Greek Public Sector Corruption and Tax Evasion

The Greek Prime Minister has to tackle long-term reforms

Wall Street Greek's International & Economic Affairs Columnist Pietro Rabassi bravely engages Greece's Prime Minister Papandreou to tackle the real problem behind the Greek financial crisis, public corruption and widespread tax evasion.

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Greek Public Sector Corruption and Tax Evasion

For two-and-a-half millennia Greece has proudly hosted the Acropolis - the symbol of Western civilization. On 28 April 2010 the Greek financial bubble exploded: Greece has betrayed this pride by almost going bankrupt, leading critics to pompously ponder the sale of Greece's ancient and core assets, including the Acropolis and the Greek islands. However unlikely that possibility is, the hope for a long-term recovery is very slim otherwise.

On 2 May 2010 the IMF and the Eurozone rescued the Greek economy. As a guarantee for the rescue package, the Greek Prime Minister George Papandreou elaborated a detailed recovery plan to raise billions of Euros to salvage the Greek economy: public sector employees had their salaries reduced or, for levels below 2,000 EUR, frozen; the retirement age for men and women were equalized and brought on average from 61 to 65; the value added tax (VAT) was increased; taxes were raised on alcohol, cigarettes and fuel. Some measures were applied also to the wealthier population: luxury taxes were increased by 10%; bonuses were to be abolished at public banks and taxed at 90% in private ones; Google (Nasdaq: GOOG) maps have been used to track undeclared swimming pools.

Yet the recovery plan is shortsighted because it fails to solve the deep problems in Greek society: corruption in the public sector and tax evasion.

These two problems are estimated to cost the Greek government up to 20 USD billion per year and to represent up to 30% of GDP.

An Example:

Have you ever been to a public hospital in Greece? Do you want to avoid waiting longer than a year to have a medical appointment? We have a solution for you: an envelope with a couple hundred Euros. You can be quite confident that the doctor will wisely invest his yearly collection of envelope money to buy a new car or perhaps build a new swimming pool in his villa in Kifisia, one of the luxurious areas of Athens. Why shall he waste time in declaring his envelope money to the Greek authorities? And of course, he knows that all his neighbors have a pool but that nobody declares them: why shall he be different from his neighbors?

Our Letter of Suggestion to the Greek Prime Minister:

Your Excellency, we would like to remind You that it is Your duty to fight corruption in the public sector and to enforce the taxation laws. You should make sure that the rule of law is applied and respected at all levels of society, by the more and less wealthy. This means challenging and changing the current Greek way of life where it is flawed: this may be hard to implement but it is the best long-term solution to avoid future crisis and to establish a more efficient government.

How can You achieve this? There are four avenues.

First, improve the quality of the services Your administration provides by accounting for fraudulent public servants. Only when Your citizens see that the public services are of good quality, will they feel stimulated to pay taxes and co-operate with the government. Let us look at one example. You could hire some young college volunteers or NGOs (rewarded as 'Presidential fellows') to serve on a rotational basis for 6 days a week for at least 6 months in the lobby of major public hospitals. They will invite people to fill out an anonymous survey on whether they have been treated correctly with no corruption requests. If they feel they have been encouraged to bribe, the Presidential fellows will invite them to address the Ombudsman. The Ombudsman will be located in an easily accessible place in the hospital and will report to an anti-corruption team whose chief will report directly to You. This will exercise pressure on the public hospital employees to avoid corruption. If You advertise this, the media will love it and the pressure will be even higher.

Second, to encourage people to declare their assets and revenues, You could grant a tax amnesty on their first declaration. Alternatively, You should train your tax inspectors to detect any immovable asset. You should require tax payers to auto-declare the value of their immovable assets. The State would reserve its right to buy them out at a price 10% higher than their declared value if the market value was different from the declared value. This way, assets will be likely to be declared at their market value!

Third, You could run campaigns in schools, on TV and in public meetings. These campaigns would educate citizens on how important it is to declare their assets and pay taxes: only if they pay taxes, they can expect the government to provide public services.

Fourth, after implementing the other three avenues, You will be able to effect many popular actions for the Greek nation with the billions of dollars that You will have raised. For instance, you might increase the wage of the public servants that have been so angry with You when You cut it down!

If You fail to ensure a long-term recovery, You may really need to sell our beautiful Greek islands. Are You planning to sell the Acropolis soon? Before it is renamed as the AT&T (NYSE: T) or the Bank of China Palace (OTC: BACHY.PK), I would be interested in buying it, not only because it is the symbol of Western civilization, but mainly to save the dignity of our great ancestors and our national pride.

Pietro G. Rabassi
Πιέτρο Γ. ΡΑΜΠΑΣΙ



Editor's Note: This article should interest investors in National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Deutsche Bank (NYSE: DB), Banco Santander SA (NYSE: STD), IberiaBank (Nasdaq: IBKC), Barclays (NYSE: BCS), Mitsubishi UFJ Financial (NYSE: MTU), Itau Unibanco Holding (Nasdaq: ITUB), Lloyd's Banking Group (NYSE: LYG), Mizuho Financial (NYSE: MFG), Banco Santander- Chile (NYSE: SAN), Citigroup (NYSE: C), Allied Irish Bank (NYSE: AIB), Credicorp (NYSE: BAP), Westpac Banking (NYSE: WBK), Grupo Financiero Galicia (Nasdaq: GGAL), Banco Latinamericano de Comer (NYSE: BLX), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Spanish Bond Spread Widens, European Unemployment Grows, Indian GDP Thrives

International Markets

Today's international market news drove broad declines across Asian and European equity markets. In Asian, Indian GDP surged in the third quarter, but both India and China are tightening monetary policy in response to rising inflation. In Europe, the opposite is true. Austerity is choking economic growth and economies are failing. This morning, debt spreads widened significantly across Spain, Italy and Portugal on default concerns amidst a report of rising unemployment across Europe.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Spanish Bond Spread Widens, European Unemployment Grows, Indian GDP Thrives

European Debt Sells Off

Investors sold off the government debt of Portugal, Italy and Spain Tuesday on fear that the thunder will roll from Greece, to Ireland and across Europe's trouble spots before preemptive austerity measures can have any impact. The yield on Spanish 10-year bonds moved as high as 5.7%, 3.05 percentage points greater than the German 10-year. At this time last week, the difference only spanned about 2 percentage points. The Italian 10-year bond opened up a 2.1 percentage point spread, the most since the launch of the age of the euro. Portugal, the next in line to fail according to most pros, saw its bonds move in the same direction.

European Unemployment Record

Unemployment in Europe climbed to a 12-year high. Eurozone joblessness increased to 10.1%, with an extreme 20.7% rate measured in Spain. The next highest rates were seen in Slovakia (14.7%) and Ireland (14.1%). Italian unemployment moved up three-tenths of a point, to 8.6%, while French joblessness improved to 9.8%, from 9.9%. The German labor market also improved over this last month.

Dollar Gains on Foreign Troubles

With all the concerns about Europe, the dollar and yen drew capital, gaining on the euro Tuesday. The dollar is headed toward its first monthly rise against the yen since April, despite QE2. Given the disintegration of Europe and tensions surrounding the Korean Peninsula, the dollar has gained about 0.3% on a Bloomberg compilation of the currencies of 10 developed nations. The yen is doing well also, as you might imagine, rising 12%, while the euro has shed 9.1% against the group in 2010. Today, more money is flowing into dollars and yen, but the Chinese yuan weakened against the yen on speculation it will tighten monetary policy to cool its economic growth.

Indian Growth Heats

India grew its GDP by 8.9% in Q3, exceeding analysts' expectations. Thus, India is expected to raise interest rates, like China, to tame growth. India's second quarter growth was revised higher as well, to 8.5%. Economists are attributing the growth to domestic drivers, favorable weather and foreign investment. Developing market expansion is acting as a nice counter-balance to western weakness, keeping the hemisphere's distress somewhat salvaged. The risk to India and China is runaway inflation, and so India has raised rates for the sixth time this year. CPI measured 11.6% at last check in India, mostly due to higher food prices.

International Market Movers:

Europe:

* ESTX 50: -1.0%
* FTSE 100: -0.4%
* CAC 40: -1.0%
* DAX: -0.4%
* IBEX 35: -0.9%

Asia:

* NIKKEI 225: -1.9%
* Hang Seng: -0.7%
* S&P ASX 200: -0.7%
* CSI 300: -1.7%
* KRX 100: +0.4%
* BSE Sensex 30: +0.6%

Relevant tickers include National Bank of Greece (NYSE: NBG), Dexia (OTC: DXBGF.PK), Commerzbank (OTC: CRZBY.PK), Barclays (NYSE: BCS), Lloyds (NYSE: LYG), Royal Bank of Scotland (NYSE: RBS) and Credit Agricole (NYSE: ACA), Deutsche Bank (NYSE: DB), Credit Suisse (NYSE: CS), UBS (NYSE: UBS), Banco Santander (NYSE: STD), Allied Irish (NYSE: AIB), Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), NYSE: UNB, Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), PNC Bank (NYSE: PNC), Morgan Stanley (NYSE: MS), NYSE: RY, NYSE: BAP, NYSE: KEY, iShares MSCI Spain Index (NYSE: EWP), The Ibero-America Fund (NYSE: SNF), The Ibero-America Fund (Nasdaq: XSNFX), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX), Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Trade Deficit Expands in June 2010

Trade Deficit Expands

It looks as though June's stronger dollar played a short-term role in international trade. The latest trade report showed an expanded deficit, mostly due to the trade of non-petroleum goods and an expanded trade deficit with China, the EU and OPEC nations. We found it troubling to see exports fell in June, while imports grew. The best case realistic scenario is one where both imports and exports are growing.

Markos N. Kaminis earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, for Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV & radio. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

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Trade Deficit Expands in June 2010

The headline report today came in the form of the International Trade data for the month of June. The report was released in the pre-market, and offered an exaggeration of expectations. Economists expected the deficit to show modest expansion in June, to $42.35 billion. Rather, the deficit widened broadly to -$49.9 billion, the widest mark since October 2008. While a return to the economic activity of years past should translate into higher trade deficit, the drivers this month were not entirely positive in nature. The trade deficit for June will also play a negative factor in Q2 GDP revision.

The deficit expanded, not due to faster growth in imports than exports, which would be healthy and normal historically speaking, but due to polar divergence between imports and exports. While imports increased by $5.9 billion, exports dropped $2.0 billion against May levels. All the action was centered around the trade of goods versus services, and goods carry 3.4 times the importance of services in trade, based on June's data.

You might have expected the deficit to be greatly impacted by reduced European demand for US exports given EU issues, and the deficit between the EU and US did expand to $7.8 billion, from $6.2 billion. However, it was an expansion of the trade deficit with China that did most of the driving in June, with deficit expansion to $26.2 billion, from $22.3 billion.

The deficit also expanded between OPEC nations and the US, to $8.9 billion from $7.8 billion. We would expect this to be the result of change in the price of energy and petroleum based goods in June. However, oil prices came down sharply from May, and the average price of oil in June was lower as a result of little change through the month. Indeed, the non-seasonally adjusted petroleum deficit stood at $21.2 billion, while the non-petroleum unadjusted deficit was $40 billion. The government notes the numbers do not add up due to seasonal adjustment and rounding. Petroleum imports greatly outweigh exports, and so the petroleum trade deficit actually narrowed slightly in June. It seems something else is driving the general trade deficit expansion between the US and OPEC nations. After inspection, it was the seasonal adjustment to petroleum trade that led to the expansion, and volumes demanded increased by 32 million barrels. Perhaps Gulf moratorium and related issues played a role.

The details of the report show that the deficit was mostly driven by decreases in the export of capital goods ($1.4 billion), industrial supplies and materials ($1.0 billion) and increases in the import of consumer goods ($3.1 billion), automotive vehicles and parts ($1.3 billion), other goods ($0.6 billion) and capital goods ($0.5 billion). The decrease in exports is troubling in this context against a sharp increase in imports, and it may be due to the stronger dollar that existed in June.

The euro and British pound have gained ground against the dollar over the past month though, thanks to EU stress tests, and the yuan is doing the same on China's economic reins. However, in light of the latest Fed informal forecast published within its monetary policy statement, risky assets are selling off and the dollar is strengthening again.

Buyers of commodities are global shoppers, and will take from cheapest source; it seems where options exist and where differentiation is minimal, the US can't compensate its exporting activity for dollar strength. The good news is that we're a finished goods producer, wherever we still produce goods. However, with the rapid development of the emerging world, perhaps the American differentiation advantage dissipates. Perhaps then trade is even more sensitive to currency fluctuation, in the world's favor versus the US. This brings currency policy with unfair players like China into focus, and so expect to see a rising argument in the American political spectrum.

The gain in imports may also have been affected (like exports) by relative dollar strength in June, versus the organic demand for goods we would hope for in economic recovery. Are American products losing their luster overseas and at home, as we demand more payment in foreign currency and find cheaper foreign goods more appealing? I would not lose too much sleep over this, as I think it's clear this is only a temporary effect, as the dollar should lose value over time (and has since June), in my long-term view. Also, transportation costs look to rise as global growth resumes and pressures fuel prices again, putting pressure on foreign producers selling into the states.

I also look for (hope for) an American manufacturing revival in the alternative energy technology space, which could boost demand for American differentiated goods again overseas. I'm not just speaking to solar panels, but to the autos and other goods that will include new and hopefully well protected technology. This is something any American president should be seeking, as the nation has its working class majority to provide for, as well as the sophisticates we all seem to think we are.



This article might also interest investors in Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Norfolk Southern (NYSE: NSC), Canadian National Railway (NYSE: CNI), CSX (NYSE: CSX), Union Pacific (NYSE: UNP), Federal Express (NYSE: FDX), UPS (NYSE: UPS), Kansas City Southern (NYSE: KSU), Burlington Northern Sante Fe (NYSE: BNI).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

European Banks Stressing Testing

Coming Clean

European banks are being asked to come clean, but the EU might not be thrilled with what the search turns up. The application of American style stress tests on European banks seems sure to uncover hidden assets, burrowed bad loans, lax and otherwise questionable lending activity, and just general trouble.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

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European Banks Stressing Testing

While US investors took a breather for the celebration of Independence Day, all was not at ease overseas on Monday. Ambiguity seemed to remain around the European version of bank stress testing, with investors expressing concern about how Europe plans to resolve issues with troubled banks. Institutions also worried that the tests may not go far enough to satisfy the investment community. Questions may still remain whether Europe's banks could withstand the toughest of times (read sovereign default). However, EU Economic and Monetary Affairs Commissioner Olli Rehn said (in his usual painful stutter) full transparency would be demanded with sovereign default risk factored in. As long as the Europeans come clean and at the same time offer a plan for troubled financial institutions, there may be hope to bring the valuation gap between US and EU banks in line. The valuation difference is approximately 20% on price-to-book ratios. However, we suspect what the Europeans turn up might just be more concerning than what we don't know now. Perhaps American style economic solutions simply will not fit Europe's shoe size, or maybe it's just time Europe change its ways. That's a sad thought though...

There remains great concern about the state of the European banking system. Europe's banks have written down or off less than half the assets of US banks (percentage basis), and there's some evidence that Spanish banks are hiding real estate loan losses on their balance sheets. This is very likely not limited to Spain though, and mark-to-make-believe is still en vogue in Europe among volatile securities, thanks to crisis implemented accounting rule changes. The EU says it will disclose the results of its stress tests by the end of July, but we have to wonder if they are still feeling okay about that after seeing the early showings. For now, investors would like to at least see the criteria of the stress tests disclosed. This will be Europe's chance to prove to investors that it means business, and will force banks to come clean. Without signs now that EU bank results will not be fudged nor withheld, investors simply cannot embrace the idea. In the end, the EU might be better off not looking at all anyway.

European bank shares came under pressure Monday due to stress test stresses. The day's loser list included Barclays (NYSE: BCS), Lloyds (NYSE: LYG), Royal Bank of Scotland (NYSE: RBS) and Credit Agricole (NYSE: ACA). Deutsche Bank (NYSE: DB) cannot even escape concerns, with worries about the German banks use of accounting rule changes to avoid writedowns. The Swiss banks are favored by some due to their heavier write-downs, but Swiss banking business also took an important hit when the banks agreed to give up names to the US IRS (so I am not in that boat). There also remain significant concerns about second tier regional banks that have been exposed to real estate revaluation.

The Difference in Shoe Sizes

The situation is just messier in Europe because of the European way of life. As the EU tries to implement US tactics, I expect they will discover they do not fit as well over there. I must admit to admiring and enjoying the European way of living, for the few weeks of the year I used to soak it up. However, it's clear that this relaxed attitude can no longer extend to business, or the euro will sink to below parity.



Relevant tickers include National Bank of Greece (NYSE: NBG), Dexia (OTC: DXBGF.PK), Commerzbank (OTC: CRZBY.PK), Barclays (NYSE: BCS), Lloyds (NYSE: LYG), Royal Bank of Scotland (NYSE: RBS) and Credit Agricole (NYSE: ACA), Deutsche Bank (NYSE: DB), Credit Suisse (NYSE: CS), UBS (NYSE: UBS), Banco Santander (NYSE: STD), Allied Irish (NYSE: AIB), NYSE: BAC, NYSE: GS, NYSE: JPM, NYSE: C, NYSE: UNB, NYSE: WFC, NYSE: TD, NYSE: PNC, NYSE: MS, NYSE: RY, NYSE: BAP, NYSE: KEY.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

British Austerity

Wrong Way Winston

British austerity measures were announced today, and while the British budget chief says they're fair, we think the details show otherwise. Whether they are or not, extreme fiscal management at times like these is precisely the wrong thing for Winston to do now - as prescribed by Ben Bernanke. Given that the entirety of Europe seems to be engaging in the new fad called austerity, we expect economies to tank across the pond, nationalism to rise and the union to possibly crumble.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

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British Austerity

British Treasury Chief, George Osborne called it "the unavoidable budget". Some have billed the new British measures as the toughest peace-time fiscal management action in UK history. Others compare it to the spending retrenchment of the early Thatcher years. The budget unveils spending cutbacks amounting to $25 billion over the next five years.

Osborne said the cuts would not impact the least privileged (a kind way to say poor), but take a closer look. A good portion of the British budget cuts target welfare spending. For instance, there will be a three-year freeze on benefits paid to parents for raising children. The poor generally have children, and more of them than the too-busy-to-be-bothered nanni hiring upper crust. The costs of raising children is more of a burden to the poor than rich as well, but you cannot ask human beings to not have any children, a gift of life.

The budget also limits subsidies for public housing, and it will employ new qualifications (read more critical) for those receiving benefits due to disabilities. This Osborne chap seems to be speaking out of one end of his mouth and acting with the other. Hey, a blank statement that the poor will not affected will not stop the media from reporting that it does, chap.

In keeping a fair balance to those who pay for British cutbacks, the U.K. will raise its retirement age, squeezing the most it can out of its aged. I guess it's only fair that the grayed and crooked work a little longer for the good of London, and take some more stress off the rich and well-to-dos. So we punish the poor and the old then aye? I guess London is counting on those folks being too feeble and weak to protest. To be fair, people are living longer these days due to advances in medicine, and they are in better shape as well generally. Maybe we can let this one pass.

What can't pass us by is the British move to raise the Value-Added-Tax to 20%, from 17.5%. The value added tax ensures producers and sellers do not simply pass on taxes to customers, without paying anything themselves. Instead, producers and sellers pay a tax, while still passing the increase on to you. Also, this type of tax does not distinguish between rich and poor, and so the poor end up hurting more because of it, since the money they pay represents a greater portion of their income. Winston, you've done it again! How the new British Administration can pass these measures off as supportive of the poor and elderly is bewildering to me.

While Winston raises $16.3 billion through 2015 via welfare cuts, he'll raise just $2.9 billion via a tax on banks (I don't like indiscriminate taxes either, but this is supposedly to insure against future bank related risks - like the ones just seen played out). Okay, he's also raising the capital gains tax, though he is almost apologetic about it, not via his words, but as voiced by his cutting of welfare (it seems to me an appeasing action for the cold-hearted among the rich in my view). The only bit of aid to the elderly that I can find is Winston's promise to state sponsored retirees, providing them with cost of living increases to their pensions. I guess Winston is just protecting his own here; don't forget he'll be a state sponsored retiree some day. Gee, thanks Winston... Also, he said he would "make sure that the measures are fair." Well, thanks again, but actions speak louder than words.

The U.K. wants to avoid crisis, but while not there yet, you might consider less aggressive actions spread over longer time span. Or, you might try being a bit more creative and perhaps original in finding money, instead of hitting up the poor. It's just so cliche'! It's even reminiscent of old school monarchies situated right there in jolly old England. Well, that spurs a thought - perhaps if the king is back, then Robin Hood might return as well.

I'm a buyer into the the Keynesian view that we cannot pull away life support, or rather the bare essentials, from our struggling economy, lest we flirt with depression. But you do not have to take my word for that; just read the statements of Fed Chairman Bernanke over the past three years.



This article should interest investors in the shares of Barclay's (NYSE: BCS), Lloyds Banking Group (NYSE: LYG), Allied Irish Bank (NYSE: AIB), British Airways (NYSE: BAY), BP (NYSE: BP), British Sky Broadcasting (NYSE: BSY), Currency Shares British Pound (NYSE: FXB), DFA United Kingdom Small Company Fund (Nasdaq: DFUKX), iShares MSCI UK (NYSE: EWU), NYSE: BAC, NYSE: JPM, NYSE: GS, NYSE: MS, NYSE: C, NYSE: DB, NYSE: CS, NYSE: UBS, NYSE: STD, NYSE: WFC, NYSE: NBG, NYSE: AIG, NYSE: FNM, NYSE: FRE.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Secret Swiss Bank Accounts Expose Switzerland

Turn your account info in to the IRS or your old pal (wink, nod) at the Swiss bank office will turn you in. The Swiss government today concluded a long drawn-out legislative and legal process, finally allowing and enabling Swiss banks to turn over the names of account holders to international authorities investigating tax evasion.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: UBS, NYSE: CS, NYSE: FXF, NYSE: EWL, NYSE: SWZ, Nasdaq: XSWZX, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Secret Swiss Bank Accounts Expose Switzerland

Your favorite secret Swiss banker is turning you in, and if you have ignored the IRS' kind offer to disclose your account information ahead of time, you might find yourself in prison soon. UBS (NYSE: UBS) cut a deal with the US government some time back, through which it agreed to a retribution payment of $780 million to cover its enabling of American tax fraud via Switzerland's secret bank accounts. UBS representatives faced criminal prosecution if they did not agree to talk names, and UBS itself had to weigh the potential loss of its US business, which hung in the balance. In the end, the Swiss sold you out - all you who were using Swiss banks to hide assets from your wives and wealth from your governments.

After the agreement though, the proud Swiss, a nation that has attracted so much banking wealth due to the secrecy of its system, determined the deal illegal. A Swiss court ruled that it violated Swiss law. Thus, the law would have to be altered for the deal to be consummated. Certain Swiss politicians did not like the idea of their nation possibly falling into the cross hairs of the United States, and so took up political debate on the topic. Today's action basically averted a public referendum that would have led Switzerland to cross the line the Americans drew in the sand.

When the deal was first penciled in February of 2009, we wrote "Yesterday's news that UBS would settle with U.S. tax authorities, and in so doing, provide information on U.S. investor funds kept in secret accounts, has effectively destroyed significant value in Swiss bank firms. The secrecy distinction served as a differentiators, providing Swiss banks with a means of drawing excess deposits from rival institutions across borders. That's not to mention the aristocratic appeal of Swiss banking, which mostly resulted from its exclusivity and secrecy."

In March 2009, we added, "Call me crazy, but this looks like a mistake to me! The Swiss have decided to play by the rules, adopting OECD standards on tax evasion. They will offer specific information to tax authorities in cases where convincing evidence is available. Clearly though, that is going to be somebody's opinion to form. The Swiss believe that not sharing information in this limited manner would effectively blacklist them at the OECD and maybe more organizations, and they expect that would threaten their banking system and economy. A great portion of the world's capital is hidden away in Swiss accounts for a reason though, anonymity. I would trade blacklisting to keep that, as it is the elite and exclusive stigma that attracts large depositors, and in some (read many) cases dirty money. I think the Swiss will see a loss of funds now, though many other once discrete banking options are lining up to play by the rules as well. From an idealist's and also honest man's perspective, and not a businessman's, I like the Swiss decision. I just think it's bad business is all, however ironic that may be."

A ton of money already bled out of the Swiss banks ahead of the pending account disclosures. Capital found its way to other similarly secret markets like Luxembourg, Singapore, Cyprus and Dubai. Still, some money surely stuck around, expecting the Swiss government to preserve its banking market appeal. While Switzerland was not the only game in town, it was the one westerners (and easterners for that matter) were most comfortable leaving their billions with.

Switzerland is not a part of the European Union, nor does it use the euro single currency, so we might not see an obvious reason to attribute EU pressure to the decision. The risk of losing the American market is catalyst enough, but recall Germany and France took strong stances against Swiss banking policy as well. Once tax income became scarcer, the Germans wanted their rightful share of monies hidden in Swiss accounts. Losing Europe and the US made the Swiss decision easier, though still painful. I would not be investing in Switzerland or Swiss firms today. Swiss stocks inched higher on the salvation of western business, with both UBS (NYSE: UBS) and Credit Suisse (NYSE: CS) fractionally up, but over the long-term, this hurts the Swiss economy in my view.



Article should also interest investors in Deutsche Bank (NYSE: DB), Banco Santander SA (NYSE: STD), IberiaBank (Nasdaq: IBKC), Barclays (NYSE: BCS), Mitsubishi UFJ Financial (NYSE: MTU), Itau Unibanco Holding (Nasdaq: ITUB), Lloyd's Banking Group (NYSE: LYG), Mizuho Financial (NYSE: MFG), Banco Santander- Chile (NYSE: SAN), Citigroup (NYSE: C), National Bank of Greece (NYSE: NBG), Allied Irish Bank (NYSE: AIB), Credicorp (NYSE: BAP), Westpac Banking (NYSE: WBK), Grupo Financiero Galicia (Nasdaq: GGAL), Banco Latinamericano de Comer (NYSE: BLX), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), NYSE: FXF, NYSE: EWL, The Swiss Helvetia Fund (NYSE: SWZ), Nasdaq: XSWZX.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Spain's Financial Stress Test

Ole!

Spain, while under financial stress, is seeking to employ financial stress tests upon its banks. The action could prove the perfect medicine for what ails Spain, providing investors comfort in the condition of the Spanish banks and potentially alleviating pressure on Spanish borrowing costs.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: EWP, NYSE: SNF, Nasdaq: XSNFX, NYSE: EEA, Nasdaq: VEURX, NYSE: PEF, NYSE: EKH, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, NYSE: RNE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: FEUFX, Nasdaq: FIEUX, Nasdaq: IERAX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: PEUGX, Nasdaq: RYAEX, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Spain's Financial Stress Test

Spain auctioned off long-dated government bonds today. With Spanish yields pumped and bond prices relatively low, and with Spain seemingly still distant from disaster, domestic demand for the new issuance was strong. The Spanish Treasury sold a combined EUR3.479 billion of the 4% April 2020 and 4.70% July 2041-dated government bonds, just slightly short of the upper end of the EUR2.5 billion to EUR3.5 billion range it targeted. It actually received EUR6.83 billion worth of bids for the bonds, so the news was somewhat reassuring this morning.

Still, like Greece, the Spanish government contends against paying high yields for its borrowings which the Europeans tend to blame on speculators. The spread on Spanish government bond yields over German bunds, the euro zone benchmark, Thursday reached their highest levels since the introduction of the euro currency. The average yield on the 10-year bond marked 4.864%, compared with 4.045% at the previous auction in May.

Those who understand market dynamics know that anomalies work themselves out if profit does not follow a trade. So, patience is warranted in Spain and Greece, though definite and creative financial efforts are wise now to secure financial stability, and in turn, bring borrowing costs down. I say creative, because I believe simple direct taxation and budget cuts are ill-timed now and too ambitious; they threaten to do significant damage to the Greek economy, and the same applies to Spain. I reiterate my often-stated belief for the same reason Ben Bernanke professes against such action in the US; it's because it is precisely the wrong action to implement during recession (lessons learned from the Great Depression). I again say, spread out austerity over a longer time span, support your EU brethren, and find more creative ways to restore fiscal responsibility.

Spain is engineering an effort to mitigate its borrowing costs, and it is employing a borrowed idea from the US Federal Reserve's recent history. Germany is boldly pushing its EU partners to publish bank stress test results, which might help to support the Spaniards (considering they want it). We are assuming Greece would rather not know what lies beneath the balance sheets of its local money lenders, though we hear the National Bank of Greece (NYSE: NBG) has diversified risks and might be fine.

It's possible that enough other (i.e. Hungary) nations have something to hide to keep the stress test results from being published in detail. The tests are currently underway, but a previous test led to a vague release of information, rather than the detail that would truly appease the market.

The Europeans just don't get it when it comes to market psychology. Investors will not take a vague reassuring statement seriously. European cluelessness on this topic is what drove Greece to the cliff's edge. The market wants transparency and action! Kudos to the Spaniards for moving forward in this way, but let's see what gets published before we raise their hand in the air. The Spaniards face significant borrowing repayments in July, and high borrowing costs must not persist for Spain to avoid trouble. In case you did not realize it, it is the pressure of the bond market that has Spain and others moving preemptively. Thus, the free market is acting in a favorable manner, pushing financially irresponsible nations to get their act together.



Editor's Note: Article should interest investors in iShares MSCI Spain Index (NYSE: EWP), The Ibero-America Fund (NYSE: SNF), The Ibero-America Fund (Nasdaq: XSNFX), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

China Exports Ramp

Today's Coffee

A ramp up of exports out of China helped to appease global market concerns today, but US Administration statements killed the party for the Chinese.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, Nasdaq: CAAS, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: SOLF, Nasdaq: CSUN, Nasdaq: BIDU)

China Exports Ramp

The global investment community had grown increasingly concerned about China, its building asset bubbles and its plan to control them; and the impact China might see from troubles within its most important trading partner - Europe. China eased those concerns today though, as it reported May exports surged 48.5%! Imports reportedly also increased sharply, rising 48.3%. The lifting of the China weight from investors' shoulders is helping the day's stock surge. The ESTX 50, had European shares broadly rising (+2.04%), while the Dow was up roughly 2.0% here at home. The Shanghai composite, CSI 300 Index, still fell 1.15%, as some of the news had leaked overseas on Wednesday, driving that days growth. However, this morning offered some harsh rhetoric from the US Treasury Secretary, and also a warning from US Admiral Mike Mullen that kept Chinese stocks in order.

Keying on the Economic Data

China posted its second straight month of trade surplus in May, which is saying something given its pace of domestic development. China's trade surplus jumped to $19.53 billion in May, which was more than twice economists' expectations. April's surplus only managed $1.68 billion. China's General Administration of Customs reported May exports amounted to $131.76 billion. That's a whole lot of tea leaves, and all that other stuff China produces now. China has impressively logged six months of export growth, and the pace seems to be quickening (April rose a lesser 30.5%).

It may be too early yet to look for a significant decline in European demand for Chinese goods. Austerity measures are only just passing into legislation and starting to take effect across European nations including Greece, Spain, Portugal, Italy, U.K. and Ireland. US economic revival may be enough to pick up the slack, if Ben Bernanke's assessment of 2010 - 2011 GDP growth (3.5%+) proves true, but Bernanke admits to the difficulty (and is not known for) of prescient forecasting. We should all recall the Fed's belief that the mortgage crisis would be contained within that segment of the economy. We should also be well aware of what has happened to global economies since those statements.

US Jumps at Opportunity

Treasury Secretary Timothy Geithner found opportunity in China's export data release today. Geithner, appearing before the Senate Finance Committee, said "The distortions caused by China's exchange rate reach far beyond China's borders and are an impediment to the global rebalancing we need." Geithner added, that a more flexible yuan would allow China to pursue "a more effective, independent monetary policy, which is particularly important now, with China's economy facing a risk of inflation in goods and in asset prices."

Geithner's opening statement spelled out US intentions clearly:

"Our policy is to expand the opportunities provided to Americans from a growing China. We want future growth in China to result in more exports from the United States and more jobs in the United States. We want China to change those policies that disadvantage American companies and to provide greater protections for American intellectual property. We want China to provide a level playing field for the products of American workers and investments by American companies. And we want China to change its growth strategy to rely less on exports and more on consumption."

China can be a tool for President Obama to revive the American manufacturing sector; services now make up 2/3 of the American economy. The President sees high-technology, especially in alternative energy, as America's best value-added opportunity for exporting into China. In that effort, we might help to level the trade playing field while also securing the global climate. The Chinese market has such potential, if the Chinese can keep good reins on growth and avoid deep recession, possibly depression, that could result from bubble bursts. Countering that risk, the Chinese possess that same hungry work ethic that the early wave of European immigrants provided to American industry. Thus, they should prove resilient to downturns in my view.

Geithner pointed out the importance of the Chinese domestic market, which has its economy poised to become the world's second largest soon. It will likely become America's most important export market, something many could not have fathomed when protesting against Chinese made goods and industry over the last decade. However, the Chinese are also excellent replicators, and who is to say they will need us for long. A communist, introverted nation threatens to become a reproducer of goods, driving local production of learned American technology while ignoring patents. There is little to no intellectual property protection guaranty when playing with China.

So perhaps the US should be helping India more, and leaving China in the cold until it acts more responsibly, and seems a cohesive fit with western civilization. Otherwise, our trusting of China and our fear of missing the opportunity tied to it might lead to a rude awakening one morning.

Governments matter, and governments act selfishly, as per the requirements of maintaining power. Many point to the US as a bully nation, but consider how a China topped world order might look. Thus, I applaud US efforts to reason with China while maintaining the important strategic relationship. However, if we support economic development there, might we prove communism to the people of China, and thus reinforce it? I think so, and I fear lack of cohesion might lead to major conflict later on.



Relevant Tickers: Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Spanish Protests Dictate Trade

The Morning Greek

Today's Market Impact Factor: -2
(-5 to +5)

As Spanish protests evolve today, so will go stocks. Some 2 million or so Spaniards are estimated to be hitting the streets in protest of public sector pay cuts today. This latest copy of "Morning Greek" offers analysis of weekly same-store sales, small business sentiment, DC drivers, international market activity and corporate news factors.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ, NYSE: EWP, Nasdaq: XSNFX)

Spanish Protests Dictate Trade

The day's activity hinges on how the Spanish protests evolve. If the Spaniards march on Parliament ala the Greek protests against austerity, then all hell might break loose on stocks. Trading should be cautious both today and tomorrow as investors and traders closely watch the unfolding events in Spain and Portugal.

International Market Drivers
Market Impact: -3

Europe is back in the market's keen focus again today, as Spanish unions hit the street to protest Spain's recently proposed government pay cuts. The Spanish government wants to cut the salaries of several public sector industries, including the health and education fields. This comes to Spaniards just one month after austerity measures intended to save 15 billion euro barely passed through its parliament. Thus, there is no guaranty new legislation can pass, and if it does, expect the government to pass on as well.

"This is the clearest and most present danger to Europe and the whole of the world; turnover of government toward radical leadership that might destabilize world peace in future years."

Spain's version of austerity is along the lines of Greece, and intended to prevent the ugly crisis Greece is now enthralled within. For Spaniards, in addition to the cutting of public-sector pay, the austerity measures also call for suspending automatic inflation-adjusted pensions and the end to payouts for parents when they birth children. Okay, so some of these measures make perfect sense, but in Democracy, when you take things away, you can expect to be taken away - especially in Europe.

Some 2 to 2.5 million Spaniards are reportedly hitting the streets today. Thus far, very little violence has occurred, but one major roadway was blocked by burning tires this morning. As the day progresses, the extent of civil disobedience will dictate US market direction. Global instability is perhaps the most major threat to stocks today and always.

This latest measure is seen as a test for future, tougher changes targeted against unions and employee rights in Spain. The unions see the day as a pivot point to take a stand against such threats. Thus, before the sun sets in Spain, the civil situation could change dramatically. Tomorrow, Portugal catches fire when the Portuguese government seeks to strangle its citizens...

International Market Action:

Europe:

* ESTX 50: -1.3%
* FTSE 100: -1.2%
* CAC 40: -1.4%
* DAX: -1.2%
* Athex: +0.5%

Asia:

* NIKKEI 225: +0.2%
* Hang Seng: +0.6%
* S&P ASX 200: +1.3%
* CSI 300: +0.1%
* KRX 100: +0.8%
* BSE Sensex 30: -1.0%

US State Primary Elections Today
Market Factor: +2

The day offers 12 primary elections across several US states, including Tea-Party contention in Nevada. California is another story, where the GOP spent big and put up big name contender Carly Fiorina to compete for a senate seat. California is also seeking a new governor to replace term-limited Governor Arnold Schwarzenegger.

ICSC Weekly Same-Store Sales
Market Factor: +1

We've been keeping a close eye on the weekly same-store sales data out of the International Council of Shopping Centers (ICSC). The latest data, reported this morning for the period ended June 6, showed another week's worth of improved sales pace.

On the weekly check up, sales gained 0.8%, versus the prior week's gain of 0.6% (-0.8% drop the week before that). On a year-to-year basis, the sales growth pace picked up to 3.0% against the prior year period; that compared against last week's growth rate of 2.5%, and 1.3% the week before that. Better weather surely played a role between the last two weeks. That said, this latest data is appeasing to our concerns that consumer activity might be normalizing to a stall. Still, the absolute level of activity remains nothing to write home about, and economic activity still appears to me at risk of stalling.

Redbook also releases its weekly sales data every Tuesday morning, but we do not typically report it due to its limitations. It tends to reflect the story told by ICSC anyway. In this latest case, the week's year-to-year sales pace picked up to 3.6%, versus the prior week's 2.5% pace.

Small Business Optimism Survey
Market Impact: +1

The NFIB (a small business organization) produced its Small Business Optimism Index for June today. The measure showed improvement again this month, rising by 1.6 points to 92.2. June's reading is the best since September 2008, just before it fell off a cliff a month later.

Seven of ten index components improved, but the NFIB reports that small businesses are still not prepared to put their money where their expectations are. Employment and capital investment plans did not budge much and remained at what the NFIB calls "recession levels." We'll have more to say on small business in a follow up piece.

DC Drivers
Market Impact: +1

The President, also known as a reflection of popular sentiment, which is in turn a reflection of media and survey results, is today taking a stronger position against BP (NYSE: BP) and its responsibility to make oil spill victims financially whole.

Federal Reserve Chairman Ben Bernanke participated late last evening in an interview forum at the Woodrow Wilson International Center for Scholars. You could have heard it on Bloomberg Radio (like me). Last week, the Chairman gave a speech on Small Business in Michigan that you Midwestern readers can see here.

Earlier this morning, Fed Governor Elizabeth A. Duke addressed the Consumer Bankers Association Conference entitled, "Moving Beyond the Financial Crisis." You can read Governor Duke's statement here.

Corporate News Schedule

The corporate news schedule is a busy one Tuesday.

Transocean (NYSE: RIG) makes its case against BP when it presents at the RBC Capital Markets conference today. Dr. Pepper Snapple (NYSE: DPS) will present to shareholders, and General Mills (NYSE: GIS) will split its shares 2-for-1. Lockup curbs expire for the shares of Assured Guaranty (NYSE: AGO), EQT (NYSE: EQT) and International Coal Group (NYSE: ICO). Meanwhile, Societe Generale's rogue trader faces trial.

Broadcom (Nasdaq: BRCM) reported quarterly results after the close yesterday. The company beat expectations and BRCM shares are down more than 1% to start the morning. Broadcom beat Thomson Reuters consensus estimates by 11 cents. It also provided revenue guidance above consensus for its next quarter, but kept margin expectations in line. Looks like the market was expecting the good result, and perhaps thought better numbers or guidance were pending; thus the shares are lower. Broadcom also noted its long-term growth stability is secure and strong. Looks like margins have been set low in order to allow the company to beat again next quarter. However, the market is not a fool, and learns and sets expectations accordingly. Thus BRCM management's attempts to set up its shares' performance is useless, though useful for defensive purposes. The goal is rather to not disappoint, versus beating expectations. However, expectations are clearly not tied to published EPS estimates - so the value of game playing comes into question.

RF Micro Devices (Nasdaq: RFMD) is down near 2% this morning, after its EPS report at the close yesterday. RF also beat estimates by 5 cents, and is lower as well. RF reported that its June quarter revenue is "fully booked", and sees gross margin comparable to the March quarter. Perhaps the driver of share decline, if it was not expectations that were simply set too high, transceiver revenue is expected to increase sequentially in the June quarter, but will begin ramping down in September. Also, free cash flow generation is expected to be stable, versus growing. However, the company expects to be cash positive in its FY 11.

Also reporting results overnight, Flextronics (Nasdaq: FLEX) (down 1% in morning trading) and Dow Chemical (NYSE: DOW) (down 1%). Dollar General (NYSE: DG) reported results this morning.

Upgrades/Downgrades

Receiving upgrades today: Corning (NYSE: GLW), Boeing (NYSE: BA), Altra Holdings (Nasdaq: AIMC), Bed, Bath & Beyond (Nasdaq: BBBY), Colfax (NYSE: CFX), IPC, The Hospitalist (Nasdaq: IPCM), Marathon Oil (NYSE: MRO), MPG Office Trust (NYSE: MPG), Semtech (Nasdaq: SMTC), SunTrust Banks (NYSE: STI) and Tesoro (NYSE: TSO). Receiving downgrades: Baker Hughes (NYSE: BHI), Diamond Offshore (NYSE: DO), Hess (NYSE: HES), Noble Corp. (NYSE: NE), Valero Energy (NYSE: VLO).

EPS Schedule

The EPS schedule includes Bob Evans Farms (Nasdaq: BOBE), C&D Technologies (NYSE: CHP), Cantel Medical (NYSE: CMN), CorVel (Nasdaq: CRVL), CPI Corp. (NYSE: CPY), Dollar General (NYSE: DG), Forest City Enterprises (Nasdaq: FCEA), Mitcham Industries (Nasdaq: MIND), Mobile Telesystems (NYSE: MBT), ModusLink Global (Nasdaq: MLNK), NCI Building Systems (NYSE: NCS), Oil-Dri Corp. (NYSE: ODC), Oxford Industries (NYSE: OXM), Pall Corp. (NYSE: PLL), Pep Boys (NYSE: PBY), Take-Two Interactive (Nasdaq: TTWO), Talbots (NYSE: TLB) and Texas Instruments (NYSE: TXN).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Israel & China Weigh on Stocks

The Dow fell 1.11% as US traders tried to find their way through the latest geopolitical fire, this one burning in Israel and Gaza. Asian shares were already on their way down though Tuesday, given soft manufacturing data and a new property tax roll out.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: ICE, NYSE: NYX, Nasdaq: NDAQ)

Israel & China Weigh on Stocks

ISM Manufacturing Report

ISM's Manufacturing Report for May offered positive news Tuesday. ISM's Purchasing Managers Index gained to 59.7%, surpassing economists' consensus expectations for 59.5%, based on Bloomberg's survey (Barron's reports 59.0%). May's figure fell short though of April's watermark, set at 60.4%. Still, May was only second to April, when examining the last 12 months worth of data. The reading, well above the 50.0 break-even point for economic expansion, offered further reason for cheer within its details.

Manufacturing sector growth expanded for the tenth consecutive month, according to ISM's analysis. Sixteen of the 18 manufacturing industries ISM measures reported growth in May, in the following order: Paper Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Printing & Related Support Activities; Chemical Products; Nonmetallic Mineral Products; Machinery; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products. The only industry reporting contraction in May was Petroleum & Coal Products.

New Orders remained strong, as the component index measured 65.7% for the second consecutive month. Production slipped ever so slightly, to 66.6% from 66.9. Manufacturers again reported sales that exceeded budget in several sectors, and so employment is improving. The Employment Index gained a full point to 59.8, signaling manufacturing will continue hiring. May's Employment Index continued a trend of job growth in manufacturing, with six consecutive months worth. Exports are stronger, while imports are lighter. Order backlogs look improved and the inventory situation seems to indicate restocking is needed. In other words, things seem solid in the manufacturing sector.

Construction Spending

The final months of the First-Time Homebuyers Tax Credit drove sales of existing and new homes through April, while eating into new home inventory levels significantly. This apparently drove a spike in homebuilder construction spending in April, as activity increased 2.7%. April's increase came on top of March's growth of 0.4% and against economists' consensus view for no change. This was another positive for stocks Tuesday, but with all eyes on the forward month data that will not have the benefit of the special tax incentive, they could only move so much. Besides, construction spending was still 10.5% lower than April of 2009.

China Cooling?

The Shanghai Composite Index slipped 0.9% on Tuesday, after the China Federation of Logistics and Purchasing reported China's PMI fell in May to 53.9, versus 55.7 in April. News also emanated from a government run paper that China would launch trials of a new property tax in two provinces. Shares fell across Asia, as worries mounted that the big engine was being idled.

Geopolitical Heat

The repercussions of Israel's raid on a private vessel carrying aid for Gaza have the world up in arms. Turkey, where most of the ship's crew hailed from and where its dead also hailed, pulled its ambassador and other diplomats and canceled joint military exercises. Jordan was outraged, as was the entire Middle East. Egypt opened up its border to Gaza as a show of support. Western nations were a little less emphatic, with Netanyahu visiting Obama, but Great Britain called for an end to the blockade. Before the day was through, reports came in that Lebanese anti-aircraft fired upon Israeli planes that buzzed Lebanese territory.

Corporate News Drivers

Lufkin Industries (Nasdaq: LUFK) split 2-for-1 and Inergy Holdings (Nasdaq: NRGP) 3-for-2. Juniper Networks (Nasdaq: JNPR) announced it would simplify its data center networks for its customers, allowing legacy systems to be fazed out. JNPR shares slipped 6.7% on the day. Apple (Nasdaq: AAPL) CEO Steve Jobs is one of many tech big shots at the Wall Street Journal's All Things Digital Conference.

The earnings schedule included reports from Bank of Nova Scotia (NYSE: BNS), Collective Brands (NYSE: PSS), Hawkins Inc. (Nasdaq: HWKN), Kohlberg Capital (Nasdaq: KCAP), Lion's Gate Entertainment (NYSE: LGF), MVC Capital (NYSE: MVC), Targeted Genetics (Nasdaq: TGEN) and Westport Innovations (Nasdaq: WPRT). Auto makers report May sales on Wednesday (NYSE: F, NYSE: HMC, NYSE: TM, NYSE: DAI, NYSE: TTM, Nasdaq: NSANY).

The day's biggest price gainers were Jones Soda (Nasdaq: JSDA), Zion Oil & Gas (Nasdaq: ZNWAW), Birks & Mayors (AMEX: BMJ), Hallador Energy (Nasdaq: HNRG), eLong (Nasdaq: LONG), Versar (AMEX: VSR), Mediacomm Communications (Nasdaq: MCCC), Golfsmith Int'l (Nasdaq: GOLF), eV3 Inc. (Nasdaq: EVVV), Astea Int'l (Nasdaq: ATEA), Abraxis Bioscience (Nasdaq: ABII), Universal Display (Nasdaq: PANL), Hurray Holding (Nasdaq: HRAY), Patrick Industries (Nasdaq: PATK), Engex Inc. (AMEX: EGX), PROLOR Biotech (Nasdaq: PBTH), NL Industries (NYSE: NL), Direxion Daily Energy Bear 3X (NYSE: ERY), Mesa Laboratories (Nasdaq: MLAB), WSP Holdings (NYSE: WH), Community Partners Bancorp (Nasdaq: CPBC), CFS Bancorp (Nasdaq: CITZ), WCA Waste Corp. (Nasdaq: WCAA), Nobility Homes (Nasdaq: NOBH) and Columbia Laboratories (Nasdaq: CBRX).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

I Told You So

I hate to say I told you so, but I told you so! Yesterday we said the market was up on soft catalyst, that being the Chinese lip service regarding its confidence in European debt. This angered some of our readers with close ties to China. We said specifically, "you are banking on false hopes" if you were buying on that news alone. Given that the economic data was weak, we thought stocks would retrench Friday heading into a long weekend with the trigger happy North Koreans getting antsy.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ)

I Told You So

Acting as an obstacle to your smooth transitioning into the long weekend, Friday produced four economic reports. Between Personal Income and Outlays, Chicago PMI, Consumer Sentiment and the Farm Prices reports, the market had its hands full. The Dow gave back more than a percentage point, as investors entered the long weekend purposely light.

Personal Income & Outlays

Personal Outlays inched up fractionally (less than 0.1%) in April, falling short of economists' consensus expectations for a 0.2% increase. By this time, we've adequately pounded home the fact that the early April Easter aided March consumer spending while pulling from April. March outlays jumped 0.6% after all, clearly illustrating this effect; though March's big gain followed a rise of 0.5% in February. Moving forward, May's figures should prove revealing, as we move away from the Easter skew. We think the skew is especially clear in spending activity for nondurable goods, which decreased 0.1% in April.

Spending on durable goods was more likely impacted by very specific factors affecting motor vehicles. Durable goods orders still rose 0.1% in April, versus a 3.6% gain in March. In exposing the March driver, we call your attention to the effect the Toyota (NYSE: TM) scandal had on the industry. General Motors and Ford (NYSE: F) took swift action to take market share from Toyota by offering special discounts for drivers who switched from Toyota to the US brands. Honda Motors (NYSE: HMC) took its own steps and Toyota countered. All this price cutting led to a boost in overall sales.

The Core PCE Price index moved higher by 0.1%, versus expectations for the same. Personal Income rose 0.4%, less than economists' expectations for a 0.5% increase. Personal income also rose 0.4 (revised from 0.3%) in March. Goods-producing industries' payrolls increased $5.8 billion, compared with an increase of $4.1 billion in March; manufacturing payrolls increased $4.5 billion, compared with an increase of $1.6 billion. Services-producing industries' payrolls increased $18.6 billion, compared with an increase of $9.6 billion. Government wage and salary disbursements increased $1.9 billion, compared with an increase of $2.9 billion.

Chicago Purchasing Managers Index

After gaining in April to its highest mark since April 2005, the Chicago PMI backtracked a bit in May. The index fell to 59.7, from April's 63.8, which was a full five points higher than March. The consensus pegged May's measure at a higher 62.0, and the employment measure sank to below break-even at 49.2 (50 marks expansionary activity). New Orders remained strong at 62.7, and Production also proved healthy at 61.0. Finally Inventory showed serious signs of restocking activity, as the component measure moved higher to 56.4. Prices Paid remained concerning, as the measure for it fell, but to a still hot 64.0 figure.

Consumer Sentiment

The Reuters/University of Michigan Consumer Sentiment Index showed consumer hopes rose in May, but inflation expectations increased even more. The final reading on the May Reuters/University of Michigan Consumer Sentiment Index came in at 73.6, up from April's 72.2. Still, the general consumer feel has not changed much this year, with February and March both ending at 73.6. It seems consumers are unsure more than anything else.

The Current Situation measure stuck at 81.0 in May, equalling April's feeling among consumers. However, Expectations for the future improved, as that index moved to 68.8, from 66.5. Meanwhile, consumers' inflation expectations increased dramatically, with shoppers pegging a 3.2% rise for the next year, versus April's estimate of 2.9%.

Farm Prices & Other

The Department of Energy review of the Deepwater Horizon oil spill led to an emotional hearing, bringing one LA congressman to tears. President Obama ventured to Louisiana to test the waters, and the issue is quickly looking like yet another major failure of modern America in risk management and problem mitigation. Gee, maybe you should have studied in class instead of drinking all week long and cheating your way through college! We have a serious education issue in this country, and a mania with law manipulation and media interpretation. Fix the damn leak already! Focus! Yes, I'm a bit angry.

The Department of Agriculture's Farm Prices data were released as well. Ahead of the Memorial Day holiday, the bond market closed at 2 PM EST.

Corporate News Drivers

Canadian Natural Resources (NYSE: CNQ) split 2:1 at the market close. EPS reports include Golar LNG Ltd. (Nasdaq: GLNG), Industrie Natuzzi (NYSE: NTZ) and Quality Systems (Nasdaq: QSII). Today's most actives so far included Tower Semi (Nasdaq: TSEMG), CKX, Inc. (Nasdaq: CKXE), Broadway Fin'l (Nasdaq: BYFC), Roberts Realty (AMEX: RPI), Waccamaw Bankshares (Nasdaq: WBNK), Jackson Hewitt Tax Service (NYSE: JTX), First Community Bank (Nasdaq: FCFL), Synthetic Fixed Inc. Securities (NYSE: GJW), ChinaNet Online (Nasdaq: CNET), Towerstream Corp. (Nasdaq: TWER), Arabian American Development (Nasdaq: ARSD), ADVENTRX Pharma (AMEX: ANX), WSB Holdings (Nasdaq: WSB), Netlist (Nasdaq: NLST), Globalstar (Nasdaq: GSAT), Origin Agritech (Nasdaq: SEED), Freddie Mac PRL (NYSE: FRE-PL), Sypris Solutions (Nasdaq: SYPR), GeoGlobal Resources (AMEX: GGR), MGP Ingredients (Nasdaq: MGPI), Seven Arts Pictures (Nasdaq: SAPX), Xinyuan Real Estate (NYSE: XIN), DayStar Technologies (Nasdaq: DSTID), NeuroMetrix (Nasdaq: NURO), Ambac Fin'l Group (NYSE: ABK), DJSP Enterprises (Nasdaq: DJSPW, Nasdaq: DJSP), Blue Coat Systems (Nasdaq: BCSI), Good Times Restaurants (Nasdaq: GTIM), The Allied Defense Group (AMEX: ADG), Ameritrans Capital (Nasdaq: AMTCP), Universal Holding (NYSE: UVV), Beasley Broadcast Group (Nasdaq: BBGI), CFS Bancorp (Nasdaq: CITZ), NYSE: FRE, SureWest Communications (Nasdaq: SURW), ATP Oil & Gas (Nasdaq: ATPG), Oceaneering Int'l (NYSE: OII), Oak Ridge Fin'l Services (Nasdaq: BKOR), Tetra Tech (NYSE: TTI), InfoLogix (Nasdaq: IFLG), Bioanalytical Systems (Nasdaq: BASI), NACCO Industries (NYSE: NC), Bank of Virginia (Nasdaq: BOVA), GenMark Diagnostics (Nasdaq: GNMK), Bridgeline Digital (Nasdaq: BLIN), Tennessee Commerce Bancorp (Nasdaq: TNCC), DRIL-QUIP (NYSE: DRQ) and Riverbed Technology (Nasdaq: RVBD).

Oh, and I told you so!



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.