Bad News First- Monday Domestic Markets Fell on News Greece May Exit the EU.
Good News Most of Greek Debt is Owned by the IMF, the European Central Bank and Eurozone governments, not the private sector banks.
The real concern is China where stocks fell but recovered on Tuesday. An interest rate cut last weekend by the Chinese may stimulate their markets. On Tuesday morning the Shanghai Composite Index closed up 5.5% after falling 5%. Late Monday more confidence was shown as the Finance Ministry said that the state’s pension fund (who knew Communists had pensions?) could be allowed to invest up to 30% of its net asset value in securities.Info from sources WSJ, Barrons.com, MarketWatch.com and CNBC.com 6/29 & 6/30/2015
Unless You’ve Been Living in a Cave the new Big Thing in the world of finance is the Robo-Advisor. That’s what they’re calling when you fill out a form, send in a check, or allow access to All your money and have a computer manage your retirement or personal savings. Yes, some server in some server farm is managing your money. You don’t see an account representative, talk to someone about what you really want or have a number to call if you feel like asking a simple question. There is a machine, hidden far away, that manages your money. For a small fee, or semi-small fee, a machine (maybe the size of a toaster oven) allocates and diversifies, dices and chops, a customer’s investments. It’s being hailed as the best thing for those individuals that don’t want or need to have anything to do with (ugh) brokers or financial planners. It’s promoted as being cheaper, more efficient and it’s been done before. Yes, most managed money is and has been robo-managed for decades. Large and small investment firms have investment models set by certain algorithms and have been selling the service to customers for as long as I can remember. Most of the major insurance company annuity income plans are robo-managed. A customer chooses conservative, moderate or aggressive portfolio path and the system manages it. It sets the allocation, buys the appropriate funds and rebalances when it thinks it is necessary. The difference with those robo-advisor programs and the new Big Thing Robo-Advisors is that there is and has been a broker or planner, at the beck and call of the client, that explains the service, what the plan is attempting to accomplish and provides handholding if a plan disappoints or needs to be augmented. Most current advertised Robo-Advisory services don’t provide that unless you have several million dollars. So when the New Best Thing fails or doesn’t perform the customer has to take things into their own hands which includes scrambling to find a 1-800 number. Pulling the cord out of the wall from the computer doesn’t work in case of a financial crisis.
Consumer Confidence Soars! The U of M study showed the consumer confidence index jumped to a 5 month high, 16.5% above where it was a year ago. Fortune 6/25/2015
Scary Numbers or Trying to Scare. Here’s a situation where you and I know this is absolutely wrong. Headlines read 1/3 of all workers have no savings for retirement. Then the article go on reporting what a headache these folks will be for us hard working, savings souls. The problem is that the 1/3 of all workers not saving is probably correct. That includes young workers to the workforce, immigrant workers and those with low income jobs. The Harris survey where these number came from were conducted by asking 2,000 adults age 18+ last May. wealth management news 6/27/2015.
Headline Sunday ‘Enough Already!’
Eurozone countries have had their fill of the Greek problem. Sunday, June 28th, Greece reached out to EU for compassion and were met with newspaper headlines that reflected most all Europeans had enough of the Greek Theatre. I would expect by the time you read this the problem has been solved and Greece has either capitulated to EU requests or has been tossed from the EU. info from various sources including WSJ 6/28/2015
The Greece Problem Has No Easy Solution. From everything I’ve read the Eurozone is not in any way in a compromising attitude toward Greece. The Greek Government completely misread the resolve of their Eurozone neighbors. Bloomberg reported that ‘Europe’s uncompromising stance reflects more than simply disapproval of the way the new Greek government handled negotiations. The continent is in a better place to deal with the potential collateral damage of a messy Greek situation, be it financial or technical.’ Neighboring countries have taken time to increase their own financial defenses. The Greek government has completely misread their ability to negotiate without significant compromise. It may have already gotten real ugly. Bloomberg, WSJ, CNBC and other sources.
Monday Morning Greek Banks Closed. 6/29/2015
Many ATMs ran out of money. Limits on how much one could withdraw per day.
Alexis Tsipras, Greek PM, Socialist, Far-Far Left leader of the Syriza Party, ran on a platform of renegotiated bailouts and ceasing to pay debts which amount to 175% of Greek GDP. Estimates are in excess of $350 billion. On Monday the EU didn’t blink when Tsipras walked, banks in Greece were closed, and talking heads on U.S. cable financial programs, simply shrugged their shoulders and said that the world had been waiting for just such an event. The only ones that would truly suffer were the average citizens of Greece if in fact Greece breaks from the EU. While there could be political repercussions for EU members there are little financial consequences outside of Greece. The Washington Post reported January 26th that Tsipras has been emboldened by support from left-leaning economists. Failing to cut a deal with the EU could seal Greece’s financial fate for a generation, perhaps longer. Playing hardball with the likes of Merkel has shown that Tuspiras has been more a showman than negotiator and that left-wing political rhetoric is best left to college campuses and coffee houses.
Monday Markets Down Triple Digits. A Greek Default & Exit From the EU Would Make an Endless Depression. MarketWatch 6/29
Things are a changing…
Is it my imagination, or creeping senility, that the stuff broadcast on TMZ and evening news as news you’d get arrested for doing in the 1960s? Remembering Lenny Bruce? 
Getting Back to Greece. The Greek negotiating team came back to the EU Tuesday to ask for another bailout. The reason they explained they needed the money to make the payment that is due at midnight. At 9:35PM the EU responded with, ‘It is regrettable.’ No new deal on the table but Merkel said that last minute talks were available. Here are a few charts to help put this in perspective.
Wednesday Morning European stock markets signaled higher as Greece defaulted. Interestingly gold hasn’t budged to the Greek situation and many thought it would. The reason, according to CNBC, is that many think the Greek crisis will be contained. Meantime Hedge Funds, who should have known better, and had bought debts of Puerto Rico and its troubled electric utility, were looking for ways to salvage something as the country is struggling with $70 billion in debt and a sluggish economy. CNBC.com 7/1/2015
QUESTIONS, CALL PAUL @ 586 295 0430 or WRITE HIM @ pstanley@westminsterfinancial.com.
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