Tuesday, June 30, 2015

Today's Investing for Survival

Twelve reasons why the average investor loses money (medium):

The Morning Call--Monday's disaster hat trick

The Morning Call


The Market

The indices (DJIA 17596, S&P 2057) took it in the snoot yesterday in the aftermath of the Greek government’s decision to call a referendum on the Troika’s bail out proposal, the fear of Puerto Rican bond default and a crashing Chinese market.   Both finished below its 100 day moving average (the Dow ended below its 200 day moving average) and its former all-time high.  In addition, the Dow closed below the lower boundary of its intermediate term uptrend (I know it is a bit confusing for the lower boundary of an intermediate uptrend to be above the lower boundary of a short term uptrend.  But it is a function of differing rates of ascension between the two going back to mid-2011); while the S&P ended below the lower boundary of its short term uptrend.  I posed the question in last week’s Closing Bell: do the bears now have the juice to push the Averages below those strong support levels (100 day moving averages)?  This time the answer appears to be, yes.

Longer term, we now have two challenges going on: (1) if the S&P remains below the lower boundary of its short term uptrend though the close on Wednesday, that trend will be negated, (2) if the Dow remains below the lower boundary of its intermediate term up trend through the close on Thursday, that trend will be negated.  For the moment, the uptrends are: short term (17465-20271, 2058-3037), intermediate term (17665-23807, 1851-2619) and long term (5369-19175, 797-2138).  

Volume was off from Friday’s Russell rebalancing session; but with that exception, it was the highest in the last 30 trading days.  Breadth was poor, but not nearly as bad as I thought that it would be.  The VIX soared 35%. Closing above its 100 day moving average and the upper boundary of its very short term downtrend.  It is also nearing the upper boundary of its intermediate term downtrend.

The long Treasury was up 2.5%---not surprising given its role as safe haven.  However, it remains below its 100 day moving average and closed right on the upper boundary of its very short term downtrend. 

Somewhat surprisingly, GLD did almost nothing, remaining below its 100 day moving average and the neckline of the head and shoulders formation.  Oil fell, remaining below the upper boundary of its short term trading range.  The dollar fell, closing below its 100 day moving average and the lower boundary of a very short term downtrend.

Bottom line: the indices are now challenging the lower boundaries of major uptrends as well as their 100 day moving averages---which have provide major support over the last two years.  The key now is whether those trend breaks will be confirmed. 

Not helping matters are (1) Puerto Rico’s governor stated that the island’s debt was not payable and (2) continued turmoil in Chinese markets.   On the other hand, the lack of any move up in gold prices or the dollar suggests that investors aren’t running to the ‘safe havens’.

Finally remember that (1) significant global events can blow technical analysis out of the tub on a short term basis; that is one of the reasons for our time and distance discipline and (2) the Market was way oversold on the close last night.  So again, follow through is key.


            Yesterday’s US economic data was weighed to the upside:  May pending home sales rose more than forecast and while the June Dallas Fed manufacturing index was down, it was less than anticipated.  Good for our forecast.

            Forget data dependent, the Fed is Market dependent (medium):

            But not particularly relevant, given the increasing uncertainty surrounding events is Greece.

            Greece will default on IMF payment today (short):

            For an opinion, I defer to more knowledgeable experts than I:

            Mohamed El Erian on the Grexident (medium):

            David Stockman on the Grexident (medium):
            In the interest of ‘fair and balanced’ (medium):

            ***overnight, the Troika offered to consider debt rescheduling/forgiveness in exchange for Tsipras urging the Greeks to vote yes to accept the Troika’s bail out proposal.

Bottom line: Markets got hit by a double whammy yesterday with the odds of a Grexit rising and the prospects of Puerto Rican default coming to the fore (***overnight, the governor confirmed that he would seek to delay some debt service).  Add that to the dive in Chinese markets and investors were faced with a pretty stomach turning cocktail.  Whether or not these factors precipitate a mean reverting move in the stock market is yet to be seen.  Even if you think not, I believe that this is not a time for heroics.

***overnight, the Chinese market continued to plunge while the Chinese government announced that it was considering allowing state pension plans to invest in stocks---yeah, that is going to end well.


   This Week’s Data

            May pending home sales rose 0.9% versus expectations of up 0.6%.

            The June Dallas Fred manufacturing index came in at -7.0 versus estimates of -13.5.


            Another proposed regulation from the administration that is sure to help employment (short):


  International War Against Radical Islam

            The US and Russia now bumping heads in Syria (medium):

Monday, June 29, 2015

The Morning Call---Now it really gets interesting

The Morning Call


The Market

            The S&P (2101) is now approaching its 100 day moving average (2095).  But it remains above it unlike the Dow which has been below its comparable level for three days.

            The long Treasury continues to get pounded.  As you can see, it is now near the lower boundary of its short term downtrend.  A technical bounce wouldn’t be surprising; but the trend is lower.  The bothersome aspect is coming up with an economic scenario that explains the current divergence in bond and stock prices.    

            I thought that I would update the oil chart.  You can see that it has been trading around the upper boundary of a short term trading range since late May.

            The VIX was down fractionally on Friday.  As long as it maintains a negative trend, it is a plus for stocks.

            The Chinese stock market opens limit down (short):

            Bank of International Settlements slams central bank monetary policy (medium and today’s must read):

            ***overnight, Greece goes ahead with referendum; capital controls imposed; markets in for a rough day.


   This Week’s Data


            Thoughts on inequality (medium):



  International War Against Radical Islam

Saturday, June 27, 2015

The Closing Bell

The Closing Bell


Statistical Summary

   Current Economic Forecast

                        Real Growth in Gross Domestic Product                       +2.6
                        Inflation (revised)                                                           +0.1%
                        Corporate Profits                                                             +3.7%

            2015 estimates

Real Growth in Gross Domestic Product (revised)      0-+2%
                        Inflation (revised)                                                          1.0-2.0
                        Corporate Profits (revised)                                            -5-+5%

   Current Market Forecast
            Dow Jones Industrial Average

                                    Current Trend (revised):  
                                    Short Term Uptrend                                 17465-20271
Intermediate Term Uptrend                      17645-23787
Long Term Uptrend                                  5369-19175
                        2014    Year End Fair Value                             11800-12000                                          
                        2015    Year End Fair Value                                   12200-12400

            Standard & Poor’s 500

                                    Current Trend (revised):
                                    Short Term Uptrend                                     2056-3035
                                    Intermediate Term Uptrend                        1851-2619
                                    Long Term Uptrend                                    797-2138
                        2014   Year End Fair Value                                     1470-1490

                        2015   Year End Fair Value                                      1515-1535        

Percentage Cash in Our Portfolios

Dividend Growth Portfolio                          53%
            High Yield Portfolio                                     54%
            Aggressive Growth Portfolio                        53%

The economy provides no upward bias to equity valuations.   The dataflow the week of June 22  beat Street expectations by more than any other set of weekly stats this year: above estimates: May existing and new home sales, weekly mortgage and purchase applications, May personal income and spending, month to date retail chain store sales, June consumer sentiment, the June Richmond and Kansas City Fed manufacturing indices and the final first quarter GDP number; below estimates: the May Chicago national activity index and the June Markit flash manufacturing and services PMI’s; in line with estimates: the June durable goods and ex transportation combo.

The more important indicators were almost all above Street forecast:  above estimates: May new and existing home sales, May personal income and spending and first quarter GDP; below estimates: none; in line with estimates: the May durable goods and ex transportation combo.  This marks the fourth week in a row in which the majority of numbers have been above consensus.  That’s great in that this performance likely takes a possible recession off the table.  However, it follows eighteen weeks of data that were consistently below expectations.  True, the weather and the West coast longshoremen’s strike had an impact. Nevertheless, in my judgment, the growth rate of the economy has still shifted down a gear and is growing at a lesser rate than the already anemic pace of the current recovery from the financial crisis.

Our forecast:

a much below average secular rate of recovery, exacerbated by a declining cyclical pattern of growth resulting from too much government spending, too much government debt to service, too much government regulation, a financial system with conflicting profit incentives and a business community hesitant to hire and invest because the aforementioned, the weakening in the global economic outlook, along with the historic inability of the Fed to properly time the reversal of a vastly over expansive monetary policy.
        The pluses:

(1)   our improving energy picture.  Oil production in this country continues to grow which is a significant geopolitical plus.  However, we have yet to see the ‘unmitigated’ positive attributed to lower oil prices by the pundits.  Not surprisingly, with oil prices recovering somewhat, this same crowd is trumpeting the pluses that rising prices will have on capital spending.  If they keep trying, the law of averages says that they will eventually be right.  But who will listen?

       The negatives:

(1)   a vulnerable global banking system.  On Thursday, it was announced that JP Morgan, our ‘fortress bank’, was implicated in yet another scheme to defraud the public---this time for pushing private banking clients to buy the bank’s own investment products.

My concern here is that: [a] investors ultimately lose confidence in our financial institutions and [b] the recent scandals are simply signs that our banks are not as sound and well managed as we have been led to believe and, hence, are highly vulnerable to future shocks from either subprime debt problems in the student loan or auto markets or turmoil in the EU financial system resulting from a Greek default or exit from the EU.

(2)   fiscal policy.  Something positive for a change from our ruling class.  The congress gave Obama His right to negotiate the Asian trade deal.  Overall, I think it a plus for the economy.  Like most legislation, there are some short comings: [a] renewal of the Import/Export bank charter---which I am not a fan of and [b] the oft heard complaint of the erosion of congressional powers by the executive. 

To be clear, I think the latter one of the most significant constitutional problems that the US faces.  That said, congress has been submitting to this process for the last 75 years under both party’s rule and the only time we hear complaints, it is more for partisan political reasons than anything to do with the constitutional issue of separation of powers.  So I might be more sympathetic if the current legislative complainants had been fighting the massive overreach by executive orders lo these many years.  But that is not the case.  So, while I wish that someone had the cojones to do something to change the trend in this process; but that is not likely to happen.  In the meantime, if I was going to object to the usurpation of congressional authority, I have a complaint list a mile long at the bottom of which would be free trade negotiating power.

On a less constructive note, the Supreme Court upheld the constitutionality of Obamacare.  Setting aside the act’s social/political value, the economic affect to date has been as many expected---detrimental to economic growth, especially as it applies to small business, which, lest we forget, is the main driver of employment.  It is also far more expensive than was originally forecast and, hence, has  become another federal program that either sucks taxes out of the people or adds to the deficit---thus falling under the aforementioned categories of  ‘too much government spending, too much government debt to service, too much government regulation’.

(3)   the potential negative impact of central bank money printing:  The key point here is that [a] the Fed has inflated bank reserves far beyond any comparable level in history and [b] while this hasn’t been an economic problem to date, {i} it still has to withdraw all those reserves from the system without creating any disruptions---a task that I regularly point out it has proven inept at in the past and {ii} it has created or is creating asset bubbles in the stock market as well as in the auto, student and mortgage loan markets.  

An absolute must read:

(4)   geopolitical risks: tensions continue in Ukraine and there is no letup in the fighting in the Middle East.  However, they are taking a back seat to the Greek standoff.  I will note that the US/Russian rhetoric has reached a point that is a little concerning---my worry being a misstep by the administration which has proven time and again its lack of skill in foreign affairs.

(5)   economic difficulties, overly indebted sovereigns and overleveraged banks in Europe and around the globe.  The headline remains the test of wills between the Troika and the Greeks over a bail out agreement.  While the rhetoric took a less discordant tone the last seven days, the parties appear no closer to a deal.  And time is running short---at least on the current calendar of payment deadlines. 

Adding even more drama, the ECB said Thursday that it has ended its liquidity injections into the Greek banks.  Then on Friday, the Troika gave Greece another final [if you believe that] ‘take it or leave it’ offer [as of this writing, details are unclear but we do know that it is only a five month agreement] to be met by Monday; which the Greeks then rejected as ‘blackmail’ and threatened to call for referendum.  Clearly, this a minute to minute situation and may have changed by the time you read this.  Given history, we should never underestimate the eurocrats’ ability to snatch victory from the jaws of defeat even with one foot off the cliff.

My bottom line here hasn’t changed: I don’t know how this ends and I don’t know what it means for the markets if it ends badly; but I do believe that there will be unintended consequences; and since those are by definition unknowable, this situation demands some caution.          

Here is the really, really, really optimistic case (short):

Getting off the Greek dilemma for a moment, the international economic news over the last seven days has not been all that positive.  The EU flash composite index came in well above forecasts.  Regrettably, the comparable Chinese number was as bad as the EU was good---which along with a major stock selloff prompted the central bank to ease monetary policy dramatically.  In addition, June German business confidence fell for the second month in a row, South Korea downgraded its 2015 economic growth outlook and Japan, despite its Godzilla QE, can’t get off dead center---May inflation and household spending were basically flat.  Overall, nothing to suggest that the global economy will make any contribution to our own growth beyond what is providing now.

    ‘Muddling through’ remains the assumption for the global economy in our Economic Model with the proviso that if a Greek default/exit occurs, all bets are off. This remains the biggest risk to forecast.

Bottom line:  the US economic news continues to indicate improvement from its first quarter swoon.  That is positive in that it, hopefully, is taking the recession scenario off the table.  But, in my opinion, that in no way suggests any acceleration in our growth prospects above the rates that existed in the preceding couple of years.

The international data did little to demonstrate any kind of pick up in global economic growth.  But we did get, as we are accustomed to, another central bank pushing the QE button---in this case China, which is trying to deal with both lagging economic growth and a speculative stock market.  Sound familiar?  So ‘the head in the sand’ monetary strategy remains the keystone of global central bank policy.  No one seems willing to consider the clear overall failure of QE or the consequences of the misallocation and pricing of assets.

Finally, the Greek/Troika negotiations are on a treadmill and time is running out.  A resolution may still occur, but there remains a decent risk that it will not.

This week’s data:

(1)                                  housing: May existing and new home sales were better than consensus; weekly mortgage and purchase applications were up,

(2)                                  consumer: May personal income and spending were above estimates, month to date retail chain store sales were up; weekly jobless claims rose less than expected; June consumer sentiment was higher than anticipated,

(3)                                  industry: the May Chicago national activity index was below forecasts; May durable goods orders were disappointing, but ex transportation they were fine; both the June Markit flash manufacturing and services PMI’s were below consensus; the June Richmond Fed manufacturing index was much better than estimated while the Kansas City index, while negative, was somewhat improved,

(4)                                  macroeconomic: the final first quarter GDP growth number was -0.2%, in line but below the initial reading of -0.7%.

The Market-Disciplined Investing

The indices (DJIA 17947, S&P 2101) drifted lower on the week, trading down near the lower level of their very short term trading ranges.  The upper boundary of that range is marked by the Averages prior highs (18298, 2135); the lower boundaries are their respective 100 day moving averages.  On Friday, the Dow closed below its moving average for the third day in a row; the S&P remains above its comparable level (2095) but just barely.  I have previously noted that the 100 moving averages have offered tremendous support over the past two years.  So the question now is the reverse of one that I posed two weeks ago when the indices appeared poised to challenge their prior highs and upper boundaries of their long term uptrends: do the bears now have the juice to push the Averages below those strong support levels?  Follow through.

That said longer term, the indices remained well within their uptrends across all timeframes: short term (17465-20271, 2056-3035), intermediate term (17645-23787, 1851-2619) and long term (5369-19175, 797-2138).  

Volume rose markedly on Friday; but that was primarily due to the Russell rebalancing.  Breadth improved, more so than I would have thought.  The VIX was off fractionally, finishing below its 100 day moving average and the upper boundary of a very short term downtrend.  Any price below 13, I believe offers great value as portfolio insurance.

The long Treasury got whacked again on Friday, closing below its 100 day moving average and below the upper boundaries of its very short term and short term downtrends.  Indeed, it ended right on the lower boundary of its short term downtrend.  So a technical bounce here wouldn’t be a surprise; but the trend is still down and has decent momentum.  I continue to have a problem coming up with an economic scenario that explains the 15% losses in the bond market but vacillation near all-time highs in the stock market.

GLD continues to do nothing.  Oil remains at the upper end of a short term trading range while the dollar closed below its 100 day moving average and the lower boundary of a very short term downtrend.

Bottom line: the indices are trendless at the moment, caught between their all-time highs and their 100 day moving averages.  Resolution of the Greek bailout dilemma likely holds the key to any directional move out of that range and could swamp any short term technical factors.

Two other things to watch that may also play a role in determining stock price direction are the bond market and the Chinese stock market, neither of which present any optimism for assuming higher stock prices. 

My technical bias remains to the downside primarily because I believe that the upside is limited by the resistance I expect to be offered by the upper boundaries of the indices long term uptrends while there is a much larger downside represented by the lower boundaries of their short term uptrends. 

That spread is clearly not enough to warrant getting beared up.  However, the spread between the upper and lower boundaries of their long term uptrends is something else again.  That should give pause to anyone dying to buy stocks at these price levels.

Fundamental-A Dividend Growth Investment Strategy

The DJIA (17947) finished this week about 48.2% above Fair Value (12105) while the S&P (2101) closed 39.8% overvalued (1502).  Incorporated in that ‘Fair Value’ judgment is some sort of half assed attempt at getting fiscal policy under control, a botched Fed transition from easy to tight money, a historically low long term secular growth rate of the economy and a ‘muddle through’ scenario in Europe, Japan and China.

The June 22 week of US stats dovetails nicely with our forecast of no recession but decelerating growth.  Hence, there is no need to challenge the longer term growth of productive capacity assumption in our Valuation Model.

Likewise, as I have noted previously, the Fed has already done its part to assure ‘a botched…transition from easy to tight money’.  It is now facing the probability that unless it gets very lucky, (1) if it tightens, it will run the risk of hampering or even stopping what sluggish growth the US economy currently has or (2) if it doesn’t tighten, it still may have to implement QEIV due to the aforementioned economic lethargy and/or events in Greece that produce a shock that would necessitate a further infusion of liquidity to maintain stability within our financial institutions---and that is just what we need: more pricing distortion in the securities market and more asset misallocation.   

Making matters worse, the long end of the yield curve has been rising.  That would be normal in an environment of improving economic activity.  Unfortunately the reverse is occurring; or more correctly said, the economy is showing signs of stabilization after a rough first quarter but is not likely to get back to its growth rate of a year ago.  My conclusion is that the bond guys have lost faith in the Fed; and if that spills over into the equity market, well, times could get tough.

We are getting down to the short strokes in the Greek bailout negotiations.  No apparent progress has been made in the last seven days; and even worse, the ECB is ending its liquidity injections in the Greek banking system---meaning a possible bank holiday on Monday if no solution is achieved.  Of course, there were rumors of such an occurrence last weekend and nothing happened.  I have no idea how this crisis gets resolved; though if history is any guide it somehow will end positively, even if it doesn’t correct failed fiscal policies of the past.  Further, I remain unclear as to the ultimate consequences of a default or Grexit; but I suspect that they will impact the Markets negatively.

Bottom line: the assumptions in our Economic Model are unchanged.  If they are anywhere near correct, they will almost assuredly result in changes in Street models that will have to take their consensus Fair Value down. 

The assumptions in our Valuation Model have not changed either; though there are scenarios (Grexit) that could lower Fair Value.  That said, our Model’s current calculated Fair Values are so far below current valuation that any downward revisions by the Street will only bring their estimates more in line with our own.

I can’t emphasize strongly enough that I believe that the key investment strategy today is to take advantage of the current high prices to sell any stock that has been a disappointment or no longer fits your investment criteria and to trim the holding of any stock that has doubled or more in price.

Bear in mind, this is not a recommendation to run for the hills.  Our Portfolios are still 55-60% invested; but their cash position is a function of individual stocks either hitting their Sell Half Prices or their underlying company failing to meet the requisite minimum financial criteria needed for inclusion in our Universe.

                Corporate dividends plus buybacks now equal more than operating cash flow (short):

DJIA             S&P

Current 2015 Year End Fair Value*              12300             1525
Fair Value as of 6/30/15                                  12105            1502
Close this week                                               17947            2101

Over Valuation vs. 6/30 Close
              5% overvalued                                12710                1577
            10% overvalued                                13315               1652 
            15% overvalued                                13920                1727
            20% overvalued                                14526                1802   
            25% overvalued                                  15131              1877   
            30% overvalued                                  15736              1952
            35% overvalued                                  16341              2027
            40% overvalued                                  16947              2102
            45%overvalued                                   17552              2177
            50%overvalued                                   18157              2253
            55% overvalued                                  18762              2328

Under Valuation vs. 6/30 Close
            5% undervalued                             11499                    1426
10%undervalued                            10894                   1351   
15%undervalued                            10289                   1276

* Just a reminder that the Year End Fair Value number is based on the long term secular growth of the earning power of productive capacity of the US economy not the near term   cyclical influences.  The model is now accounting for somewhat below average secular growth for the next 3 to 5 years. 

The Portfolios and Buy Lists are up to date.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973.  His 47 years of investment experience includes institutional portfolio management at Scudder. Stevens and Clark and Bear Stearns, managing a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies.  Through his involvement with Strategic Stock Investments, Steve hopes that his experience can help other investors build their wealth while avoiding tough lessons that he learned the hard way.

Friday, June 26, 2015

The Morning Call---Another last (really) 'take or leave it' offer

The Morning Call


The Market

The Averages (DJIA 17890, S&P 2102) fell again yesterday.  The S&P remained above its 100 day moving average; but the Dow finished below its comparable level for a second day.  Both ended below their prior highs (18295, 2135).  My very near term focus continues to be on indices behavior around those 100 day moving average support levels.

Longer term, the Averages remained well within their uptrends across all timeframes: short term (17445-20251, 2053-3032), intermediate term (17638-23788, 1849-2617) and long term (5369-19175, 797-2138).  

Volume declined; but breadth was mixed.  The VIX (14) was up another 6%, finishing near but below its 100 day moving average and within a very short term downtrend and a short term trading range.  Anything below 13, I believe offers value as portfolio insurance.

Percentage of stocks above their 50 day moving averages (short):

The long Treasury made a slight comeback, but still closed below its 100 day moving average and the upper boundaries of very short term and short term downtrends. I remain a little concerned about the differing pin actions in the equity and bond markets.  Barring a meaningful pickup in longer term economic activity, TLT shouldn’t be 15% off its high.  Of course, I could be wrong on economic growth; but if so, why is the stock market vacillating?  Or maybe it is the Greek bail out problem.  However, if it is going to rescued which our bond (gold and dollar) market seems to reflect (which investors selling safe haven assets would imply), why aren’t the stock boys equally convinced?   Whatever the scenario, I worried about the reason(s) stock prices are flat but bond prices are down double digits.

GLD declined again [no safe haven here either], remaining below its 100 day moving average and the neck line of the head and shoulders pattern.  Oil was down, ending below the upper boundary of its short term trading range. The dollar also sank and remained below its 100 day moving average and within a very short term downtrend and a short term trading range.

Bottom line: the Averages continued to drift within a very tight range marked by their former highs and their 100 day moving averages. However, the Treasury bond, gold and dollar markets are trading near their 2015 lows.  I don’t have a clear explanation that encompasses a reason for this pin action---which is why it makes me nervous.  However, as long as the indices trade within uptrends across all timeframes, there is no point in getting to beared up for technical reasons.

            The Chinese market continues to get hammered.  As I noted last week, there is not a lot correlation between our Averages and their Chinese counterparts.  However, we need to be aware of what is going on and watchful for any spillover effects (medium):

            A short term limit to S&P advance? (medium):

            A crash risk index for the Market (medium and interesting):


            Yesterday’s US economic numbers were mixed: weekly jobless claims and May personal income and spending came in above estimates while the June Markit Flash services PMI and the June Kansas City manufacturing index were lower than anticipated.  However, the personal income and spending stats were certainly the most important.  So I have to score the day as a plus for the economy, which in turn makes the aggregate data releases this week the best so far in the year.  That isn’t enough to rethink the recent downwardly revised forecast, but it does help take recession off the table.

            Overseas, (1) South Korea lowered its 2015 economic growth forecast which hardly helps the global outlook and (2) China eased monetary policy again which only adds to the excessive level of financial liquidity and the potential problems it spawns (see above). 

            ***overnight, May Japanese inflation barely budged off extremely low levels, but household spending eked out a small gain for the first time in a year.

            But, of course, investors seemingly remained focused on the Greek bail out or the lack thereof; and the news flow took a still more negative turn.  There was no agreement in the Wednesday meeting, the Thursday and Friday meetings were cancelled, Merkel said that she wanted an agreement by Monday and ECB said that it was ending liquidity injections in the Greek banks.   That sounds like a snoot full of bad news---and it is, if they all mean what they say.  The question is will the eurocrats pull another rabbit out of its hat and kick the Greek solvency problem down road or have Greek’s finances reached the point of no return? 

            The latest on Greece as of the last night (medium):

            Behind the scene in Germany (medium):

            ECB threatens to end liquidity injections into Greek banking system (medium):

            ***overnight, it looks like we have another ‘take it or leave it’ offer to the Greeks from the Troika.  At this time, there is no details of the offer (medium):

Bottom line: yesterday’s economic stats cap off the best week for this dataflow this year (all that is left is today’s consumer sentiment report)---and we only had to wait six months.  That backs up our forecast.

On the other hand, the Greek financial dilemma remains a problem that only seemed to get worse yesterday.  The US market’s fate seems to be tied to the Greek deal; although,   I am not sure what kind of upside there is since our Models incorporate a ‘muddling through’ assumption for the global economy.  That said, I am not sure what the downside is either.  However, the difference is that the downside (which as aside, I have no idea how to quantify) whatever it is, is not in either our Economic or Valuation Models. 


   This Week’s Data

            The June Markit flash services PMI was reported at 54.8 versus expectations of 56.6.
            The June Kansas City Fed manufacturing in came in at -9 versus the May reading of -12.


            Here is the optimist’s view of Fed policy.  It focuses mainly on why and how the Fed pursued QEInfinity.  However, the key going forward is how it unwinds it.  In the last three paragraphs the author assumes that the Fed will execute a perfectly controlled exit, which, as I have pointed out more times than you probably cared to hear, the Fed has never, ever been able to do successfully (medium);


More on the passage of the ‘fast track’ trade bill (medium):

The Supreme Court upheld Obamacare.  Justice Scalia’s dissenting opinion (medium):


            Is Portugal the next problem? (medium):