Greek-led Eurozone chaos disrupts stocks, bonds, commodities as gold gets a bid and international monetary instability reigns supreme. UPDATING.
WASHINGTON, June 29, 2015 – The chaos caused by the intransigence of Greece’s Communist-led government boiled over this weekend after Greek Prime Minister Alexis Tsipras announced a snap July 5 referendum in his country on Sunday to determine whether Greek voters would support or turn down the latest iteration of bailout and austerity measures offered by the EU through the “troika.”
Tsipras’ offer amounted to a not-very-diplomatic flip of the bird at the rest of the Eurozone, given that the deadline for accepting or rejecting the latest bailout terms is June 30. The result: the potential for a Greek exit from the Eurozone’s single currency − the dreaded “Grexit” − looms larger than ever.
The Eurogroup in charge of negotiations quickly returned the favor, flatly rejecting yet another Greek government request for “a few more days” to drag out its answer while awaiting results of the referendum, whose wording has yet to be determined, following a pattern of a banking- and capitalist-hostile government that often seems to float about in another world.
While the European Central Bank (ECB) has pledged to keep emergency funding for Greece’s banking system at current levels—for now—euros are getting ever scarcer in that country as the clock ticks down to the final buzzer. Thousands of Greek citizens queued up at ATMs across the country over the weekend, desperate to get hold of hard currency before disaster strikes.
But most ATMs were quickly exhausted, leaving customers with virtually no alternative for money as threatened capital controls and a weeklong banking “holiday” have already been proposed and are likely to get set in motion even as this article is written.
According to CNBC, which cited a Reuters wire report, “Asked, as he left a meeting of the Financial Stability Council, whether banks would open on Monday, Piraeus Bank Chief Executive Anthimos Thomopoulos, said: ‘No.’ Additionally, a source told the wire service that the Athens stock exchange would not open on Monday either.”
From their words and deeds, it’s obvious that the current Greek leadership is employing standard Marxist rhetoric and tactics, focusing on a “class struggle” scenario they’ve been dreaming up, hoping to rouse the Greeks into leaving the euro even as that same government—and the Greek people by an overwhelming majority—claim they want to stay with the single European currency.
The Maven doesn’t have the reporting resources to keep up with every move of this fast-moving story in real time, but European sources like Reuters and the BBC are good bets for the news-hungry.
What we’re left with in the U.S. is a stock market that’s likely to plunge at the open, with Dow futures currently off a whopping 188 points and the other averages falling into similar red ink lines.
UPDATING DEVELOPMENTS from our earlier report:
Three updated items recently posted by Reuters:
- Greek government had planned to close banks for seven days. Now claims they will reopen on Thursday.
- Also: 850 Greek branch banks will open to pay pensions, date not cited.
- Potential ECB cave: ECB will keep emergency funding to Greek banking institutions open through the scheduled Sunday referendum. But as before, credit line will allegedly by minimal and main credits and bailout funds still not extended, in what appears to be a half-way move.
Today’s trading tips
Unless your intestinal fortitude is ironclad, today, or at least this morning, is probably not the time to buy anything at all, unless you want to chase one of the gold ETFs: IAU, GLD, or SGOL.
Gold is up this morning. But unknown, influential currency manipulators—likely an international banking and central banking cartel—have been keeping gold artificially low for at least two years running now, so any upswing in gold is likely to be a quick trade here. Beware.
Warren Buffett has often said that the best time to buy quality stocks is when blood is running in the streets, and we’ll be getting at least a trickle of the red stuff today. But this story has many threads, so it’s best not to be hasty whether buying or selling.
Long stock positions can be conservatively protected by selling calls against them, a strategy known as “writing covered calls.” Weak positions should probably be dumped before they get worse.
Finally, entire portfolios can be hedged by buying a block of the double-short S&P 500 ETF, symbol SDS, that’s large enough to cover the value of your portfolio. This is known as a hedge and should go up at least enough to protect the value of current positions investors wish to hold, although in such an environment, perfection is not guaranteed.
But if you’re not heavily invested, perhaps the best advice is to sit back and watch the gruesome fun. It’s not every day that an ideological government chooses catastrophically self-destructive grandstanding over a more logical path. But it’s what we’re viewing today and this week. Don’t imagine it can’t happen here.Click here for reuse options!
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