INTERNATIONAL MARKETS: A Trojan Horse for Europe & Asia

International markets are trading on 3 key factors and several other points today. Turkey continues to weigh heavily, though after the Turkish central bank action and aggressive wording, it is lifting its neighbors to the west today. U.S. Fed action from Wednesday drove all markets lower to start Thursday, but then a strong American GDP data point lifted them back up. Direct measures of economic activity out of Spain and Germany are reflecting well for Europe today, save the black market notation. Two key markets are closed in Asia on the Lunar New Year. That Year of the Horse their ushering in might be an appropriate yet disappointing one, should that horse be a Turkish Trojan version.

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.

International Markets

EUROPE	9:54 AM ET	ASIA/PACIFIC	CLOSE
EURO STOXX 50	+0.4%	NIKKEI 225	-2.5%
FTSE 100	-0.1%	Hang Seng	-0.5%
CAC 40	+0.4%	S&P/ASX 200	-0.8%
German DAX	+0.2%	Korean KOSPI	NA
Athens ASE	+3.7%	BSE India SENSEX	-0.7%

ASIA Today

Markets are closed today in China and Korea for the celebration of the Lunar New Year – The Year of the Horse. Markets will be shut until February 7 in China and until the end of the week in South Korea for the celebration.

ASIAN MARKET ETFs	Today
iShares MSCI Japan (NYSE: EWJ)	-0.34%
SPDR S&P China (NYSE: GXC)	+0.91%
iShares MSCI Australia (NYSE: EWA)	+1.35%
iShares MSCI S. Korea (NYSE: EWY)	+0.97%
iShares S&P India (Nasdaq: INDY)	+1.91%

Asian stocks mostly fell on the day after the U.S. Federal Reserve pushed forward with its asset purchase tapering effort. Global investors are worried that the U.S. consumption economy could falter without the Fed’s extra efforts, after previous signs of such faltering. Basically, Asia just followed the lead of American shares, which dropped precipitously on Wednesday. Even as Asia develops its economies, U.S. and Europe continue to represent important sources of life for Asian business. Emerging markets have been in turmoil since the weak manufacturing report from China, which remains unsettling and unresolved.

The NIKKEI 225 was stripped bare as it fell 2.5% on the day. Japan is having its worst month in nearly two years. Shares of Toyota (NYSE: TM) and Honda (NYSE: HMC) are down about 0.3% each this morning in U.S. trading. However, American traded ETFs are up for most of Asia this morning, reflecting what is likely to occur in Asian trade Friday. The SPDR S&P 500 (NYSE: SPY) is bouncing back today on a solid GDP report and on strong earnings from Facebook (NYSE: FB) and others.

EUROPE Today

Look at those volatile Greek shares, as the Global X FTSE (NYSE: GREK) soars 2.8% after a very rough recent period. Greece is of course Turkey’s neighbor and deemed more closely tied to the Turkish economic turmoil than other euro-trash brothers. The Athens Stock Market Index (ASE) is higher by 3.7% at this hour, but the other indexes we follow here are relatively unchanged.

EUROPEAN ETFs	Today
Vanguard FTSE Europe (NYSE: VGK)	+0.04%
iShares MSCI U.K. (NYSE: EWU)	+0.12%
iShares MSCI France (NYSE: EWQ)	-0.07%
iShares MSCI Germany (NYSE: EWG)	+0.18%
Global X FTSE Greece (NYSE: GREK)	+2.79%

Still, European ETFs started the U.S. trading day much higher than they are trading at this hour, as the Vanguard FTSE Europe ETF (NYSE: VGK) chart shows. If we looked back before the U.S. market open and the good news about GDP, though, we would find a hump at around 8:30 AM ET. Europe started the day lower, similarly following the path of Asian shares on the U.S. Fed decision and American stock decline yesterday.

Chart at Yahoo Finance

Europe is still unnerved by Turkish and other emerging market issues. Turkey’s Borsa Istanbul 100 Index marked a 1.0% gain on the day, and the iShares MSCI Turkey (NYSE: TUR) is up 2.3% in U.S. trading after the Turkish central bank acted aggressively.

Spanish & German Data

In other news, Spain’s GDP grew 0.3% in the fourth quarter, as expected, but some estimates show the Spanish economy is growing faster in the shadows. The black market is now estimated to be roughly 25% of total economic activity, as distrust of government and distaste of taxes results from tough times. The iShares MSCI Spain (NYSE: EWP) was up 0.9% near noon in US trading.

German unemployment declined more than forecast in January. The number of unemployed declined by 28K in January, better than the 5K predicted, to 2.93 million. The unemployment rate stuck at 6.8% after adjustment to the December rate, where it marks the lowest rate in two decades. Shares of major German corporation, Siemens (NYSE: SI), were still down by 0.8% on the day.

The Year of the Horse is here. Let’s hope it doesn’t open and offer up a sour surprise.

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.

Spain's Recession Killing the Bull

Spanish data is driving the euro region lower this morning, with all major indexes down on the day. U.S. futures started lower on the news as well. Spain’s GDP contracted by 0.4% in the second quarter, in line with a previous forecast but down from the first quarter’s drop of 0.3%. Expanded spending cuts on painful austerity cut into Spanish consumer spending, leading to a widened budget deficit. Yet, Spanish bond yield’s touched a three-month low at auction today. Bond yields are down more than 130 basis points since late July on the 10-year bond benchmark. Still, the IBEX 35 was down a half point when measured here this morning. Still, the iShares MSCI Spain Index Fund (EWP) seems to be finding some footing, as more aid for the peripherals of the EU seems to be on the way. Spain’s Prime Minister Mariano Rajoy is scheduled to meet with EU President Herman Van Rompuy today to discuss just that.


Chart from Yahoo Finance

The Spanish recession is certainly not being remedied by austerity today, as consumer spending declined 1.0% in the second quarter. A Deputy Economic Minister called the current state of Spain’s economic cycle, the “moment of steepest fall”, and said it would continue into the second half of the year. Spain’s big hope is that the European Central Bank (ECB) might buy its bonds to help lower its borrowing costs. In a new bond offering today, Spain managed to raise more funds than expected. Unfortunately, there’s little confidence being expressed by Spaniards, with private sector deposits at Spanish banks down 4.7% in July.

International Markets

EUROPE	ASIA
EURO STOXX 50: -0.6%	S&P/ASX 200: +0.4%
DAX: -0.5%	Nikkei 225: -0.6%
CAC 40: -0.7%	Hang Seng: +0.1%
FTSE 100: -0.2%	Shanghai Shenzhen CSI 300: +0.5%
IBEX 35: -0.5%	India’s BSE Sensex 30: -0.3%

Prices measured at 7:45 AM EDT

Separately, French officials announced a gasoline price reduction of approximately six euro cents per liter, as a campaign promise of President Francois Hollande is fulfilled. The CAC 40 decline of 0.7% was leading the region lower, despite the move. The iShares MSCI France Index (EWQ) has risen recently as France has gained with most markets, but it’s vulnerable today.

The euro rose Tuesday against the dollar on that same ECB hope. Mario Draghi will speak in Jackson Hole this weekend, following Ben Bernanke’s highly heralded speech scheduled for Friday morning. The PowerShares DB US Dollar Index Bearish (UDN) looks to benefit this morning, as the PowerShares DB US Dollar Index Bullish (UUP) is down in early trade. The euro rose 0.4% this morning to $1.2547. The euro is likely to face a test after its recent rally, especially if Mario Draghi can only offer more talk without follow through, as I expect this weekend. However, before long, I also expect the ECB to buy hard-pressed euro nation bonds; investors are keeping that in mind as well.

The shares of major European banks face a test today, but action should be kept in check by the pending discussion from Jackson Hole. Banco Santander S.A. (SAN) is lower 1% in early trading today on the poor Spanish data, and faces a tough go today. Shares of Citigroup (C) are down fractionally and Deutsche Bank (DB) should neither find support. Europe weighs on U.S. stocks today, and has the SPDR S&P 500 down fractionally in early going.

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.

Central Bankers are Horrible at Shock and Awe

The SPDR S&P 500 (NYSE: SPY) is lower by nearly a half point, as the market cares more today about what caused three major international central banks to take action than about the actions they took. That’s because central bankers are horrible at shock and awe tactics.

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.

The European Central Bank (ECB), Bank of England (NYSE: BOE) and China’s central bank each took substantial steps to support their respective economies Thursday. The ECB cut its key rate by a quarter-point, yet the Euro STOXX 50 is down 1.6% at the hour of scribbling here, while the Vanguard MSCI Europe ETF (NYSE: VGK) is down 2%. The BOE expanded its quantitative easing program, yet the FTSE 100 Index is down fractionally, while the iShares MSCI United Kingdom Index (NYSE: EWU) is down nearly a point. China surprised the market with its own rate cut announcement, yet the iShares FTSE China 25 Index Fund (NYSE: FXI) is in the red. So what gives?

The day brought attention to the depths of the deterioration in Europe, as key bankers tend to support their decisions with explanatory discussion. Only in this case, the market might have been better served by some discretion. Instead, the market is hearing about how Germany, the keystone of the euro-zone economy, is showing signs of breaking. The German DAX offers good evidence of that concern, as it drifts 0.9%. Panic seems to be striking in fact, with Germany’s Deutsche Bank (NYSE: DB) collapsing 4.5% at this hour. Of course, Lloyd’s Banking Group (NYSE: LYG) is not doing much better, down 4.1%.

Once Mario Draghi, the ECB chief, finished speaking, Italian and Spanish bond yields spiked. Spanish 10-year bond yields climbed 41 basis points, to 6.81 percent. Italian bond yields rose 21 basis points to 5.97%. Both approached levels seen just before the EU summit breakthrough. Apparently, investors had also built in hopes of a bolder ECB action, a surprise result of the summit.

Instead, investors are worried today about what insiders might know about key global economies in the U.K., E.U. and China. The seemingly coordinated action only heightened fear by raising concern about the critical economies of the world, ex-US. American banks bearing risk are down in sympathy today as well, with Citigroup (NYSE: C) off 3%, J.P. Morgan Chase (NYSE: JPM) off 3.6%, Morgan Stanley down 2.7% and Goldman Sachs (NYSE: GS) sliding 2.2%.

Article is relevant to Banco Santander (NYSE: STD), ITA (Nasdaq: ITUB), UBS (NYSE: UBS), Westpac Banking (NYSE: WBK), 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).

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.

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.

Interpreting the International Trade Report

The International Trade Report for the month of March showed an enthusing trade deficit expansion of $6.4 billion, as it widened to $51.8 billion. Economists surveyed by Bloomberg had forecast expansion to a lesser $49.5 billion at the consensus. We think the news was an important driver for stocks Thursday, killing a six day slide, but just barely. Through this report, we attempted to determine whether the trade data was truly the ace it seemed to be. In our study and after accounting for several important catalysts, we found it to be less enthusing than the market’s initial reaction might imply. This may be why stocks retraced ground Thursday into the close.

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 Industrial Select Sector SPDR ETF (NYSE: XLI), Caterpillar (NYSE: CAT), Boeing (NYSE: BA), General Motors (NYSE: GM), Ford (NYSE: F), SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA), Starbucks (Nasdaq: SBUX), McDonald's (NYSE: MCD) and Yum Brands (NYSE: YUM).

International Trade Report

The good news implied in the expansion of the trade deficit may be counterintuitive, but I believe it continues to apply today. It is two-fold. When America’s economy was most healthy over the last decade, the trade deficit was wide and expanding. Of course, America’s leaders have engaged China over the last few decades for two reasons. The first was for American companies to find cost savings in manufacturing overseas. This widened profit margins for American companies while offering our consumers lower prices for goods. The impact to our labor markets and the tendency for China to bend the rules of fair trade has cost us though.

The second hope was for American companies to find opportunity to participate in the development of the bursting populations of the Far East. Clearly, the hope is that trade will work to our benefit over the long run as well as it has up until now, depending on China’s willingness to play fairly. If it all goes according to plan, Chinese demand would support the growth of American companies and eventually drive a trade surplus with the nation. While I have my doubts about that, today, the widening trade gap still reflects a healthy situation in my view. Over the long run, I anticipate China will simply steal American intellectual property and know-how and advance its own home grown versions of our companies and products, so that the projected benefits will prove overstated. I’ll talk more about the trouble I see with China in a future article.

Another positive sign of the trade data (on the surface) was that the report showed that both imports and exports increased on a monthly basis. It’s good news, reflecting a growing global economy in March, but there’s a fly in the ointment we discuss further along here. On a year-over-year basis, the deficit expanded by $5.8 billion, with exports up 7.3% or $12.8 billion, and imports higher by 8.4% or $18.5 billion.

Exports increased 2.9% in March, or by $5.3 billion. This seems like fabulous news given 20% of American exports are sold into Europe, or have been historically. Unfortunately, closer inspection shows the goods deficit with Europe expanded to $9.8 billion in March, from $5.9 billion in February. This is probably due to a decline in exports sold into the struggling region, but might also be partly driven by increased imports into America. Of course, dynamic currency markets are playing a role as well.

Given the importance of China, the increase of the trade deficit to $21.7 billion in March, from $19.4 billion in February, seems enthusing. It’s probably being driven by more demand for Chinese made goods here at home. It may also be driven by lower exports into China, but given the latest expansions of General Motors (NYSE: GM) and Ford (NYSE: F) in China, that seems less likely. Also, despite the recently slowing of economic growth in the important developing nation, recent data from Starbucks (Nasdaq: SBUX), McDonald’s (NYSE: MCD), Yum Brands (NYSE: YUM) and others continues to show increasing demand for American goods and services. And China has taken steps to spur growth, including opening up to more foreign investment, which not coincidentally, has sparked a rally in many of China’s small and microcap names.

The market also found it enthusing that American imports increased by 5.2%, or $11.7 billion. With the microscope on the globally tied American economy and on consumer spending under today’s unique unemployment situation, we found reassurance in the growth of imports. Growth was attributed to capital goods, consumer goods, industrial supplies and materials, and automotive vehicles, parts and engines. We have to agree that those would be the best places to find increased activity.

That aforementioned fly in the ointment could be found in this report and through the study of a second report. The trade deficit with OPEC expanded by $2.7 billion to reach $9.1 billion. This was obviously being driven by price increase in petroleum and imported distillates. In fact, higher fuel prices skewed the growth of both factors in international trade. Import and export prices were reported the same day as the international trade data, as always, but for April. If we want to compare apples to apples, we have to dig up the March data. Unfortunately, it shows that March saw steep increases in both import and export prices. Therefore, fuel prices contributed to both sides of the trade scale, but especially to import growth, which we hoped to attribute American economic demand to. I suspect that this realization helped to quell some of the day’s enthusiasm Thursday, and the realization that the jobless claims data was not as exciting as the headlines portrayed.

The shares of the most likely benefactors of the data were mixed to modestly higher, before fading into the close Thursday. Much of the export growth was attributed to industrial goods and supplies, but the Industrial Select Sector SPDR ETF (NYSE: XLI) ended only fractionally higher. Shares of major industrials like Caterpillar (NYSE: CAT), Boeing (NYSE: BA) (see my report) and General Motors (NYSE: GM) all closed in the red, as they also contended with soft Chinese trade data published the same day.

As time passes, the suspect positives from this report will lose their impact, and the market will continue to look forward to new data points for insight into what is developing in trade. My outlook is modestly negative, with a view for the cliff’s edge that we should reach soon enough, given the disruption driven by Europe and potentially Iran this year.

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), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), 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.

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.

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.

A Plea for Greece, Europe and Us All

In April 2010 I authored a concerned and prescient plea entitled, Greece News & My Disgust, within which I penned such wisdom as: "The current plan inspired by Greece's big brothers is not feasible. It will only open up black markets, torch the streets of Athens and lead more Greek wealth to leave the country." My prediction did not end there unfortunately, and I hope it is never fulfilled, because I said, "It will only usher in a radical government to replace the current."

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: 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.

A Plea for Greece

The rating agencies are correct about Greece. The nation of my forefathers will default on its debts, despite all the latest efforts of the Greek government and the EU. It’s a shame that a bleak end seems inevitable for Greece, given the great sacrifices of the Greek people. Yet, it’s only inevitable because of the blind, bullheaded nature of thinking leading governments today, including in Greece and across Europe. I’ll be offering several creative ideas for legislators that should be digestible to most of them, yet will likely be ruled out because of their out-of-the-box nature, and due to the hard work that would be involved in implementing them. It’s much easier to sign on to pay and pension cuts, until the people will have no more of it, at which point pain is returned to sender, and perhaps earned due to disconnection and ignorance.

Fitch downgraded Greece last week to a level predicting default and S&P cut the Greek Republic this week to a mark indicating “select default”. The rating agency actions were despite the Greek government’s efforts to reduce the country’s debt burden and to cover its current principal and interest payments via troika payout. Greece took the strides necessary for it to assure it could survive through its latest deadlines, but that will not be enough in the end, because they are also undermining themselves with increasingly deeper austerity. Greece will effectively force its private debt holders to swallow a deep cut in the value of their loans through legislation. That move in itself is indicative of default, but remained an option for the already understood to be unreliable sovereign debtor.

When they naively promised not to issue any new austerity measures last year, government representatives Venizelos and Papademos showed a lack of economic foresight that matched poorly against the technocrat label of the latter. That said, judging by the poor excuses passing for economic plans prevailing across the spectrum of decision makers today, the two have plenty of company in poor judgment. Venizelos simply accepts the prevailing option offered up by the majority of intermingled and politically corrupted economic minds, but Papademos should know better.

Our leaders, globally, look to me increasingly like blind mice traversing through a field of big cats. Yet, I fear an overhaul of them would only usher in more ignorant minds with more dangerous courage. For some sad reason, the European actors in the Greek tragedy were surprised when they bumped into revised lower Greek economic activity which left debt levels short of agreed upon watermarks for aid delivery. In Mid-February, fourth quarter GDP fell short of expectations, cut to a level indicating contraction of 7.0% in Greece, down from 5.0% contraction in Q3.

A surprise to the blind rodents, the decimation of the Greek economy was of course exacerbated by austerity, which was something that I warned my followers would happen from day one. Perhaps the captains on the hollow hill will not overlook my advice planned for publishing over the weeks ahead, through which I will offer a series of lifesaving strategies for Greece, Europe and the global economy. I hope I will at least be able to communicate my ideas well enough for them to reach a few ears that might help make a difference. If not, perhaps I’ll come home to clean house.

Greece will certainly default, because the trajectory plotted by its pilots is flawed. Greek navigators from the famed island of my descent would see that what Europe and Greece have done is negligently plan a path that fails to compensate for all factors. It is as if they have plotted a critical course without compensating for the gremlin wind. Thus, we continue to find ourselves obscenely off-course. Now that Germany and a few other mini-members have promised their constituents that no new aid will be issued to Greece, the destination is determined and it is the bottom of the Mediterranean Sea. Though some see the latest promises as political, and so easily undone when the surprise of unmet fiscal goals and uncovered debt expenses resurface after elections across Europe and Greece this year. If that is the case, like Venizelos, they will open their mouths, shrug their shoulders and pass a new tranche of aid as fires fury at their feet.

Without creative thinking, including the ideas I will present shortly to whoever will listen (including the few important ears attendant to me in Greece and Greek-America) Greece will certainly default. With that, spreads will certainly widen for the Portuguese, Spanish, Italians and probably the rest of the previously considered to be untouchables. So whoever is in political office post elections might do better to reconsider political ploys to remain there, because a burning seat is worse than no seat. At the same time, the abandonment of Greece is not the optimal direction for Europe, and may even work more in favor of Greece when Europe fails anyway.

"What I suggest is to save Greece, but by helping Greece to save itself rather than to starve itself."

What I suggest is to save Greece, but by helping Greece to save itself rather than to starve itself. Since the global market is clearly intertwined, it is in the global interest to put the best minds to work developing creative and immediately value-adding strategies into effect. My first suggestion will be one that will require global consideration and approval. For the sake of the globe, I hope it is seriously considered and employed. Stay tuned…

The Default Disaster Missed by Markets

Unless creative ideas are embraced, Greece, Europe and probably the global economy will disintegrate, for related though separate reasons. Given my lack of confidence today in our global leadership, I would shy far from celebrating the stocks of Greece, Europe and even the United States to a lesser extent, if not the world. The argument is only solidified by the Iran trigger, which I’ll soon have more to say about. So the high flying Global X FTSE Greece 20 ETF (NYSE: GREK), up 13.7% since inception, though down 12% since my recent warning, should move even lower. Likewise, European shares, contaminated by where the EU’s terrible trajectory will take them, are likewise threatened. The iShares S&P Europe 350 Index ETF (NYSE: IEV) is up roughly 11% through February, and slightly higher since my sell call. This is because European investors could initially view the prospect of a Greek exit from the euro-zone as a positive, but I expect they will be wrong. The Vanguard European ETF (NYSE: VGK) is also up roughly 12% year-to-date, and a bit higher since the February 7th based call. Deutsche Bank (NYSE: DB) shares are up roughly 24% year-to-date on, dare I say, on a premature vision for European recovery. Reflecting capital flows and prospective hope, American financials like Citigroup (NYSE: C) shares are also up about 28% this year. Reiterating, I see these latest capital gains at risk, though at varying degrees and on perhaps different timing, based on the above detailed economic reasoning.

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).

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.

Bad Signs for Greece

The latest days’ news wire has been full of bad signs for Greece. While you have to infer a bit and see implications to developments in order to say so, it’s not too far a reach to see what could be stewing for Greece this winter is not a warming trend.

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: NBG, NYSE: OTE, NYSE: CCH, NYSE: TK, NYSE: NM, NYSE: NNA, NYSE: NMM, NYSE: TNP, NYSE: OSG, NYSE: ISH, NYSE: EXM, NYSE: SB, NYSE: SEA, NYSE: GNK, NYSE: DSX, NYSE: DAC, NYSE: TNP, NYSE: SFL, NYSE: NAT, NYSE: SSW, NYSE: GMR, NYSE: DHT, NYSE: MPX, Nasdaq: DRYS, Nasdaq: TOPS, Nasdaq: EGLE, Nasdaq: SINO, Nasdaq: PRGN, NYSE: KSP, Nasdaq: ESEA, Nasdaq: SBLK, Nasdaq: ONAV, Nasdaq: VLCCF, Nasdaq: TBSI, Nasdaq: GLNG, Nasdaq: XSEAX, Nasdaq: ACLI, NYSE: DB, Nasdaq: ITUB, NYSE: STD, NYSE: WBK, NYSE: UBS, NYSE: LYG, NYSE: BCS, NYSE: CS, NYSE: AIB, NYSE: BLX, NYSE: BAC, NYSE: C, NYSE: GS, NYSE: JPM, NYSE: MS, NYSE: EEA, Nasdaq: VEURX, NYSE: PEF, NYSE: EKH, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, NYSE: RNE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: FEUFX, Nasdaq: FIEUX, Nasdaq: IERAX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: PEUGX, Nasdaq: RYAEX

Greece May Yet Default

The latest omen came last week, when negotiations broke off between the Greek government and private bondholders. The effort is geared to liquidate about half of Greece’s private debt or 100 billion euros worth at the cost of the bondholders. It’s a lesser evil choice for the bondholders, which is only acceptable because it may help preserve the remaining portion of their investment in or loans to Greece.

This very important effort for Greece’s recovery is now also a critical step for its short-term survival. This is because it must be accomplished in order for Greece to qualify for its next tranche of aid funding from the international community. Representatives of the bondholders stated that they were stepping away in order to “pause for reflection.” The quandary is created because of math and capital markets, as the Greeks are really seeking more than the 50% cut discussed, because the effective market value of the bonds will likely drop immediately when the bond swap takes place. That said, if Greece recovers, the contract value should be approximated by market interest.

Clearly, if Greece defaults, bondholders will be left with empty hands, so Greece does have some negotiating power. However, the bondholders also know that Greece wants to avoid default and that they are needed for that process. It seems to me that whatever will satisfy the IMF is what should be adopted at this point.

Compounding the problem, Greece just reported that its budget deficit expanded in 2011 by 0.8%, to 21.64 billion euros. It was a bit better than the government’s revised forecast, but its details reflect fundamental obstacles to Greece’s economic and fiscal recovery. Despite all the government’s new taxes to lift revenues, and its expense reduction efforts, the budget still widened. That was because personal income tax collection actually softened and its ordinary budget revenue generation fell by 1.7%. Meanwhile, despite its cost cutting efforts, spending rose by 2.8% on the significantly increased debt service costs that plague the embattled nation. There should be no surprise here for readers of my column, as I’ve argued readily against the logic of harsh short-sighted austerity.

The budget deficit is supposed to have shrunk to a smaller portion of Greece’s gross domestic product. How you get there with GDP declining and the deficit rising defies my understanding. Maybe it’s European math. In any event, there’s very little here to reassure the troika nor the capital markets that Greece is making progress, and so the pressure remains.

It seems to me, given Standard & Poor’s sovereign debt slashing of much of the euro zone Friday, that it is hedging if not forecasting Greek default or some sort of unsavory result. Nine countries were downgraded in total, with the most damage done to France and Austria, which lost their top grades. Germany was spared, with its constitutional construct cited as a safety against its government’s potential for making poor decisions.

This coming week, the IMF resumes debt talks with Greece, sending a “mission team” to Athens as part of the review process. All the above discussed matters will be reviewed. Perhaps the presence of the IMF and renewed understanding of the criticality of “private sector involvement” will bring a conciliatory and cooperative tone and progress for Greece. However, the signs are bad.

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.