Whatever This “Greferendum” Thing Is
Equities start the day lower on whatever this “Greferendum” thing is. I leave for a week and you guys let Greece come back and bite us? Ok, that’s it, I’m not leaving you in charge anymore, I guess I need that teenage babysitter still. Greece is shutting down its banks and putting the bailout measures to a vote so I guess that’s the end of the bull market in the US huh? Actually it’s not, and if you are puking out Disney because of a situation that’s been going on for 5 years than I don’t know what to tell you. Imagine you decided that the market was too scary in 2011 when this whole thing kicked off. Europe was quaking, bond yields were soaring, headlines were blaring, you figured that cash was the best option in the face of massive uncertainty. What did you miss? Oh I don’t know, about 900 S&P points, a 91% return to be exact. But this time is different right? They are closing banks and they are on the verge of default. Ok, that’s troubling, and a lot of people are going to suffer some very real consequences. Here’s the thing though: if there’s two things I’ve learned since 2008 it’s that the sun will rise tomorrow and Governments / Central Banks will do whatever it takes to make sure the system doesn’t implode. If we need some new acronym filled program to ringfence Greece then they will invent it. If they need a parallel currency for a awhile, they will issue it. If they need PhDs and Bankers to sort out all the mess, they will hire them. Worry about the following before you worry about Greece: Puerto Rico default, Transports falling, Breadth, a cool summer, Fed policy mistakes, Chipotle running out of Barbacoa (the only option), and another Bush v Clinton election cycle. Everyone has had enough of this Greece issue, please just end it.
After the open all of my stock index charts looked like this, and if you really want an eye opening look at carnage wander over to the indices trading across the pond. Italy -5%, Spain -4.5%, Cac 40 -3.7%. Yikes, that’ll leave a mark. We had a small rally in the morning as optimism about this being “no big deal” worked its way thru our collective thoughts, unfortunately it didn’t last long and by lunch the S&P had lopped off 1.5%. Winners and losers? If the company produced a product that keeps lights on in your home it was up, if it produced anything else it was down. Hey…you….sitting there on the Tube reading this email….are you ready to hear about Greece for 4 days straight? No? Well too bad, because that’s all that’s going to happen. Dear CEOs / CFOs reading this recap, if you have bad news lurking I’d dump it on the tape TONIGHT! Would anyone even notice? Your product made a bunch of tree frogs sick and the EPA is on your back? Time for a press release! Earnings look a tad light because your new spandex socks are ugly? Call up Bloomberg asap! Anyway, the market spent all morning / afternoon puking on itself because an issue that’s been with us for half a decade might be coming to some kind of messy conclusion.
The end of the day saw stocks REALLY turn lower and by the time the bell rang we had lost 2%. Take a look at this one day move in the VIX…if that doesn’t wake the market up from its summertime slumber I don’t know what will. Only 6 names in the S&P closed positive today…that is an absolute wood shedding. So before we wrap this up and drown ourselves in a vat of bourbon I wonder…what happens if Greeks vote Yes to this referendum? Do we re gain all these S&P points in one fell swoop? Probably not right? What I’m trying to say is this….do we really believe this entire selloff is about Greece or are there just too many overhangs and this one finally broke our back. Greece is just one thing, there are a few others circling which make me uneasy. Oh well, we’ll find out soon enough, but the bull market has definitely been put on hold.
Final Score: Dow -195bps, S&P500 -209bps, Nasdaq -240bps, Rus2k -258bps.
- Succinct Summation of the Day’s Events: This one is simple, Greece made the market selloff.
- Great quote here from Josh Brown: “There are no countries in the modern world that have defaulted on their loans more often than Greece, save for Honduras and Ecuador. Look it up. The fact that history is repeating for the umpteenth time should not cause you to lose your s***. Fortunately for the world, we’ve had time to prepare and the Greek economy is about the size of the economy of Atlanta, Georgia. Contagion is a real risk, but probably not the risk it was when this all began. More to the point, contagion is always a risk, not just when the newspapers begin talking about it”.
- Is this the kind of headline you read at a market top? Americans Can’t Sell Stocks Fast Enough as Rally Tops Flows
- This quote from Howard Marks seems particularly relevant for current events: Mr. Marks has a talent for gauging crowd psychology and adopting what David Swensen once dubbed “uncomfortably idiosyncratic” positions. Mr. Marks turned cautious well before the credit crisis exploded in 2008, recognizing that too many reckless deals were getting done. Then, when Lehman Brothers collapsed, he wrote a memo explaining his assumption that this wasn’t “the end of the financial system” but “just another cycle to take advantage of.” As he wryly put it, “Most of the time, the end of the world doesn’t happen.”
- Gillette should scrap the 5 razor blade thing and go old school! Imagine shaving with that monstrosity
- Italy is one of my favorite places to visit
- So is Switzerland
- El Erian thinks the “graccident” has happened: No one wished for a Graccident. Yet it has occurred, and its costs are considerable. Urgent steps are now required to ensure some good can result from this horrid situation.
- Let’s go with a bit of inspiration
For our final video I wanted to link something relevant to today’s price action. I think this one worked out pretty good!
Have a good night.