insurance companies, and pension funds that have bought their sovereign debt are at risk, and that jeopardizes the entire Globe. The five top banks in the US have Credit Default Swap (CDS) exposure on an even higher magnitude insuring the debt threatening the financial structure of our economy. Investors cannot assess the risk/reward ratio for existing investments; new investments in plants and equipment that stimulate jobs will be postponed until clarity returns. This hesitancy is natural and will cause a downward spiral in economic activity, ensuring a deep and long European recession; it will have a ripple effect across all borders.

Reduced trade with Europe cannot be beneficial to any of the economic zones of the world. The developing economies around the world owe their prosperity to selling goods to the developed countries. Resource rich countries such as Australia and Canada owe their prosperity to selling raw materials to the developing nations, and the US has plants and suppliers outside of the US - notably in China and the Pacific Rim countries. Everything and everyone is interconnected; if a disruption occurs, look for increased protectionism and tariffs along with rising nationalism. An economic slowdown will bring social unrest in the distressed markets, further compounding the tendency to repatriate factories and suppliers back into the home market and exasperating the situation. Globally, bankers, investors, and manufacturers that have made plans on expansion and continued growth with debt obligations will feel the slowdown first. Revenues will be reduced and will result in cost cutting; then employment reductions, further causing social unrest; then non-payment of loans; and finally in the failure of the project and/or total default. A contraction appears to be unavoidable, but there are prudent preparations to consider.

Income and debt level will be paramount to surviving this coming downturn. The savers of the world have been devastated by the historically low interest rates. Savings accounts, CD’s, Municipal Bonds, and US Treasuries, the haven for the retired and conservative investors, have been eviscerated. Pension funds and insurance companies requiring a yield component have been forced to search for much riskier investments to achieve just marginal returns to service distribution requirements. These conservative vehicles may have assumed much more risk than previously thought. Annuities, pensions, insurance policies may be at risk if there is a sovereign default in Europe, unknown to and far away from Main Street America. These are the vehicles in which the retired and elderly often depend along with Social Security; they may be at grave risk. Income enhancing securities such as MLP’s and high yield investment need to be reviewed and if prudent, positions hedged, reduced, or stop losses instituted. Long-term US Treasuries yield less than 3% currently, but provide a reliable income stream, and as the reserve currency of the world, the dollar should benefit from global disruptions.

The central banks of the world typically react to crisis by injecting liquidity, which will eventually, perhaps in 24-36 months, precipitate inflation, possibly double-digit inflation, which will threaten long-term bonds. The task will be to conserve one’s capital and exit the downturn intact and be able to re-position capital when the bottom has been reached. In a reduced revenue and yield environment, payments must be eliminated or reduced to coincide with reduced income in order to conserve capital. Typically a downturn will last 13-26 months, but this one may be longer.

“Underwater” or non-cash flowing Real Estate investments need to be liquidated, preferably via the “short sale” process. Foreclosure typically should be avoided, as the penalty period for obtaining mortgages is reduced using the short sale. If the timing is perfect, the waiting period could coincide with the downturn, and capital could be re-allocated to properties, as long-term inflation may follow the downturn as the liquidity injected into the economy searches for a home. Strategic real estate opportunities are still available, and more may become available as the downturn unfolds. Strategic properties are typically yielding a passive 5-6% return unleveraged to 8-9% cash on cash, with conservative lending. Currently, strategic real estate is a very favorable investment offering monthly income with the strong potential for revenue growth as well as a huge hedge against any future inflation.

There is a strong possibility of a global recession. A prudent investor needs to be aware and cautious as the traditional sources of income have been eliminated. Long-term treasuries are great in deflation and real estate is great in inflation; both generate the current income needed through a downturn. A combination of both may be advisable, check with your advisor and review the suitability for your portfolio.

Article is relevant to Deutsche Bank (NYSE: DB), Banco Santander (NYSE: STD), ITA (Nasdaq: ITUB), UBS (NYSE: UBS), Westpac Banking (NYSE: WBK), Lloyds Banking Group (NYSE: LYG), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Bank (NYSE: AIB), Banco Latinamericano (NYSE: BLX), National Bank of Greece (NYSE: NBG), Royal Bank of Canada (NYSE: RY), BBVA Banco Frances (NYSE: BFR), The Bank of Ireland (NYSE: IRE), Bank of Montreal (NYSE: BMO), Canadian Imperial Bank of Commerce (NYSE: CM), ING Groep (NYSE: ING), Citigroup (NYSE: C), Global X FTSE Greece 20 ETF (NYSE: GREK) and Vanguard European ETF (NYSE: VGK).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

March Madness for Consumers

The close to last week offered up a sour tasting consumer report, and given the slew of related data produced through week, we thought we would take a look at the state of the American consumer today. The latest reporting of consumer confidence put a dent into the roaring market’s rise, with the SPDR Dow Jones Industrials Average ETF (NYSE: DIA) looking tired Friday. What I see in store for retail and the consumer discretionary sector is not as savory as the profits logged year-to-date therein.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

March Madness

On the week, we received at least five consumer relevant economic reports, including the Reuters/University of Michigan Consumer Sentiment Index, Retail Sales, Consumer Price Index, Bloomberg Consumer Comfort Index and the ICSC –Goldman Store Sales data. None of it really stymied the market’s rise through the week, with the SPDR S&P 500 Index ETF (NYSE: SPY) gaining 2% through Friday’s close. In fact, I suspect Friday’s reported Consumer Sentiment Index slippage was only partially responsible for the market’s intraday reconsideration of the week’s stock gains; though what’s behind the new consumer view played a major role.

Consumer Sentiment fell by a point, according to the Reuters/University of Michigan survey. The index declined to 74.3, from February’s 75.3, setting early stock action at odds with the week’s trend. The key driver of the slip was inflation expectations, which pulled down the overall expectations component. Rising gasoline prices have consumers worried about how the critical cost might eat into their lifestyles. But, as of now, consumers don’t yet see gasoline prices sticky. When that happens, you have a real problem for this consumer driven economy.

Just a day earlier, the Bloomberg Consumer Comfort Index offered a different perspective. Bloomberg’s weekly measurement of the consumer mood improved to -33.7, from -36.7 the week before. The driver of this change was of course the latest labor market gains, as seen in the nonfarm payroll rise in the Employment Situation Report and in the latest week’s Jobless Claims dive to a four-year low mark.

So just how important have gasoline prices been given the divergence in these two metrics. Clearly, they have been more important over the course of the month than the week. The Consumer Price Index was just reported for February Friday. It showed a 0.4% increase in prices, largely on gasoline (+6%) and overall energy price increase (+3.2%). Excluding food and energy, the Core CPI only edged 0.1% higher, which was less than expected (+0.2%) and less than January’s 0.2% gain. However, if petroleum remains elevated for long enough, the impact could seep into the cost of goods eventually. Granted, “long enough” is probably longer than the world will wait for Iran to comply. Thus, I think you can count on inflation, because war with Iran would only compound on the pressure weighing on petroleum prices.

The latest indicators of consumer spending included two reports published this past week. The International Council of Shopping Centers (ICSC) produced another soft result. The ICSC report showed week-over-week sales growth at 0.7%, with the year-to-year change at just 2.3%. The latest crisis at J.C. Penney (NYSE: JCP) and Sears (Nasdaq: SHLD) offers evidence that capacity remains extended, and there will be winners and losers competing for limited consumer funds.

Retail Sales were reported for February earlier this week, rising 1.1%, a swifter pace than January’s 0.4% gain. Hold your horses though, because gas station sales added a bunch to taint tangible growth. Excluding autos, sales were up 0.9%, and when taking out gasoline and autos, growth managed just 0.6%. That was in line with the economists’ consensus and matched January’s pace. The growth was still impressive to some of us who have been looking for a consumer sector slide. Bite your tongue before berating me for that view, though, because the economic trial I’ve been looking towards appears to be developing.

Investors in the consumer and retail sectors should be happy enough so far this year, with the SPDR Select Sector Fund – Consumer Discretionary (NYSE: XLY) and the SPDR S&P Retail ETF (NYSE: XRT) up roughly 14% and 16%, respectively, through March 16. Yet, I reiterate and renew my warning. Beware the ides of March, for they bring European economic struggle and higher gasoline and energy prices. I expect your labor market support to crack soon enough as a result. I reported recently on the undermining I anticipate for still unsure small business confidence. Much of that should have catalyst in crushed consumer confidence. In conclusion, I remain concerned about the vulnerable economy given the weights upon it and the risks against it.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Undermining Small Business Confidence

The National Federation of Independent Business (NFIB) produced its monthly Small Business Optimism Index Tuesday for the month of February. The measure of the small business mood gained for the sixth consecutive month, rising 0.4 points to a mark of 94.3. The NFIB warns that the reading is still low based on historical comparison, and that the rate of improvement is “glacial.” We would add that it comes just in time to be undermined by the fiscal and economic failings of Europe and the geopolitical fumbling of the world. In other words, before you get too excited about today’s slight victory, take a look at the tough schedule ahead this season.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: NYSE: SLY, NYSE: VB, NYSE: VBK, NYSE: VBR, NYSE: VIOO, Nasdaq: SCLP, NYSE: PZI and NYSE: WMCR.

Small Business

The popular spin on confidence today will be centered around the positives, including the month’s height against its 2007 grounding. That fact will overshadow the truth about its sitting lower than last February, and potentially following the trend of last year, where early gains were undermined. Last year, we saw mostly fear driven decline, though followed by some setback in economic activity. Certainly those same two factors should come into play again this year, given Europe’s self-deprecation and the battle fleet sitting offshore of the tinderbox of Iran.

Any fluffing of the data will certainly not be the fault of the NFIB’s Chief Economist, Bill Dunkelberg, the guy who probably doesn’t remember giving me my undergraduate business degree at Temple University. His view has been wisely tempered throughout the recovery, properly reflecting the cautious mood of the group of typically optimistic entrepreneurs. This month, he noted the “wildcard” that gasoline prices play in the vulnerable small business marketplace. Of course, the last few months climb in petroleum distillates would be dwarfed by what would follow any engagement of Iran in battle. Considering that all the guys opposing President Obama, save Ron Paul, already have their hands on the trigger, concern is well-placed. Yet, it might be better suited today, as wars tend to start in surprising fashion, and big guns already sit with targets set upon one-another.

You might want to note that the details of the survey are anything but enthusing. Some 22% of small business owners, the same number as was reported in January, said their biggest problem was “poor sales” in February. Take note as well that more small businesses reported declining sales than reported rising sales in February. Considering the seminal importance of the core issue, you might want to restrain your natural inclination to tout the four-tenths gain and refrain from your long bets for the long-term. That said, generally speaking over the long-term and under normal business conditions, I would expect more small businesses to fail than to survive, and the survivors to provide more than enough economic value to compensate.

Capital expenditures were up again, but remain near historical lows. What’s worse is that few business operators view today as a good time to expand. Not enough of them have real plans to expand in a significant way either. There’s a good reason for that I suppose; the number of small business owners expecting better business conditions in six months sits in negative territory. While a significant portion of that figure is certainly determined by business expectations, it’s also affected by other factors. Those cited most by small businessmen were taxes and regulation. Surprisingly, credit access was not a central issue. Washington seems to finally be taking notice, with less emphasis on Federal Reserve actions and increasingly more attention upon fair trade and business incentives. Presidential elections tend to focus the attention of public servants well…

While job creation was up in February and over the last three months, plans to increase hiring in the future fell off among the nation’s smaller businesses. A greater net of employees were added, yes, but on a greater increase in employees at a smaller number of firms than cut at a greater number of firms. That was generally consistent with the latest improving trends in the government’s employment data. However, what’s more important, and we paraphrase Eddie Murphy, is what employers have done for us lately. In this case, I mean the near future.

The latest economic data out of Europe, save perhaps today’s investor confidence improvement in Germany where the stink of the PIIGS has yet to really bite, has been generally deteriorating. Can you believe it, austerity (read starvation and blood-letting) isn’t working? The problem for us, save compassionate hearts should they still exist, is that we sell roughly 20% of our exports into Europe and that Europe buys a bunch of stuff from all over the world. The entangled global marketplace is therefore at risk of noticing European strife, and that’s before a Lehman like event could drive swift striking crisis. So the latest tiny gains in small businesses are not impressive and stand at high risk of being undermined.

The market was off to a solid start despite the mediocre small business report Tuesday, instead taking its lead from February’s Retail Sales data, which while only showing in-line numbers, still rose 0.6% ex-gasoline and autos. The SPDR Dow Jones Industrial Average ETF (NYSE: DIA), SPDR S&P 500 (NYSE: SPY) and PowerShares QQQ Trust (Nasdaq: QQQ) were each up about a half point at the start of trading on that driver. Even the SPDR S&P 600 Small Cap ETF (NYSE: SLY), which you might expect to better reflect the small business view, was up a half point. That said, I think the omen seen in the expectations of small businessmen will be considered increasingly, and seen in data to come.

This article should interest investors in small cap stock securities like the SPDR S&P 600 Small Cap ETF (NYSE: SLY), Vanguard Small Cap ETF (NYSE: VB), Vanguard Small-Cap Growth ETF (NYSE: VBK), Vanguard Small-Cap Value ETF (NYSE: VBR), Vanguard S&P Small Cap 600 Index ETF (NYSE: VIOO), Russell Small Cap Low P/E ETF (Nasdaq: SCLP), PowerShares Zacks Micro Cap ETF (NYSE: PZI) and Wilshire Micro-Cap ETF (NYSE: WMCR).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

What Greece’s Bond Default Means

The International Swaps & Derivatives Association (ISDA) determined that Greece’s private debt restructuring effectively constituted a credit event, otherwise known as a default. This is not the kind of default that the world’s financiers had feared, though it is neither impotent with regard to repercussions for Greece.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Greece's Bond Default

Greece said some 85.8% of private debt holders of Greek-law bonds and about 20 billion euros of foreign-law debt agreed to take a “hair cut” on their holdings, accepting a promise from Greece for a much smaller payback on their loans. While any number (like 85.8%) should be questioned when it comes from the notorious and now desperate Greek government, we’ll humor them for the sake of global order. Greece enacted a retroactively contracted collective action clause based on the greater than two-thirds count of private debt-holders reportedly agreeing to its proposal. The coerced and clearly unconventional hair-cut was judged by the ISDA to be an effective default on the debt, and it was. This was no surprise, with ratings agencies Moody’s (NYSE: MCO), Standard & Poor’s (NYSE: MHP) and Fitch all effectively cutting Greece’s sovereign debt ratings to default levels over recent weeks.

The decision will trigger $3 billion worth of credit default swaps, with payouts depending on the value of Greek bonds on the open market. Some estimate on the “gray market” that the value of the still questionable private debt to be issued by Greece is worth about $0.21 on the dollar invested, so the holders of the swaps should receive some $0.79 per dollar. In this case, the details are less important than the general action, which effectively validates credit default swaps and projects a new view on the sovereign debt market.

While the securities actions represent a sort of default, they actually support the backing of the troika through the reduction of Greece’s overall debt burden. That said, the new debt Greece has offered its private debt holders remains costly, with an expected yield upward of 20%. That’s because Greece’s already questionable credibility has incurred a seminal change for the worse.

The nation’s crippling austerity is understood by the capital markets to be detrimental to economic growth. I have already written much about my disagreement with Europe’s cure for Greece. It’s like Greece is cutting off its leg rather than setting its broken bone. The reason is so that it can progress today and tomorrow, but the result remains a severely crippled Greece, hampered by its self inflicted injury. That’s not the way I would go about it, and I will answer how I would go about it in the very short-term through a series of reports.

On Friday, the Global X FTSE Greece 20 ETF (NYSE: GREK) gave back some of the gains made since Greece again secured troika support. The iShares S&P Europe 350 Index (NYSE: IEV) did the same. The stock action correctly reflects the uncertainty that remains regarding resolution to this crisis. The shares of the National Bank of Greece (NYSE: NBG) and Deutsche Bank (NYSE: DB) likewise reflected this uncertainty.

So today many are confused as to just what has occurred in Greece. Has it defaulted or not? The answer is yes, it has defaulted technically speaking. However, no, it has not yet failed in its desperate effort to stay afloat. What has happened is that the nation has forced a small number of people to endure some significant pain, those being the private bond holders. Of course, in a complete default scenario, those few wouldn’t do any better. Many believe Greece still will inevitably default on the entirety of its debt or choose a different path post elections, despite the efforts of the troika to ensure payback. If or when Greece does fail due to its (and Europe’s) poorly prescribed blood-letting solution, then I believe the euro-zone should fall apart as well.

The reason for this is of course contagion and something more. The events of last week should not weigh on the sovereign credits of Portugal or any of the other PIIGS beyond any short-term bump. Yet, the euro zone scheme remains a poorly devised half-solution for the region, designed to help it compete in the changing global marketplace. However, only when its national components sacrifice sovereignty will the fiscal union hold for the whole. That scenario will not likely develop, though, due to human attachment to culture, history and tribe. Thus, I say the failure of the euro zone is probable.

Editor's Note: This article should interest investors in National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Deutsche Bank (NYSE: DB), ITA (Nasdaq: ITUB), Banco Santander (NYSE: STD), Westpac Banking (NYSE: WBK), UBS (NYSE: UBS), Lloyd’s Banking Group (NYSE: LYG), Barclay’s (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Banks (NYSE: AIB), Banco Latinamerican (NYSE: BLX), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

On Europe, Can You Hear Me Now?

Over the last several months, I’ve been harping about what the impact of a recession in Europe would be for the U.S. economy and stocks. However, in todays "I’ll believe it when I see it" society, and with a stock market on the rise since early October, investors have been hard to sway. Still, I’m a tough cookie, willing to take the abuse of popular opinion to guide those willing to listen toward the protection of their capital and advanced, wise placement of new money ahead of the herd. So, with regard to Europe, can you hear me now?

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Can You Hear Me Now?

It was just a few days ago when I said the Greek problem was our problem and held steady on my bearish call on the rising European ETFs. Well, Tuesday the EURO STOXX 50 Index dropped 3.4%, and that Vanguard European ETF (NYSE: VGK) that was sticking stubbornly higher last week, dropped 4.1%. The iShares S&P Europe 350 Index (NYSE: IEV) fell 4.0%, and the words of your favorite Greek turned golden. It seems by the movements of the markets that most of you were surprised, but readers of my column sure weren’t. Though, fear not new friends, because there’s more where that came from.

The reason for the latest lashing was prophesied almost word for word in previous articles found along this string. Deteriorating European economic data is increasingly indicating recession is plaguing Europe, coloring in the areas we demarcated for our following friends over the last few months. Meanwhile, the recently reported as resolved Greek issue lingered, like we said it would here. But let’s not lull too long in the lotion of our latest lucid thoughts.

The European Union reported on Tuesday that economic output contracted 0.3% in the fourth quarter of 2011. The important economic region’s weakness was hurt by soft household spending, manufacturing activity and exports. Yet, no economist should be surprised, as the austerity being forced down the throats of Europe’s most indebted nations (better when slowly digested) was bound to choke economic activity during this post financial crisis new age. The secular bear seems set to roar some more now as a result.

Add to the economic woes of the Europeans the threat of Greece missing its deadline to restructure its privately held debt via swap, and you have the recipe for a stock market wake up call. Greece has secured the agreement of some 58% of its private debt-holders to-date to accept a severe change in the terms of their contracts, hinged on a halving of the money owed them. Greece had hoped, somehow, to secure 90% agreement, but of course misjudged as usual. All of the nation’s major banks and probably its pension funds are bowing to government pressure, and over 30 European banks and insurance firms have been successfully coerced to surrender as well. Greece will employ collective action clauses to force the rest into compliance, if it secures adequate approval to change the terms of the agreement. Everything seems to be up in the air still, with the deadline set at 10:00 PM Thursday Athens time.

Some of the institutions which have agreed to participate are Ageas (OTC: AGESY.PK), Allianz SE (OTC: AZSEY.PK), Alpha Bank SA (OTC: ALBKY.PK), Axa SA (OTC: AXAHF.PK), La Banque Postale, Banco Bilbao Vizcaya Argentaria SA (BBVA.MC),BNP Paribas (OTC: BNPQY.PK), CNP Assurances SA (Paris: CNP.PA), Commerzbank AG (OTC: CRZBY.PK), Credit Agricole SA (OTC: CRARY.PK), Credit Foncier, DekaBank Deutsche Girozentrale, Deutsche Bank AG (NYSE: DB), Dexia SA (DEXB.BR), Emporiki Bank of Greece SA, EFG Eurobank (OTC: EGFEY.PK), Generali (ASG.F), Greylock, Groupama SA, HSBC Holdings Plc (NYSE: HBC), ING Bank (NYSE: ING), Intesa Sanpaolo SpA (OTC: ISNPY.PK), KBC Groep NV, Marfin Popular Bank Plc (Athens: MARFB.PK), Metlife Inc. (NYSE: MET), National Bank of Greece (NYSE: NBG), Piraeus Bank SA (Athens: TPEIR.AT), Royal Bank of Scotland Group Plc (NYSE: RBS), Societe Generale SA (OTC: SCGLY.PK) and Unicredit SpA (UCG.MI).

The S&P 500 Index was up Wednesday, but dropped 1.5% Tuesday, with the SPDR S&P 500 ETF (NYSE: SPY) off the same amount. Why would you suppose that is if not for the tragically real economic risk posed by a European recession to the U.S. economy? That said, the latest American data refreshed the thirst of greedy traders seeking reason for rise, with the often off ADP Private Employment Report noting the estimated addition of 216K private sector jobs in February. As Europe starts to rub off on the rest of the world, including the American economy, which ships 20% of exports into the struggling domain, I expect global markets will move lower in more determined fashion. So, I continue to warn against taking satisfaction in the economic data of the day, while not considering what may change in the months ahead. And I haven’t even mentioned the Iran trigger, which weighs heavily over our collective heads.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Job Market Gains Look Tired

With almost any topic, one can take a positive view or negative, and that slant could be affected by the general opinion of the reviewer about that topic. Thursday’s Jobless Claims data, like most economic data, offers that same potential. The rate of jobless claims is still not optimal, but on a relative basis, it is certainly better than the last few years’ results. However, the pessimist, or maybe the realist who sees what’s developing in the global economy today, might say the latest lull in this data point, with claims stuck around the same rate, could indicate the latest improvement trend seen in the labor market is stalling. If that is the case, with the economy potentially stalling or recessing this year on various important factors, then we may have found another inflection point for labor, with a deterioration trend to follow.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: NYSE: RHI, NYSE: KFY, NYSE: MAN, NYSE: MWW, Nasdaq: KELYA, Nasdaq: JOBS, NYSE: JOB, Nasdaq: CECO, Nasdaq: PAYX, NYSE: ASF, Nasdaq: KFRC, NYSE: TBI, NYSE: DHX, NYSE: SFN, NYSE: CDI, Nasdaq: CCRN, Nasdaq: ASGN, NYSE: AHS, Nasdaq: BBSI, Nasdaq: HHGP, NYSE: SRT, Nasdaq: RCMT, Nasdaq: VSCP, OTC: ASRG.OB, OTC: MCTH.OB, OTC: IGEN.OB, OTC: STJO.OB, OTC: TNUS.OB, Nasdaq: TSTF, OTC: STTH.PK, OTC: PSRU.OB, OTC: CRRS.OB

Tiring Job Market

Weekly Initial Jobless Claims were reported at 351K in the week ending February 25, down only 2,000 from the prior week. Indeed, the four-week moving average reflects the stall in labor market gains, as it settled in close to the weekly count, at 354K. Several consecutive weeks of claims running at about this rate have had that effect, and the moving average improved 5,500 in the latest period. But is the latest activity indicative of a still improving labor market, or rather reflective of a stall in the rate of improvement? In the event of the latter, perhaps the claims data is telling us something about the economy, which seems to me likely to stall as well this year.

First of all, much of the gains in labor are suspect to begin with. In the past, we talked about the seasonal benefits. We have also discussed in detail the anomaly caused by the drop-off of the long-term unemployed who likely fall off the radar when their extended benefits expire. With the long-term unemployed representing a high percentage of total unemployment, this is likely playing an important role in the latest improvement trend in the unemployment rate, which was last measured at 8.3%. The number of Americans claiming benefits of some sort, including unemployment benefit extension payments, numbered approximately 7.5 million on February 11.

Still, the weekly initial jobless claims data do not include such noise. The data therefore offer an important and clear insight into today’s layoff activity, and some insight into the state of labor. With regard to this data point in particular, it’s clear now that there’s been some improvement in layoff activity. But, we cannot be so sure this is reflective of improved hiring patterns.

The Monster Employment Index (MEI) measures online job demand, and therefore offers some insight into hiring. The latest report covering January was partly tainted by a seasonal lull, but it offers useful insight anyway. While the MEI dropped to 133 in January, down from 140 in December and 147 in November, it was still 9% higher than last January’s 122 mark. Within the data, Monster Worldwide (NYSE: MWW) showed that the public sector continued to shed jobs, but it was the only area that showed contraction in January. Monster commented that transportation and warehousing, retail and wholesale have maintained strong growth trends. That said, the rate of improvement of job demand within manufacturing slowed, falling into the single digits for the first time since February 2011. One might argue that this could be on seasonal issues, as manufacturers shut down plants for maintenance at certain times during the year. But today’s ISM Manufacturing Index decline, and this week’s Durable Goods Orders drop-off seem to concur with what I interpreted from the Chicago Fed’s National Activity Index, which I believe foreshadows economic sluggishness if not recession. Finally, unless it’s a Renter Nation you’re interested in, then housing is not faring well either, despite the gains that I see shaky in homebuilders’ shares.

While relative employment stocks celebrated Thursday, the shares of employment services firms seem to confirm my view of the labor situation generally. The stocks are mostly higher since early October, but indicate a loss of confidence over recent weeks. For instance, looking at the charts of Robert Half International (NYSE: RHI), Korn Ferry (NYSE: KFY) and Kelly Services (Nasdaq: KELYA, Nasdaq: KELYB), we see that trend clearly. Kelly Services (Nasdaq: KELYA) is up 42% since October 3, 2011, but down roughly 14% from an intraday high of $18.05 in early February. Robert Half is also up about 42% since early October but down slightly from a recent high. Monster Worldwide (NYSE: MWW) breaks the industry trend (with a negative slant), but its shares seem to have diverted from the industry on alpha, or company specific driver.

A critical eye will be required as we receive the monthly labor reports next week. I would advise those inspecting the data to remember that labor is a lagging indicator. The latest developments in Europe, plus costly gasoline prices here at home due to an Iran issue that will not go away soon, weigh heavily on our vulnerable economy this year. As economic growth slows, so should labor activity, despite what the data may tell the optimist today.

Article should interest investors in Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), American Surgical (OTC: ASRG.OB), Medical Connections (OTC: MCTH.OB), iGen Networks (OTC: IGEN.OB), St. Joseph (OTC: STJO.OB), General Employment Enterprises (NYSE: JOB), Total Neutraceutical (OTC: TNUS.OB), TeamStaff (Nasdaq: TSTF), Stratum (OTC: STTH.PK), Purespectrum (OTC: PSRU.OB), Corporate Resource Services (OTC: CRRS.OB).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.