Greece Calls Europe's Bluff

Mario Monte, the Italian Prime Minister, made some market supporting statements last week which must have sounded familiar to readers of this column. Mr. Monte said some things Greeks have long been saying as well, albeit at the top of their lungs while being beaten back by police batons. He said the troika of the IMF, European Union and European Central Bank had been too hard on Greece, demanding drastic change of the Greeks over a period much shorter than appropriate. The short-term disruption of this radical change has been more detrimental than the long-term benefit it aims to achieve, and so indigestible by the Greeks. As a result, the Greeks have spoken, and finally, European ears are listening.

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.

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).

Greece Snuffs EU Bluff

You might remember a series of articles written here over the last few years on the topic of the impossible austerity plan shoved down the throats of the Greeks. It took more than words, though, to gain the attention of Greece’s European masters. It took more than uprising even. It took the action of Greek voters, who so vehemently opposed austerity as to lift a radical political coalition into a position of influence. With political polls conflicted now as to what could result when a second election proceeds in June, the market has begun to price in a Gr-exit, or Greek exit from the euro-zone. Likewise, Moody’s (NYSE: MCO) and Standard & Poor’s (NYSE: MHP) have begun to account for what might follow in Spain, Portugal and Monte’s Italy. Suddenly, and not coincidentally, the impossible is possible for Europe.

The idea of offering euro-bonds, a unified action that at least the Germans had ruled unconstitutional, is now being openly and seriously considered. But it took the rise of the “little people,” as one politician notoriously labeled them a few years back, to force the hand of power in favor of financial fairness. When Greece’s newest political voice, Syriza, said the Europeans were bluffing regarding the required nature of their prescription for Greece, hardly anyone believed them, and yet today it looks as though they were right.

It reminds me of an interesting political ploy tried by the Greeks not long before. Just days before PASOK’s persecuted leader, George Papandreou said the Greeks deserved a referendum before inheriting the weights of austerity, we wrote that the Greek people should determine their own fate. And after the PM had played his poker hand, we said it might not be the political suicide it seemed to be, but instead genius, because it would force the Europeans to show their true hand. That same truth is apparent again today, and it reflects a weaker European position than what they had bluffed they held.

In the end, it looks as though the path was always laid out, but that political patience would have to persevere until the populace of Europe was ready to venture down it. What is happening is a better bonding of Europe, through the catalyst of crisis and the glue of fear. As the region ties itself together, though, I worry it will later more easily drown. This is because, while I understand the construct of the plan is to solidify the union, I believe fiat currency will be more easily weakened in the process. This is because I see another catalyst ahead that only a fearless visionary might venture to present now, which will unravel this best laid plan. However, this is better the topic of another story.

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.

Housing Heals Before Contracting Lethal Infection

Much has been made about the latest increases in new and existing home sales, much too much. Modest increases in activity from dreadfully low levels during a period when seasonality should spur growth is a low-bar leap. Though, I think it is clear based on the data that the housing market is finally overcoming the burden of the bubble. More importantly, though, a storm is gathering over yonder, and the future concerns me more today than this past April can enthuse me. Today’s action in homebuilders and financials, with the SPDR S&P Homebuilders (NYSE: XHB) and Financial Select Sector SPDR (NYSE: XLF) each off more than 1%, seems to say that you finally agree. I’m glad to have you on board Mr. Market; now buckle up.

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 include 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), Hovnanian (NYSE: HOV) and Beazer Homes (NYSE: BZH).

Housing Healing, Facing Infection

New Home Sales were reported Wednesday for the month of April and Existing Home Sales were reported Tuesday for the same span. The XHB caught a breeze on the first report, but was unable to ride the hot air for a second day. The shares of homebuilders Toll Brothers (NYSE: TOL), Ryland Group (NYSE: RYL), PulteGroup (NYSE: PHM), K.B. Home (NYSE: KBH), D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN) were mixed Wednesday, though housing related shares were mostly lower. Some, like Toll Brothers (NYSE: TOL) benefitted from company specific news. Still, despite the market share driven rise of the like, I say buyer beware, because the macroeconomic environment will sink all cyclical ships. That’s why the modest increases in sales activity in April, while they do show real recovery in real estate, will draw no capital from my store today.

The U.S. Department of Housing and Urban Development reported a 3.3% increase in new home sales in April, but that only brought the annualized pace of sales up to a measly pace of 343K. Granted, that was 9.9% better than the pathetic production of April 2011.

Through years of attrition, the standing inventory of decaying new construction has dwindled, with 146K fresh homes estimated for sale currently, or 5.1 months supply at the current pace of sales. That’s again better than March’s 5.2 months and last April’s 6.7 months store. The pace of sales is finally benefiting from the clearance of the wreckage of the housing bubble (read foreclosed and bank owned property). This view is also supported by a median price increase seen in existing home sales, which arose last month on a better mix of properties sold. That data would indicate that there’s an increasing portion of non-distressed property selling through. The number of new homes for sale is thin against last April’s 174K, so the builders would be nicely positioned now if not for the distressed global macroeconomic environment that is offering contradicting information to the investment decision generally.

Existing Home Sales nearly equaled new home sales in their increase, rising 3.4% in April and 10% against the prior year. Single-family home sales, which for many better reflect the true American home market, rose 3.0% and were 9.9% higher than last year. Inventory was up, but the Chief Economist of the National Association of Realtors (NAR), Lawrence Yun, clarified why. He said that April historically drives and leads the year in homes for sale. This year, April marked a 9.5% increase in homes for sale, to 2.54 million. At the current pace of sales, that represents a 6.6-month supply, up from 6.2 in March.

Fear not (at least not about this), as home price data ensures that the increase was not driven by distressed properties, but by better demand drawing sellers. In fact, shortages have sprung up in the hardest hit areas, like Phoenix, Arizona and Las Vegas, Nevada. The median price of an existing home for sale was pulled higher by all this, rising 10.1% year-to-year, to $177,400. Again, this was due to the better mix of homes for sale, not general price increase, so don’t go betting on a new housing lust because of it. Yet, other data-points also showed a change for the better. All-cash sales fell to 29% of transactions in April, down from 32% in March. Investors accounted for 20% of all purchases, versus 21% in March. And first-time buyers rose to 35% of all purchasers in April from 33% in March. These are all signs of a normalizing and recovering market.

Congratulations real estate market, you’re getting better just as we contract a lethal infection from European trash. It’s like recovering from illness, but contracting a dangerous disease just before your release from the hospital. All this good news about April is enthusing, but the latest data out of the Mortgage Bankers Association shows a slowing of mortgage application activity for home purchases in May, despite record low mortgage rates. Oh, Americans are benefiting from European strife by refinancing and lowering their debt costs, but they’re not buying homes according to the latest data from the MBA. Why do you suppose that is, if all is really hunky-dory? It’s the economy stupid!

I must have said it a million times over the last year, but Mr. Market is finally listening. America sells 20% of its exported goods into Europe, which just barely kept out of formal recession territory in the first quarter. Meanwhile, economic bifurcation has driven political fragmentation, which now threatens to break apart the euro-zone. The first effects of economic contagion have been felt from China to the United States, and our still vulnerable economy seems to be sniffling more and more. It’s precisely the wrong time to start a war, and yet, the pressure is intensifying upon one of the world’s most important suppliers of fuel, which also has the ability to disrupt an even more important spigot. Investors are selling stocks? Go figure!

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.

Real Estate or Stocks in 2012?

How does an investor assess risk? How does an investor identify potential problems with the stocks of the firms in one's portfolio? For instance, is there exposure to Greece, Spain, Ireland or Turkey? Will the company experience parts shortages from Japan or Myanmar? What are the currency implications of an appreciating or depreciating US Dollar on corporate profits? Can the record profits be repeated year after year, after year, to justify the P/E that reflects that same growth? Labor problems in China, union problems in Europe, and fluctuating transportation and commodity costs exasperate attempts at research. Most of these issues are outside of the average investor’s ability to foresee or control. Furthermore, the stock market's movements seem to be faster going down than going up; months of steady improvement can be destroyed in the matter of a few days, causing extreme angst.

Relative tickers: SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD) and Calamos Asset Management (Nasdaq: CLMS).

Real Estate or Stocks?

With the possibility of a global recession and a European depression, the prospects for stocks seem to be limited. Opinions range from a mild downturn to an economic collapse; however, there are very few forecasting an immediate return to global growth. The financial and social burden caused by debt is escalating as additional debt is used to service existing debt, compounding the problem. Tax revenue is being diverted from essential social services and fiscal incentives used to promote employment to totally non-productive interest payments. As more debt is added, the portion of the revenue collected and allocated to debt service is expanding exponentially.

The world’s governments are essentially borrowing at 0%, but when the repression of rates comes to an end, rates will rise to their true market level and the debt service will overwhelm the economies of the globe. Rates have been artificially lowered to force conservative cash into the economy in search of a riskier return, but eventually true market forces will prevail and the ensuing result will be explosive. Holders of Treasury Bonds have enjoyed extraordinary returns, receiving both interest payments and capital gains as rates have been driven down by the Federal Reserve's “Operation Twist”. Holders of Greek, Spanish, Portuguese, and Italian bonds felt very comfortable just a mere 24 months ago, but now things are radically different for them. Understandably, Treasury Bonds offer protection from a deflating environment, and while backed by the world's reserve currency their safety should be assured. The key word here is “should”. There exist two possibilities of which neither is pretty!

Currently, the 30-year Treasury Bond rate is 3%. The Federal Reserve has been pushing the rate down; a slight rise to 4% would significantly reduce the value of the bond. Should the rates rise to 5% or 6%, which is a more normal rate historically speaking, the ensuing capital loss could be as high as 50%. If inflation or even inflationary expectations started to brew, the losses could be staggering. Events across Europe could force weaker nations to seek “bankruptcy protection,” and default on their debt. Chaos would ensue, but eventually order would be restored and a pathway to recovery established.

The calamity of a default might be considered the lesser of two evils. Default and nine months of chaos may be preferable over 10 to 20 years of austerity. Should default become an acceptable option, then a cascade of nations, provinces, states, municipalities, localities, councils, and corporations could default. It is then not totally unthinkable that our great reserve currency might also default to preserve its integrity. As unthinkable as a global default might be, it is a possibility that needs to be considered, as it would allow for recovery.

Accompanying recovery would be inflation, as everything would be adjusting to new currency values and things would be in demand. Perhaps the rise of gold and silver over the last decade in an obviously deflating economy is forecasting turmoil in fiat currency and government obligations. Commodities would eventually recover: gas, oil, minerals, lumber, farms, food, water, shelter, etc., causing inflation and further pressuring debt instruments. The silver lining of a default would be the balancing of budgets worldwide with a path to recovery unveiled. This recession that has started in Europe is different from past downturns; it is not controlled by the Federal Reserve regulating rates and money supply. This is a potential cyclic event to correct global excesses.

Long-term treasuries still offer protection of capital in a very uncertain world. They still provide a small income stream to supplement other revenue sources. A portfolio of bonds needs to be risk managed and an “exit strategy” needs to be in place. Should the U.S. slide into recession, interest rates on 30-year bonds could slide even further producing capital gains. However, there will be a time to take profits and not look back. Another advantage of the repression of rates caused by the Federal Reserve is the opportunity to lock in long-term money and leverage cash flowing rentals.

Ironically, the Real Estate Market may be the asset class that preserves and grows wealth. Real estate as an asset class has been devastated and much of the risk of decline has been mitigated by the severe market correction of the past few years. Population pressure will eventually absorb all of the excess and pockets of shortages that are starting to appear most notably in my home market of Phoenix, AZ, one of the most affected markets in the nation. The strategy to employ would be to accumulate rentals in second and third move-up properties in discounted markets with good forward growth prospects, and use current low interest 30-year fixed rate mortgages finance them. The possibility of rising rates and/or market turmoil will curtail new construction and positively enhance the existing housing market. Furthermore, Cap Rates of 5-7% are available increasing to 8-10% cash on cash with use of a simple Fixed Rate Mortgage. This cash flow will be exceptionally important in any economic slowdown as rates will continue to compress and yield will become elusive.

A key component of a 5-year holding horizon is the inflation protection afforded by the “real” in real estate, as well as the growth in revenue potential as scarcities develop. The revenue stream may become of utmost importance as other traditional sources of revenue and paid benefits are curtailed or jeopardized: CD's, money markets, insurance guaranteed annuities funded by sovereign debt, state and municipal pensions may also be at risk if defaults occur. Cuts in Social Security and Medicare may be needed to reduce entitlement costs. Distressed properties discounted below replacement cost are still available, but financial institutes are working hard to clear the properties and take the losses this year. Any “underwater” residence or non-cash flowing investment property needs to be reviewed for liquidation via the “short sale” process while the market is still viable. Looking forward, costs are to be cut, debt is to be reduced, and reserves accumulated.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

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.

Consumers Signaling Recession

As retailers report earnings, some are doing well like TJX Companies (NYSE: TJX) and Wal-Mart (NYSE: WMT), while others are doing poorly, like J.C. Penney (NYSE: JCP) and Dollar Tree (Nasdaq: DLTR). Thus, it’s somewhat difficult to discern the shape of consumer spending from the mass of corporate reports. The U.S. economy is in better shape than it was a few years ago, and an improved consumer mood has tracked fading panic over the years. Yet, one tracker of the shopper mood is saying consumers are increasingly uncomfortable again, and all of a sudden. In fact, it could be signaling recession.

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.

Consumers Are Uncomfortable

As the European economy flirts with recession, having just reported flat GDP activity in Q1 after a contraction in Q4 2011, the decisions of Greek voters may be about to unravel the region. Thursday, the ramifications of that highly possible disaster were striking Spanish banks, which faced ratings downgrade by Moody’s (NYSE: MCO). But value destruction probably will not be limited to Europe, especially considering that 20% of American exports sell into the region. We noted an interesting expansion of the trade deficit with Europe earlier this month. We also noted signs of European infection of U.S. business sectors including manufacturing. The region seems to be impacting the global market, with Chinese data softening as well. Greek election chaos and European concerns have now reached the front page of the newspaper, and so American consumers are certainly aware and likely worried about it all.

Thus, it makes sense that the Bloomberg Consumer Comfort Index has dramatically retraced ground from its April 15 high point of minus 31.4. In just a short period of a month’s time, it has consistently deteriorated, reaching negative 43.6 in the just reported week ending May 13. Bloomberg and Langer Research Associates, which compiles the index, said the current mark reflects territory consistent with recessionary periods. So, the Bloomberg Consumer Comfort Index, which is a more regular measure than the Conference Board’s Consumer Confidence Index and the Reuters/University of Michigan Consumer Sentiment Index, may in fact be offering an early signal of recession.

The most recent reading of the Consumer Confidence Index was in April, measuring a period through April 12, and so wouldn’t reflect what we are seeing in the Consumer Comfort measure until it is reported again later in May. The Reuters/University of Michigan Consumer Sentiment Index, reported just last week, marked a four-year high in mid-May. Yet, this latest Consumer Comfort reading dropped to near a four-month low. It’s hard to say why the difference exists between the two indexes without an intimate understanding of the specifics of, and perhaps proprietary information about, the two metrics.

Consumer discretionary shares performed poorly Thursday on the news, with the Consumer Discretionary Select Sector SPDR (NYSE: XLY) down 2.6%. Retailer shares were also lower, with the SPDR S&P Retail (NYSE: XRT) down more than 3.5%. The shares of some retail store operators have taken a beating this week, including J.C. Penney (NYSE: JCP), which missed the Street’s EPS view badly. We recommended investors sell the shares of JCP on a company specific misstep though, not a broad reaching driver. JCP shares were down again Thursday, following a 20% slide Wednesday. Yet, Wal-Mart (NYSE: WMT) was up 4.2% on a strong EPS result, and TJX (NYSE: TJX) gained strongly earlier in the week on its report.

Company specific drivers serve to cloud the message perhaps presciently offered by the Consumer Comfort Index. However, the index was lower than its current point back in the fall of 2011, which was not a recessionary period. It’s my view that the same concern that struck at the hearts of consumers then is bothering them again today, and it is the unsettled state of global affairs. Of course, stubborn unemployment continues to weigh heavily and slowing domestic economic growth has raised new concerns. Still, the old trend of rising fuel prices has since turned, easing some of the pressure that existed then from consumers.

In my view, this Consumer Comfort Index is but one of many subtle signs of tough times coming. When they arrive, it may be late to hedge given the market’s tendency to lead. So consider yourself warned.

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.

Mortgage Refinancing Opportunity Born of Greek Strife

The troubles of Greece and Europe make for terrifying television indeed, and the horrible effects to real human life over there is difficult to bear. Yet, for many Americans, the effects to mortgage rates have been a Godsend. A flight to safety over the last week has driven U.S. Treasury demand, leading yields lower. As a result, mortgage rates have reached their lowest point in the history of the Mortgage Bankers Association (MBA) Weekly Application Survey. The MBA is already reporting a response in refinancing activity, which stands to benefit aggressive bankers, while lowering the cost of living for many Americans.

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 include Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Fannie Mae (OTC: FNMA.OB), Freddie Mac (OTC: FMCC.OB), U.S. Bancorp (NYSE: USB), PHH Corp. (NYSE: PHH), Flagstar (NYSE: FBC) and BB&T (NYSE: BBT).

Americans Find Mortgage Refinancing Opportunity

In the week ending May 11, 2011, the MBA’s Market Composite Index of mortgage application volume increased 9.2% on a seasonally adjusted basis. Behind the rise was a 13% drive higher in refinancing activity, as mortgage rates dipped into record territory across the spectrum of loan types.

Each loan type marked record territory and saw effective rate decrease, except for FHA sponsored loans, which saw an effective rate rise. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.96 percent, from 4.01 percent. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.20 percent, from 4.29 percent. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.75 percent, from 3.81 percent. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.26 percent, from 3.29 percent.

Over the last six months, mortgage refinancing has increased by 50% on the Home Affordable Refinance Program (HARP), driven by Fannie Mae (OTC: FNMA.OB) and Freddie Mac (OTC: FMCC.OB). The program was designed to assist homeowners in refinancing their mortgages even if they owe more money than the home’s current value. Something like a third of all refinancing applications have been HARP driven lately. However, over the last week, the MBA reports the HARP share of refinances fell to 28%, from 30%, as conventional refinancing increased 14% on the week versus the 4% increase of HARP driven activity. This is the direct result of the drop in mortgage rates.

The nation’s most important mortgage originators in 2011 ranked Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), Ally, PHH Corp. (NYSE: PHH), U.S. Bancorp (NYSE: USB), Quicken, Flagstar Bancorp (NYSE: FBC) and BB&T (NYSE: BBT). Perhaps helped by today’s MBA news, the shares of the top four were up between 1% and 2%.

Still, purchase activity, or mortgage applications filed for the purchase of a home, decreased 4.2% on a seasonally adjusted basis last week. While refinancing is booming, the housing market remains sickly, and I just suggested homebuilder shareholders take profits on Tuesday’s builder confidence inspired climb higher for stocks including Toll Brothers, Ryland Group and others.

While it’s a shame that the driver of the day’s helpful mortgage activity is the direct result of the strife of others overseas, Americans might help themselves now by lowering their cost of living. Considering the economic situation I see developing, it’s all the more a good idea.

Editor's Note: Article should interest investors in 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), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

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.

European Disease Infecting U.S. Manufacturing

The latest Empire State Manufacturing Survey, produced by the Federal Reserve Bank of New York, indicates a pickup in May manufacturing activity on the surface. Closer inspection always adds color, and in this case, we believe reflects growing concern about the outlook. It also shows a bifurcation developing within the sector, as mixed messages are delivered about the trend of business. We believe the report intimates infection from European markets reaching relative U.S. exporters. Given the data we’ve reported on around the industrial sector and manufacturing and international trade, and based on what we see developing globally, we view the headline improvement as just a blip in a trending dip.

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 include the SPDR Dow Jones Industrial Average (NYSE: DIA), Industrial Select Sector SPDR (NYSE: XLI), BHP Billiton (NYSE: BHP), Vale S.A. (NYSE: VALE), Alcoa (NYSE: AA), General Electric (NYSE: GE), Caterpillar (NYSE: CAT), United Technologies (NYSE: UTX) and UPS (NYSE: UPS).

Europe Infecting U.S.

The market celebrated Tuesday morning’s early release of the Empire State Manufacturing Survey because of the headline index increase. The SPDR Dow Jones Industrial Average (NYSE: DIA) rose to start the day, before other considerations (read Greece) weighed. The Industrial Select Sector SPDR (NYSE: XLI) traded choppy, though higher. Major industrial names including General Electric (NYSE: GE), Caterpillar (NYSE: CAT), UPS (NYSE: UPS) and United Technologies (NYSE: UTX) were each convincingly in the green. The NY Fed’s measure of area business showed its General Business Conditions Index gained to a mark of 17.09, up from 6.56 in April. Bloomberg’s survey of economists pegged the increase at a lesser level of 10.0 based on past performance and other indicators that reflected an uncertain direction.

The sub-index measuring new orders, which is a tangible indicator of how the business environment might be developing, inched higher to 8.3, from 6.5 in April. Shipments, however, were significantly higher, with the component measure rising to 24.1, from 6.4. Price increase has been contributing to gains here and likely continued to do so in May. That said, the indexes measuring both prices paid and received showed some moderation of the increases.

While the data showed overall gain, closer inspection shed light on a sort of bifurcated manufacturing environment. Something is developing, as the gain hid the fact that while many businesses reported improved activity, there was a similar increase in the number of manufacturers reporting less business activity. Even as 40.5% of those surveyed reported better business conditions, a gain over April’s 27.9%, 23.4% reported deteriorated business, versus 21.3% in April. Worse yet, 31.6% of those surveyed saw decreased new ordering activity, versus the 22.7% that said the same in April. That contrasted with the May gain in those who saw improved new ordering, where 39.9% saw improvement versus the 29.2% that said so in April.

The weird changes were fueled by decreasing numbers of managers reporting no change. The divergence of data may be reflective of specific markets served by manufacturers. Perhaps those serving Europe to a greater extent are now seeing decreased business. The latest International Trade Report reflected a wider trade deficit between the U.S. and Europe, which we intimated could be due to decreased European demand for U.S. goods and services. Of course, we now know that Spain is in recession as Greece falls into depression. Trouble seems to be spreading as an ill-timed austerity movement is implemented too aggressively across the euro region.

The NY Fed’s report also showed a perception among manufacturing managers that business conditions might deteriorate over the next six months. The forward looking indicators for General Business Conditions, New Orders, Shipments and Employment all decreased in value. Also, expectations for capital expenditures and technology spending declined. This all portends trouble, as the expert ear on the rail is feeling a bad vibe coming. Ironically, given the expected business slowdown, price increases are seen by manufacturing managers. I see inflation coming too, but I believe it will be selective and dynamic, and will follow nearer term deflation in industrial commodity prices. As a result, I’m not a fan of names like BHP Billiton (NYSE: BHP), Alcoa (NYSE: AA) and Vale S.A. (NYSE: VALE) over the short-term, though I believe scarcity, global demand and a breakdown of global trade, combined with fiat currency devaluation, will eventually drive the price of all materials and goods much higher.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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.

Look Beyond Today’s Jobless Claims

Weekly Jobless Claims for the week ending May 5, 2012 hung around the same territory, as we wait for the next economic inflection point. The media offers promotional headlines to get you to read the story, and so today’s most popular theme seems to be that better claims have eased concern on labor. What’s true is that the last two weeks have been better. What’s troubling is that there’s no vision in these articles for the ramifications of what is developing in Europe and China.

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 include: 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)

Jobless Claims

The latest Weekly Jobless Claims Report showed a decrease of 1,000 new benefits filers to 367K, though that’s off a prior week figure that was revised higher by 3,000, to 368K. It’s mixed news that basically offers the same truth; not much changed last week.

The trend of the last four weeks is a more useful metric for vision into what’s developing in labor in most instances. It would be less important than the weekly figure should war break out in the Middle East, or looking back at history, when events like the attacks on the World Trade Center occurred. In today’s dynamic, though gradually changing environment, we can look to the moving average for guidance. What we see is that it’s down 5,250, reaching 379K in the latest reporting period. We should note that through the four-week period, it swung higher and then retrenched. Before that, the claims count had been trending lower to a sticking point approaching 350K.

The problem with claims is that it is a lagging indicator, though a current data point. We get a good look at what’s happening in real time, but it doesn’t mean much. For this reason, we have to look ahead to what may drive the trend to come. For that reason, I say, we’re waiting on the next inflection point. What seems to be developing is a gradual creep toward recession, with deterioration happening in slow motion.

Yet, as Europe deteriorates, China is likewise offering signs of slowing economic growth. Just today, China reported weaker than expected trade growth. This is but one of many recent data points souring for the emerging nation. This all plays back to America, because we serve and participate in those markets in a big way. They have offered support in our times of distress, and they have offered means of growth as our markets have matured. The deterioration has led me to suggest industrials and other multinationals might suffer looking forward. I even believe the high-flying growth offered to our best brands might come under pressure as these markets correct. This is why I said recently that I would not buy Starbucks (Nasdaq: SBUX), a market favorite high growth multinational play. Starbucks recently showed softness in its European market, and even McDonald’s (NYSE: MCD) just offered some concerning news about global conditions as it missed the Street’s April sales expectations.

Remember that with this weekly jobless claims data point, looking forward is the key. We can garner some information from the moving average and even the weekly count, but it’s what will happen that matters to stocks, which look ahead.

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.

The Solution for Greece, Europe & the Global Economy

From the source that told you European change still threatened stocks the day of the confounding market rally on the election results in Greece and France, today I am advising that the next move may be higher. What’s killing stocks these last few days is the wild speak coming from the Greek Syriza Party, which is currently attempting to form a government. What may save stocks, probably only temporarily, will be the inability of Greece’s Radical Left Coalition to form a government, which means the Greeks will get a second chance at deciding their fate in June. Where that leads should be at least clearer, though the direction could be either.

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 include: Global X FTSE Greece 20 ETF (NYSE: GREK), SPDR S&P 500 (NYSE: SPY), 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).

Solution for Greece

Also, the ramifications of the Greek decision might not be as clear, traumatic or destructive as people, pundits and even economists describe. For instance, if the euro-zone were to fail completely, which is not as unlikely as the entrenched make it to seem, Greece’s early exit might prove helpful. On the other hand, a fascist state and/or weak leadership would find difficulty navigating the global economic environment. You see, nothing is perfectly black or white in this world, however we may attempt to simplify, and everything can be colored. Furthermore, the best solution for Greece, Europe and the global market should offer wise economic strengthening combined with sensible budget management, or the gray in between today’s two arguments.

Some might say that the premature celebration of Syriza’s Alexis Tsipras has done more to terrify global markets and perhaps even the Greeks who voted for him than to bring positive change so far. The sum I speak of would include PASOK and New Democracy leadership, who will now surely employ fear tactics to retrieve votes lost in the first election. Greece’s citizens have only to look at their stock market, with the Athens Stock Exchange General Index collapsed over the two days following the anomalous trade immediately after the election. The Global X FTSE Greece 20 ETF (NYSE: GREK) is down 13% from May 4th. The iShares S&P Europe 350 Index (NYSE: IEV), down another 1.5% into midday Wednesday, has been edging down on the omens of election polls for weeks. Though, Europe’s slipping into broad-reaching recession has certainly played a role in that.

While a secondary victory for the establishment might ease market concerns, it’s certainly not a given. On the other end of the spectrum, the disgruntled and disgusted Greek people may line up behind Syriza now. If the many tentacled monster of Greek dissatisfaction were to more perfectly unify, then it is possible Syriza could win the majority. In that case, with the extra 50 seats in Parliament given for the win and the assistance of other parties, it might also form a government. The result of that is clear, based on the emboldened braggadocio of Tsipras. He has stated he will tear up standing agreements with the troika, whose response has also clearly been laid out. It would be the end of the relationship between Greece and Europe, or at least the euro-zone. Greece would default on its debt and return to the drachma.

In my view, and reiterating yet again, neither of the two extremes needs be the fate of Greece. If the global community which makes up the IMF, and the European Union, intend for Greece’s realistic revival, they would set simpler terms for Greece to payback its debt. An extension of the timeline to payback would allow Greece to more gradually implement sensible austerity measures while also finding creative growth solutions. Instead, Greeks have had deep destructive austerity shoved down their throats. The economic feedback would not be harsh my way, and upheaval in Greece would die down. Its tourism industry would recover, and its economy would find its way toward expansion. With that result, Spain, Italy and Portugal would gain time to restore their own fiscal soundness, and the euro-zone likewise should solidify. Perhaps, then, the SPDR S&P 500 (NYSE: SPY), the SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ) might be in the green instead of red like they were Wednesday.

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.

Why Stocks Celebrated Disruptive European Elections

Based on the action of stocks Monday, it would seem investors favor the possibility that Europe might finally be rid of Greece. Or it may be that investors have seen the light, and have finally realized that the age of austerity was a dark one. Or, perhaps change of any sort would have been celebrated by a distressed market.

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.

Relevant tickers: NYSE: SPY, Nasdaq: QQQ, NYSE: GREK, OTC: HLTOY.PK, NYSE: IEV, NYSE: VGK, NYSE: EWG, NYSE: IEV, NYSE: EWQ, 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.

It's a Celebration?

European shares were mostly higher Monday, even after Greeks unseated their socialist rulers, PASOK, the ushers of austerity. So it would seem that more than their fear of a break down in confidence in the EU (that might drive Spanish and Italian bond yields higher), investors maybe worry about keeping a lumbering Greece within the group. But with France electing a socialist, who seems intent on leveling the playing field between the rich and poor, and who does not favor austerity, it would seem maybe something more important is afoot.

Bucking the trend, the Global X FTSE Greece 20 ETF (NYSE: GREK), Hellenic Telecommunications (OTC: HLTOY.PK) and Greek shares generally tumbled, as neither did the New Democracy party gain clear control. The result was likely due to the new democrats’ role in the current catastrophe. Instead, the Radical Left Coalition, or Syriza, finished second in Parliamentary voting. Anti-austerity parties, including even an anti-immigration organization, won seats at the cost of the mainstream, as Greeks expressed their frustration with austerity clearly.

But why are European shares higher, given that Greece could theoretically now reject the austerity prerequisites of European and IMF aid. The Vanguard MSCI Europe ETF (NYSE: VGK) rose 1% Monday, and the iShares S&P Europe 350 (NYSE: IEV) was up 0.8%. The iShares MSCI Germany Index (NYSE: EWG) gained 0.5% and Deutsche Bank (NYSE: DB) rose 1.6%. The popular view seems to be that Francois Hollande, the new French leader, might listen to the reason of German Chancellor Angela Merkel and others now that the election is over. However, I say there is more to it than that.

I think the market has spoken in its efficient and infinite wisdom, and what it is saying is that the age of austerity is over and good riddance to it. The French CAC 40 Index gained 1.65% and the iShares MSCI France Index (NYSE: EWQ) added 1.3% to its stature. American investors were confused, with the SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) erasing initial losses. Maybe it’s just hope that’s selling to investors these days; perhaps change of any sort would be celebrated by a desperate market. In that case, when the high wears off and investors find not much has changed with regard to the lagging economy, stubborn unemployment and burdensome debt load, and on top of that, pressure builds on other nations on the fringe, the celebration should prove short-lived.

It could take time for prospective growth initiatives to have effect, so patience may wear thin. However, shifting the burden from the poor to the rich could be just a vote away for the French and the Greeks. That is precisely why there’s talk today of a potential run of money, with its destination divided, but its origination now decided. Money has been leaving Greece for some time now though, given the duration of its crisis. For France, it’s a new phenomenon. For Europe, it could be the way of the future, and for the United States, it could be a trend that catches on.

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Europe’s Election Chaos Could Murder Stocks

The result of Sunday’s elections should spell doomsday for Europe and the stock market too, given what is playing out in Greece. Before the voting began, the polls showed Greece’s two mainstream political parties PASOK and New Democracy could garner just 38% of Parliament combined. With 60+% of the vote counted, the two had fewer than 35% of the votes in total. It appears there will not be enough votes to form a proper coalition, given the distance between the two mainstream parties and the protest vote winners on the fringe.

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.

European Election Fallout

We discussed the Political Risk that is entering the frame for Europe in an article published on April 23rd, and this risk has definitely played a role in the unsettled state of the stock market over the last month. In fact, last week was the worst so far this year for stocks, though the disappointing monthly Employment Situation Report gets the blame for that, with a second straight month of soft job creation noted.

Now, don’t get me wrong, because I’m no fan of austerity implemented during times of economic recession, and I have argued vehemently against today’s popular wisdom in Europe from the start. That’s because it seems too many folks have forgotten that it was precisely this type of activity that turned a mild recession into the Great Depression for the United States. Ben Bernanke knows it very well, but he is also served well by keeping quiet, since his expansionary efforts for the U.S. would have had more detrimental impact to the dollar if not for the hobbled euro, not to mention the tragic earthquake that struck Japan. Conspiracy theorists might also look toward the rating agencies, especially Standard & Poor’s (NYSE: MHP), which seemed to turn up the heat on Europe at a conspicuous moment for the dollar.

The results of the election should ferry in friction for the European master plan. I’m speaking of the drastic change the Germans have engineered for Greece, modeling it after its own image, so that it might receive aid to emerge from the debt it is buried under. It’s too bad though that the powers that be did not factor in the opinion of the Greeks who have been forced to swallow a swift disruptive change to their lifestyle, and all because of the poor management of their government.

Greek private sector debt was relatively small, and yet the Greek people are being asked to pay. Granted, the Greek government’s budget math would have Archimedes turning over in his grave, but some of the austerity measures being forced down Greece’s throat make little sense for an economy under threat of recession. Extending the retirement age was one thing, but firing thousands of public sector workers was mistimed and too immediate in its implementation.

The good thing about democracy is that it allows for the regular evaluation of government actions, and given Greece’s desperate acceptance of every EU command, the government will now be overhauled. What this means is that perhaps a radical voice will eventually emerge from Syntagma Square offering courageous (some would say ignorant) disagreement. With the way things have developed economically speaking, the voice will carry credence as well, and possibly shape a better way for Greece. God willing, it will not leave it outside of the euro zone, but that worst nightmare has a good chance of proving true. For now, not much of anything will get done, given the disjointed polls.

The stock market will reflect this chaotic circumstance Monday, with Asian shares starting the slide already. As of late evening Sunday in the Eastern Time zone, the NIKKEI 225 was lower 2.6% and the MSCI Asia Apex 50 was off 2.4%. European shares seemed sure to follow as I scribbled late Sunday night. They certainly showed signs of it last week, when the SPDR STOXX Europe 50 (NYSE: FEU) sank 1.5% Friday. The Global X FTSE Greece 20 ETF (NYSE: GREK) gained 1.2%, but it should soon trade in its charge for change in for panic too. In France, where Francois Hollande was celebrating victory and declaring the end of austerity, the iShares MSCI France Index (NYSE: EWQ) might offer a similar decline to its 1.6% Friday fall. Unless, that is, investors believe Europe will stick together, but at the same time look towards the sort of creative growth initiatives I’ve been calling for from the start.

I anticipate a deep and dark red day Monday for U.S. investors as well without a certain reassurance from Germany. The American stock market tends to shy away from uncertainty, let alone chaos, sort of like the 1.4% decline in the Dow Jones Industrial Average implied last week (SPDR Dow Industrials (NYSE: DIA) down 1.3%). Given that the probability of a Greek default has suddenly increased for those wearing blinders, and that the European plan could fall apart as swiftly as life in Greece has, you can bet on increased volatility in equities and a favoring of sell orders over the near-term. I reiterate, this should play out unless Europe can keep the funds flowing while easing on austerity. This will be the key, and we’ll look to Germany to see if a door is opened.

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