The market action today seems somewhat contradictory to my current belief that the market wants to go up. Well, it does, even if it is going bonkers today over the latest chapter leading to a close in the story that is Greece these days. My-oh-my, that great country has come a long way from Plato’s influential philosophy.
- With not much corporate news out Friday, traders said declines were driven by downbeat headlines about Greece’s financing talks.
This is coming down to the wire, but don’t be fooled by the media attention. The fact is this: imagine you fall behind on your mortgage payments, your other bills exceed your income, and you just lost your job. Well, the bank would foreclose and your other creditors would come after you for the money. In the meantime, you file Chapter 11.
- We’re in a quiet period…so that means news on Greece is likely to have a greater impact.
Greece will do the same if it defaults on its loans to its creditors, and that would mean life would get pretty rough in that bastion of sunshine and civilization’s history. So, it is hard to imagine the market has anything to fear, other than the idea of a default from Greece.
The market is also fretting about the Fed meeting next week. Is it possible that Ms. Yellen will announce when the Fed will begin to raise rates?
- It’s really people preparing for Greece and the Fed next week. People are selling equities and buying bonds. They are getting a bit more defensive.
Perhaps the market is getting “more defensive,” but the question is: does it need to be defensive now? After all, the inner workings of the Fed suggest it might be sometime before it actually does raise rates.
- Fed officials in March estimated this “natural rate” of unemployment at 5 percent to 5.2 percent. Unemployment stood at 5.5 percent in May. A new paper by Fed board staff shakes up this view by suggesting the number could be as low as 4.3 percent.
Wow! There’s nothing like changing the goal posts in the middle of the game. If the Fed board adopts this new employment baseline, it will be some time before the Fed even thinks about raising rates. What on earth will the market do then? By then, Greece will be history (again), and the US and global economies will going full steam if unemployment is at 4.3%.
Are you ready for yet another boogeyman created from the mind of an economist who says the following keeps him up at night?
- The share of mortgage borrowers underwater in the first quarter was down 3.4 percentage points from 18.8 percent at the same time last year, according to the Zillow data. That’s a marked slowdown in the pace of improvement from the 6.6 point drop in the 12 months through March 2014.
The pace of decline is slowing, and that is a problem, of course, because it then allows the economist to apply his computer models or to simply extrapolate that if something happens before the underwater numbers drop to less than 5%, which is normal, the whole dang system will collapse.
Keep in mind, the number of underwater borrowers was over 20% in 2012, and today it is 15% (roughly), which means the actual number of homeowners underwater has dropped by some 20%. The number of underwater homeowners is dropping substantially from the peak in 2012, but that is not enough for some folk. As I have said so many times, hilltop screamers abound.
To be honest, I had to think a bit about the math above, which brings me to another point – the US educational system needs to come into the 21st century, and who better to do that than a former Google executive who applies the successful Google business model to education?
- What Happens When an Ex-Google Executive Creates a School System?
It is a fascinating read, so take the time to look this one up, especially of you have kids in school. Just copy and paste the above headline into Google search and voila … That exec might be onto something.
Trade in the day; invest in your life …
