Top Stories of the Week
The Greek people made a truly historic vote last Sunday, stepping into the ballot box to boldly reject the requirement by their creditors that they accept further austerity measures in exchange for necessary bailout funds. The Greeks held rallies in Athens as the people got their chance to speak their mind.
Greek Prime Minister Alexis Tsipras then returned to creditors on Thursday with a proposal for terms on a new bailout package for his country, beating the deadline by an hour. And that proposal included…all of the austerity measures creditors wanted and the Greek people shot down on Sunday.
The Greek people overwhelmingly voted down the proposal advanced by creditors, but they also overwhelmingly opposed exiting the Euro. It became fairly clear on Monday that Tsipras was under the impression that the vote on Sunday would allow him to return to the bargaining table with increased leverage to secure a new deal. It also became fairly clear that this was not all true. If anything, Greece’s credtiors seemed less inclined to compromise and more ready for a Grexit.
At the end of the day, the Germans were not amused. But then, they have a reputation for that.
"Wait, Stocks Can Go DOWN?!"
Of course, while everyone has been fixating on Greece over the last two weeks, stock markets in China have been going through a downturn that has ultimately erased over $3 trillion in value. $3 trillion, better known as “about 13 times the GDP of Greece.”
The huge downturn that had been gaining momentum for some time took another odd turn this week when the government stepped in to actually freeze trading for over 1,300 stocks, limiting the active trading to just the large, blue chip companies that had enough intrinsic value to shore up the markets.
In one sense, the move appeared to work as Thursday and Friday both saw gains in excess of 4.5%. However, the intervention by the government does raise serious questions about just how free markets in China really are. It also cast a light on how Chinese equities appear to have been driven to huge new highs over the last year largely by speculation, margin buying, and irrationality on the part of many investors.
Who knows where the dust will settle on this one, but, for the time being, anyone with a lot of exposure to Chinese stocks (siiiiigh, me) is licking their wounds.
"What Does This Button Do?"
Wednesday brought an unsettling moment when the venerable New York Stock Exchange halted trading for about four hours after what was later discovered to be a technical glitch.
On the whole, the big story may be how little it actually seemed to matter. There may have been the time where the NYSE closing trading would have been catastrophic, but, in the present, it simply meant that everyone did their business on one of the many other exchanges that allow one to buy and sell stocks.
“Hmmm, Maybe I’ll Consider Raising Interest Rates From Near Zero if Someone Brings Me a Cookie. Looking at You, Bill Gross.”
I, personally, can think of no better example of how ridiculous and irrational our markets are than the way some investors will fixate on any scrap of information from the Fed, desperately trying to suss out what it might mean for policy changes.
“JANET YELLEN IS WEARING A RED BLAZER! SELL! SELL! SELL!”
“WAIT, IS SHE DRINKING TEA INSTEAD OF COFFEE? OH GOD, BUY! BUY! BUY!”
This would be my way of saying Janet Yellen made a fairly vague and noncommittal statement about the Fed’s plans that, barring any major changes, they would still plan on raising interest rates at some point in the next six months. This is, I’m guessing, mostly just setting up people to speculate wildly about whether or not each and every new piece of economic data between now and February could change her mind.
Featured on Equities.com this week…
The China Bear Market: Why the Market Action in China Warrants Every Investors Attention By the Equities Research Staff
Greece and China: From One Bubble To Another? By Michael Van Dulken
ESPN May be Firing Some Familiar Faces By Ryan Bhandari
Microsoft and Nokia Flop, What’s Next?By Jeff Kagan
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