Sunday, June 28, 2015

Soos Global Investor Update...Weekend Alert...Greece and China

Thought I’d share some informal comments that I expressed in an email chat w/an investor this afternoon focusing on the weekend events in Greece and on China’s easing in rates on Saturday.   (But first, a word from our friendly Compliance folks:  (A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.  We're delighted to hear thoughts and comments.  Thx!)

Now, back to Greece and China….
With Greece and the EZ, It’s brinksmanship at its best.  Both sides playing chicken.  In the end, I think that Tsipras has played the EZ countries for fools….making them believe that he’d really push through reforms in exchange for more bailout money.  His call for a referendum for July 7 was obnoxious b/c it’s well after the date that he’d already be in default on an IMF loan, and beyond the end-date of the EZ bailout program.  What could the goal of a referendum be?  To show proof positive that the people of Greece want to continue living beyond their means and on the backs of hard working countries in the EZ who would be supporting them?! 
Bottom line, the Grexit has been so well advertised, that it would seem unlikely that a global financial meltdown would ensue. The shuttering of Greek banks on Monday will help the ‘run’ issue (at least for a day).  That said, one would expect lots more volatility in all markets, especially the in the FX market.  There could be some ‘blowups’ of hedge funds or other investors who took sizable bets on Greece one way or the other.  Some FX firms have already announced this afternoon that trading starting tonight in the EUR will be curbed through either higher margin req’ts and/or only allowing liquidation of existing positions but no new positions.  So the ‘circuit-breakers’ that are meant to prevent a cataclysmic global meltdown appear to be already underway.
We might see a bullish move in the USD and USTsys as a ‘flight to quality’.  We might also see a selloff in other PIIGS such as Spain and Italy, though I think they’re not an immediate credit threat like Greece has been.
Now, there’s always the possibility that the EZ countries cave and actually play into the hands of the Greeks and extend the bailout as a way to allow time for a more orderly, calm Grexit. But we’ve been down that road lots of times before and that’s what’s brought us to today.
Another thing to note, away from Europe, is China’s easing over the weekend….good news!  The fact that it took a nearly 25% meltdown in the Shanghai equity market in approx one week to motivate the move does show some sign that the PBOC does want the equity market to stabilize as a way for people to feel good (and more wealthy) and for companies to access the capital markets for funding rather than just from banks.  But even there, the cut in rates and in reserve req’ts are clearly easing measures meant to kick their economy in the you-know-where!!  That should be good for EM stocks and good for Australia.  Realistically, the mess in Europe may obscure the Asian events.  If so, I may see that as a window to add to those type of positions.
Going to be interesting, especially in a holiday shortened week with the NFP on Thursday!
Rock ‘n roll!!!
Seat belts and helmets!!

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