"Too much debt, too quickly, that raised living standards to the rest of the European standards, the intro suggested that at the time Greece was the poorest of all the entrants before it. There is no use in going back, or trying to suggest that X or Y is to blame, I am pretty sure that everyone enjoyed the benefits, even if they did not ask for them."
Time for a change of nursery rhyme. My kids love this new movie called Into the Woods, it has Meryl Streep as one of the main characters (the witch) and Jonny Depp with a Cameo as the Wolf. It mish mashes the tales of Rapunzel, Cinderella, Red Riding Hood and Jack and the Beanstalk in one story where all the characters collide. A must see! So what should our new rhyme be? Or should it be a combination of all these things? Golden eggs, magic beans, cinders and hair, giants and Englishmen, red hooded girls beware
Whoa. We needed some magic beans yesterday, we were reverse Jack Bean Stalked, i.e. the markets came tumbling down, just like the giant. Why did global markets fall in a heap? First things first, the Greek talks are close to the same point, going round and round and round. Seemingly with no progress, from time to time we are led to believe that there is some progress, yet the Greeks suggest that they are no closer to any resolution, that is good for them. I certainly do feel for the ordinary Greek people, the fact that some pensions have nearly halved from the highs means that ordinary people have certainly borne the brunt of the austerity. As far as I can tell, Greece has implemented 7 austerity programs since February 2010.
That is more than just a few, that is more than a slight inconvenience. You can argue that the standard of living rose too quickly, relative to their European counterparts. The Wikipedia entry on the matter, Greek government-debt crisis countermeasures is littered with explanations on who is to blame, corruption, tax dodgers, too much borrowing, not enough belt tightening in the good times, being part of Europe and its open economy was certainly awesome, the drawback is when you get into trouble.
Greece does not have a particularly large economy relative to the rest of Europe, nor is it small, 2 percent of the total Euro zone's economy. That is not the point I guess, the quantum of the debt and the ability to pay it back in the long run is all that is important here, I think. The country has already been excused of 110 billion Euros of debt, in the very short term the country needs to pay back 1.6 billion Euros to the IMF next month; June. The finance minister of Greece seems like a solid chap, perhaps his own importance on the global scale is bound to get a boost, as your country is in the news for all the wrong reasons, all of the time.
It is quite hard to find any article that explains it in layman (laylady?) terms, Felix Salmon tries here: Greece's debt crisis: How did we get here? Greece was the 12th country into the common area, Salmon suggests that all that happened from 2004-2007 was the following: "The result was that Greece's borrowing costs plunged: it became much easier and much cheaper for Greece to borrow money, with the predictable result that Greece did exactly that. Banks and other investors from all over Europe lent billions upon billions of euros to Greece, and in turn Greeks used that money to live very well .... well beyond their means."
Too much debt, too quickly, that raised living standards to the rest of the European standards, the intro suggested that at the time Greece was the poorest of all the entrants before it. There is no use in going back, or trying to suggest that X or Y is to blame, I am pretty sure that everyone enjoyed the benefits, even if they did not ask for them. It seems that the Greeks work long hours, are they as productive? Did it get too easy, relative to where it had been before? A university professor suggested as much, in this interview in 2012, Dimitris Doulos of American College of Greece in Athens (How did Greece get here?):
"I have been saying that we are going to reach this point for the last 10 years because it was something that every economist could see. We were a country that, we produced less than we consumed. It's also a social problem - from a country that worked hard, we have become a country of social servants, and a private sector that depends a lot on the state. So, to preserve such a large state, you have to pay a lot of taxes, and that creates excessive spending and that creates deficits and debt. And, tax evasion, by the way, is another very important problem in Greece."
Of course that is just one persons opinion. If the troika (the ECB, the IMF and the EU), who hold 90 percent of the Greek debt buckle, what does that tell the rest of the union who may have worked harder to stabilise their economies (the Portuguese, the Latvians, the Irish to a lesser extent), and still bear the battle scars? Perhaps their issues were not as dire as the Greeks. I do not know. All I know is that the story is now back in focus and is possibly, quite possibly, this time coming to a head. I suspect that the base case remains, the Greeks want to remain inside of the Euro area, without a doubt. Their citizens think that it is a good idea, otherwise they would not have been withdrawing funds like crazy lately.
There are more and more people trying to figure out what would happen if the Greeks could not meet their obligations, this is 2015 when we have Credit Default Swaps, not 1850 when we had debtors gaol, or earlier in Medieval Europe when debt prisoners would become serfs and pay their debts off by working, labour of course. Nowadays there is bankruptcy and rehabilitation, that happens to individuals. Countries? Now what? Greece, what happens next? And why should I even care? Unfortunately it leads to uncertainty, uncertainty = sell first and ask questions later. Another reason given for the US stock market sell off is a stronger than anticipated durable goods order. When good news equals bad news, at least from an economic strength point of view.
Stanley Fischer, the Fed vice chairman (born in Zambia, in a town called Mazabuka) suggested that the rate cycle may turn slowly. Something that we have suggested many times is that the new lower top end of the range would be historically lower, if you can grasp that explanation, I tried. The process is not date determined, it is data determined said Fischer. Talking of Fischer, there is a blank that I have been trying to fill in, all his bios say that he went to the London School of Economics (1962-1966) and he obtained his Ph.D in Economics from MIT in 1969, where did he go to school however? Anyone from Zambia or Zimbabwe in the region of 70 years old who may know the answer to that question?
So is it the Fed and the raising of interest rates that is spooking the markets in the short term or the new word - or the Greeks potentially leaving the common currency area? The whole idea that a Graccident, a the meshing of Greece and Accident (rather than Grexit - Greece exit) is likely to take place soon. Graccident, no really. Well, it certainly is not FIFA and the top arrests that have been made that is the problem which is messing with the market. The sell off continues through today to our markets. A Graccident waiting to happen? We will see, I suspect that whilst the odds have risen sharply over the last few months, everyone wants Greece in, even though there must be some VERY TIRED officials.
Things that we are reading
This thing is amazing. It is called Lily, a bunch of students at Berkley invented this camera, not just any camera though, check it out: Our Story. It is a drone slash camera, your personal shot taker. 499 Dollars if you pre order, you will only get it in February next year, I wonder what sort of demand there is? It looks amazing, perhaps Go-pro of Google would have bought them by then. The biggest draw back is 2 hour charge time for 20 minute flight.
What? Apple readies Transit subway, train + bus guides for iOS 9 Maps, deploys robots for indoor mapping. Indoor mapping could be useful if you are at the Louvre or MOMA, not so?
Via the above story, and adding to the one above that (drones are everywhere) are vacuum cleaners and mops, the electronic kind: Roomba, Scooba and Braava. Cost? The most expensive Roomba (the vacuum cleaner) will cost you 700 Dollars, 400 Dollars for the cheapest one, the floor scrubber (the Scooba) costs 600 Dollars, whilst the mop (I hate mopping) costs 300 Dollars. Now, about that electronic iron.
I saw Grant Pattison tweet this, from a few days back: Is Rooftop Solar Finally Good Enough to Disrupt the Grid? Why would the ex-Massmart CEO tweet this? Well, you will recall that he is the executive chairman of NRG Energy, a NYSE listed alternative energy company.
I really enjoyed reading this. Jannie Mouton is one of South Africa's greatest investors and his writing style is very relaxed and easy to read - Jannie Mouton: 20 lessons from building PSG, my R44bn business
Volatility is part of the market, so buy, hold and add - To Win You Have to be Willing to Lose. This gives a good perspective on stocks "Losses are a normal part of a well-functioning market. Without occasional losses, stocks wouldn't earn a risk premium over safer asset classes such as bonds and cash."
Are we measuring inflation correctly? If we are not it has a very big impact on other data figures like the real income of the middle classes and real GDP growth numbers. The theory is that due to technology, we are getting more 'bang for our buck' so in effect prices are cheaper - Technology, inflation and the Federal Reserve
And they all lived happily ever after. Markets are lower again, mostly banks, and single commodity stocks getting sold off. The Rand is weaker. This FIFA stuff is fascinating, there seems to be absolutely no love lost for the organisation. The Houston floods are also front and centre, The Fed and Greece, I suppose that will continue to remain topical until something changes.
Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.
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