The Short End of the Long View


Greece..The fires are burning in Athens, but the mood from the Troika has been colder than the weather in Eastern Europe. While Greece finally agreed to the terms of its next bailout, the European powers have delayed the much needed next capital infusion pending yet more Draconian austerity for the country. For Greece, it is as though the effects of the chemotherapy are worse than the cancer.

One has to wonder if the Greeks will initially agree to almost anything, then say down the road, “Sorry that you believed us, but we really can’t service this debt (unless of course you lend us more to service your current debt..) and the country has grown to a halt, so we will have to default.”

Following a furious move on the upside for the equity markets across most sectors, market caps, and styles, the markets are now pulling back for the first time since the beginning of 2012  — perhaps reflecting continued concern with the Greek issue.


Oil..The trend has been toward firming GDP in the US, and China is showing signs that it may be past its concern over inflation and ready to stimulate its economy overtly with looser monetary policy.  The situation in Syria is not good for their oil exports.  Same case with Iraq, where in the absence of US military presence, the regime can pursue its sectarian policies — risking a civil war among the various Muslim factions in the country.  Then there is Iran, with its heavy saber-rattling about its nuclear program drawing more attention from the Israelis.  Add to all this the low level of reserves in the US, and you have a recipe for higher oil prices.

A recent Wall Street Journal article raises the concern that costlier oil could derail the nascent recovery. This would not be the first time that this has happened. The Fed is running out of bullets. They have already stated that a zero-interest policy will be in effect through 2014. There is little that the monetary authorities can do to offset the drag of higher oil prices.

Oil is one of those commodities that has what economists call a “second order effect” when its price is rising. That is to say that oil affects a number of prices because it is the major factor in energy costs for almost everything. Not only does the consumer feel it at the pump and every time the oil delivery truck pulls up, but also when purchasing other consumer products across the board.


Banco Della Cosa Nostra..  The Telegraph reports that the Mob has increased its “lending “practices in Southern Italy in the wake of the credit crisis in Europe. Reportedly the Mob has accrued 65bb Euro which turns a profit of 140bb Euro. This would make it the largest bank in Italy! And certainly the most profitable.  They are doing plenty of lending and they don’t own any Greek debt! Their hours are flexible (unlike most establishments in Italy) and they require little documentation.

This is an effort that would make Tony Soprano proud! Bad debts are dealt with swiftly and repayment schemes incentivize those who can still walk to pay promptly…


  1. Greece is going bankrupt and contagion will spread. Now talk of another $2T in bailouts for EU is outrageous.

    Oil will go up and Middle east will continue on this Cold war era tactics until one country snaps and a chain reaction is unleashed.

  2. Greek issue is the biggest concern in the Eurozone indeed. As for France, in fact they are the 5th largest economy in the world and 2nd in Europe (based on GDP) already had public debt exceeding 60% of their GDP. IF continue to bailout Greece then the country could lose to the UK. As for Greece, can Greece be part of Germany? Many financial analysts have calculated the debt of Greek debt might disappear if Greeks become Germans.

  3. As I mentioned “exceeding 60% of their GDP”, I meant to say the debt is way over the Eurozone limit. As you mentioned earlier on European market, it is already 205% debt of its GDP!!!

  4. Greece finally defaulted on its debt but that does not seem to resolve the financial crisis. The debt has been restructured and put off till later date although the main issue remains – no money! The bond entirely has been turned into swap that decreases annual interest payment. This makes it more possible for euro-zone to give more aid loans to Greece and make it more indebted to other euro countries!It will probably take a long time for Greece to get back to normal economic performance, and more loss is to be seen in the future!

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