May 2nd was an important inflection point in world markets, as the chart above illustrates. Since that date, emerging market currencies, bonds and stocks have all weakened. The news of the day indicated contractionary manufacturing sectors in both the U.S. and Europe, but that news does not seem to be the catalyst for the changes in emerging markets. At the present rate of decay, a liquidity crisis is in the cards, which is all the more reason why EM should level off shortly.
Since peaking in May, the S&P 500 has entered a correction phase. The decline could be because of the dreaded taper tantrum, or it could just be that the market has risen so quickly and so high since Presidential elections that it was just due for a correction. It could also be the start of a bear market.
Here’s a little something I just read in MauldinEconomics.com. Mauldin pointed out that the last three market crashes occurred during a period of loose monetary policy from the Fed. Could the fourth be forming as we speak?
Greece’s largest export is bad news. The government shut down the public broadcast system and fired 3,000 workers at the behest of the troika. Greece has 650k public workers, so the closure was largely a symbolic move. For some reason, PM Samaras did not consult his coalition partners from the left prior to the shutdown, and they’re pissed. The coalition is threatening to fall apart as opposition Syriza is bringing a no confidence vote.
Meanwhile, Greece has been downgraded to Emerging Market status. This means that over the coming few weeks, managers will need to wind down Greek holdings in order to adhere to their investment mandates. Greek markets had been selling off prior to this news, so there is the chance that this swoon could turn into a rout.
Don’t worry about all of this. As we learned yesterday in the mainstream media, Greece is beginning to recover.
The Spanish living in the countryside have resorted to brigandry. Roving gangs have been stealing produce and equipment from far-flung farms that lack the means to secure themselves.
The Spanish are surviving their economic depression by resorting to lives of crime. Thefts and robberies have increased dramatically since 2009, and this should not come as a surprise. Whether it be participating in the black market or outright stealing, people will do what is necessary to continue eating.
Constitutional courts are part of the government, so they have inherent conflicts of interest that simply cannot be resolved. Courts who rule to increase government power are increasing their own, too.
While the 35,000 Germans who filed this petition with the court are seeking justice, all they will find is some tortured reasoning telling them that the ECb does not have to obey treaties and can do whatever it wants to save the euro.
When this decision is handed down in September, it will leave all ECB programs intact and merely require that the Bundestag rubberstamp certain ECB decisions.
This article confuses two different concepts: price declines and volatility. JGBs have not declined enough to cause concern on an historical basis as yields are around their averages from 2012, but volatility has clearly increased since the 2-2-2 plan was unveiled in April. In fact, the chart above shows the increased volatility better than a paragraph or an analyst’s model. Note the jagged pattern since early April as compared to the relatively smooth line prior to then.