PARIS – “It’s a total disaster. It’s like hell here.”
Thus did a trader describe the reopening of the Greek stock market.
The main Athens stock market index, the Athex, ended the day down 16%, after trading was allowed for the first time in five weeks.
And it was down by more than 23% just minutes after the opening bell.
Down and out… despised… scorned – the situation in Greece is excellent.
For investors with ultra-long-term time horizons and strong constitutions, it may be a great time to buy Greek stocks…
Mr. Market Gets Even
Yes, prices are being discovered again… by free declaration of buyers and sellers.
Owners of Greek stocks are discovering that their equity stakes aren’t as valuable as they believed.
But for every seller there is a buyer…
Sellers are losing money. Buyers believe they are getting a bargain.
You can fool all of the people some of the time. Some of the people all of the time. And most of the people once in a while.
You can obstruct price discovery and you can disguise and distort the real value of things. But Mr. Market will get even someday. He always does.
Yesterday, we mentioned but did not explain, that Alan Greenspan betrayed Mr. Market…
In 1987, after President Reagan appointed him Paul Volker’s successor as chairman of the Federal Reserve, Greenspan went over to the zombies… or more precisely, to their allies, the cronies.
It must not have been easy for the former free market defender and member of Ayn Rand’s inner circle…
The Largest Paper Money Racket Ever
In the late 1980s and early 1990s – you could almost see Greenspan struggling with the contradictions.
He had been loyal to free markets. But his job carried with it the biggest central planning authority of all time. He knew that currency unbacked by gold was a scam, but his position as chief of the Fed put him in charge of the largest paper money racket ever.
Greenspan believed in letting Mr. Market set prices. But as gatekeeper of U.S. credit, he corrupted more prices than any human being ever had before him.
But what was he to do?
In 1993, at her husband’s inaugural address to Congress, Ms. Clinton – now the leading Democratic candidate for president – chose to stand next to him. It was one of those magic moments in history, when power and money came together to celebrate.
(When we were in Vancouver, we went to an Anglican church. A banner hung down from the ceiling proudly proclaiming the trinity: “King, Country, God.” The parishioners like to imagine that all their leaders are united… It spares them the trouble of choosing just one.)
Of all the bigwigs in Washington, it was Alan Greenspan who had the biggest wig of all. He was practically a god to the members of Congress, to whom the economy was as big a mystery as Heaven itself.
Gold Stymies the “Welfare Statists”
To the American people, Greenspan was a combination of Mr. Fixit and the Wizard of Oz.
They didn’t understand a word of what he said. And why should they?
Greenspan made no sense when he spoke as Fed chairman – intentionally. As he later explained:
But the blither and blather worked. The politicians kneeled before him. The press took off their hats. And the masses, awestruck by the incomprehensible, thought he was a genius.
What was he supposed to do? Turn his back on all that for the sake of the truth?
“What was the truth?” asked the jesting Greenspan. And he did not wait for an answer.
We wrote contemptuously about Mr. Greenspan from the end of the 1990s until he stepped down as Fed chairman in 2006.
He did his thinking in the bathtub, the press reported. Alan “Bubbles” Greenspan, we renamed him.
He had sold out – for glory, for money, and for power. But we had to admit: He got a good price! Had we been in his shoes, we probably would have been bought at half the price.
But what a pleasure it was to rediscover the old Alan Greenspan, before he turned his coat and forked his tongue. Back in 1966, when he still believed in free markets and sound money, he expressed himself clearly.
Credit Nation
But now, who speaks the truth?
No one.
Because the elites – economists… businessmen… academics… policymakers – are paid not to see it. And if they do catch a glimpse of it by mistake, they keep their mouths shut.
Like Alan Greenspan, it is all very well to understand how things really worked. But you wouldn’t want to give up money, power, and status for it.
The Huffington Post explains how the cronies bought the economics profession:
But the Huffington Post misses the really big story…
The feds have bought off the entire intellectual, financial, business, and academic establishment.
How?
With easy money.
As we explained in our speech at the Sprott-Stansberry Natural Resource Symposium in Vancouver, there is scarcely a single public figure with substantial wealth or reputation who doesn’t owe it to the great credit expansion.
In 1999, for example, Fortune magazine named Jack Welch “Manager of the Century.”
Was it because of Welch’s genius… or the fact that GE had moved into financial services during a credit boom?
Warren Buffett is regarded as the greatest investor who ever lived. But it was Buffett’s great fortune to be investing during the greatest credit expansion there ever was.
And how did Ben Bernanke and Janet Yellen get to be heads of the Fed?
They could not have done so without the wind of credit expansion behind them, which seemed to make sense of their preposterous theories.
While the cheap credit embellished résumés and reputations, it also made people dependent. Academia reaped tax-free donations from people who had made their fortunes in debt-fueled finance… not to mention more than $1 trillion in tuition fees financed by the feds’ student loan program.
Corporations sold their products on cheap credit… made their profits from cheap credit… and then depended on cheap credit to issue their bonds, buy back their own stock, and pay their bonuses.
Meanwhile, Washington ran deficit after deficit – again, all made possible by cheap credit.
And now, practically every sentient being in the nation (and some Democrats, too!) needs cheap credit to pay his mortgage, keep his job, boost his stocks, and hold down his finance costs.
Who is left to speak the truth?
Regards,
 |
Bill
Further Reading: Economists John Dawson and John Seater have quantified the costs of mushrooming anti-market regulation in terms of lost efficiency and economic growth… And their conclusion may shock you.
Crony capitalist grifters have been so successful at picking your pocket through the proliferation of regulations, rules, subsidies, and favors that, as of 2011, it’s cost you up to $125,000 in lost income… each year!
And controversial economist and Bill’s childhood friend James Dale Davidson reckons that number should be at least $133,000 now that the political system has put the “Great Predators” in charge. Read on here for more…
Investors in Puerto Rican debt woke up yesterday to a nasty shock.
For the first time ever, the U.S. territory defaulted on its bonds.
Following a major downturn in its economy, Puerto Rico paid just $628,000 of a $58 million debt payment that was due by Monday.
In total, the island owes $73 billion, which its governor says is unpayable. And due to its commonwealth status, Puerto Rico can’t declare bankruptcy… like Detroit did when it couldn’t pay its bills.
This is a much more worrying situation for U.S. investors than the trouble that has been brewing in Greece.
U.S. bond mutual funds own more than $11 billion in Puerto Rican debt.
And as you can see from today’s chart, according to Morningstar data, 377 out of 1,884 U.S. bond mutual funds are exposed to a Puerto Rican default.
That’s about 20% of all bond mutual funds.
For a list of 20 funds with the highest exposure to a Puerto Rican default, follow this link.
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Why Puerto Rico Is in a “Death Spiral”
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Your car may be the next target of computer hackers. Last month, a team of hackers remotely halted a Jeep Cherokee traveling on the highway… forcing a recall of 1.4 million vehicles.
Emerging Markets Are Suffering… but Don’t Expect a Crash
Analysts calling for an EM crash have it all wrong. Flexible exchange rates… higher foreign exchange reserves… and less borrowing in dollars… mean EMs are better positioned than in the past.
Mailbag
Today… a complaint from a former stockbroker about our marketing of David “Doc” Eifrig’s Retirement Trader advisory service. You can check it out for yourself here.
I spent 30 years as a stockbroker and can tell you that in a sustained bull market, there is no better strategy than selling puts to earn income. In a bear market, it’s a recipe for disaster. You can’t run fast enough to stem the tide of losses as you’re put stocks, usually right after the dividend has been paid, in a falling market that guarantees losses.
What do you believe in? Bull or bear market ahead?
Chris Comment: Bill is bearish on the long-term prospect of U.S. stocks, given today’s rich valuations and their dependence on an ever-expanding credit bubble.
But Doc – a veteran Wall Street trader – has a different view of where markets are headed… as do many of the analysts whose advisories we promote here at the Diary.
Our job is to pass on to our readers the best ideas we can find for making money in the markets right now. And whatever your view of the future… right now, stocks are in a bull market.
If you believe a bear market is coming… and you don’t want to follow a strategy of selling puts for that reason… that’s your choice. You don’t have to subscribe to Doc’s service or any service you disagree with.
And if you do subscribe, and don’t like what you read, you can simply get a full refund.