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…