Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Greek Stock Market, the Moments Before Drowning

Stock-Markets / Stock Markets 2011 Jun 27, 2011 - 05:44 PM GMT

By: Barry_M_Ferguson

Stock-Markets

Best Financial Markets Analysis ArticleI sit. I watch. I contemplate. I observe. The stock market appears to have lost all sense of reality and logic. Maybe it never had any. Maybe it is just drowning and the current behavior is the moment before the drowning.

The Dow Jones Greek Index is a good barometer of investor behavior. When a person is perilously close to drowning, they will grab on to anything. There are a few seconds of desperate panic. The same holds true for investors. They will grab on to any story no matter how ridiculous it may be. The former nation of Greece is in the news almost every hour. They have debt obligations that they cannot repay and the ECB is going to throw them another $100 billion in bailout money to keep their debt off the default report. To be accurate, the ECB is going to give the $100 billion to the German, French, and American banks that hold the credit default swaps tied to the Greek debt in question. They just needed to figure out how to steal it from the Greeks.


Let me touch on one thing before we get to the chart. I referred to Greece as the ‘former nation’ of Greece. Since we are in a new era of government control and central bank intervention, we need new words to describe that which has no current description. The new word we need to commit to our vocabularies is ‘de-sovereigntized’. This is the result of a formerly sovereign nation surrendering to central banking mandates giving the central bank the authority to make laws in that country. The ECB, for instance, will now control Greece’s currency, taxation, debt repayment schedules, and business revenue collection. Greece has agreed to a ECB imposed austerity mandate in which the ECB will determine Greek tax rates, small business taxes, and monetary control. The Greek government no longer has control over key points that determine a nation’s real sovereignty. As a result, we can longer look upon Greece as a sovereign nation. They have ceded their autonomy to the ECB. They have been de-sovereigntized.

But stock investors don’t care about sovereignty. They rarely think about anything but making a buck. They rarely actually think! The chart below is the Dow Jones Greek Index. Why do I bring it up. Yes, it is down some 80% from its highs of a few years ago but I think it is a good example of a drowning market. Let us remember that Greece has a GDP of about $300 billion (US) and their economy is shrinking by better than a 4% annual clip. The government has already cut wages and benefits as the government controls more than 50% of the overall economy. The new austerity rules will increase the tax rate on the population by 1% to 5%. The threshold of income that begins taxation will drop from $12k per year to $8k per year. Even the poorest people will feel the oppression of higher taxes. Business owners will be accessed and extra $300 euro penalty for being stupid enough to own a business and hire workers. Like Americans to the American government, the Greek citizens are now enemies of the state. With that in mind, let’s look at the chart.

The long, clear candles from the last trading day of May, the third trading day of June, and those of the 16th and 21st were all four or five percent one-day gains. The all came on news that an austerity package had been agreed upon. The gold line on the chart is the S&P 500 so we can see that all indices basically move in the same direction these days. It is pathetic. It is mindless. It is thoughtless. It is a market in the last moments of the drowning process. Why would anyone buy Greece? They admit to be insolvent. Now taxes are going up. Wages are going down. Their economy is contracting. What kind of insanity drives people to put money in an investment like this? Are the last three trading days on the chart an indication of the trend to come? If so, the Greek index will resume its downward slide and most likely, so too with the S&P 500.

But wait! Here comes a life preserver. The IEA is going to release 60 million barrels of reserve oil. Of the 60 million barrels, the de-sovereigntized US will be responsible for 30 million barrels. The US no longer controls its currency or taxation. The currency is distributed through the Federal Reserve system and her taxes are deposited in Federal Reserve banks.

Here comes a piece of drift wood. The Federal Reserve will continue to buy US debt and equity with maturing assets held on its balance sheet (now at $2.8 trillion).

Here comes a piece of styrofoam. The government released some bogus data about economic recovery to excite us.

Here comes a piece of plastic. The Plunge Protection Team is bloating up the indices in the last hour of trading. They popped up the Dow some 100 points in the five minutes that followed Greece’s surrender.

Hey, we better grab something before we drown! Maybe the Greek index will float by...

1 Month - GRDOW in candlestick, S&P 500 in gold
Chart courtesy StockCharts.com

Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented. BMF Investments, Inc. assumes no liability nor credit for any actions taken based on this article. 

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

© 2011 Copyright BMF Investments, Inc. - All Rights Reserved
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in