6/30/11…Eureka! It’s here at last!

Bloomberg Quote of the Day: “Pity the meek, for they shall inherit the earth.” – Don Marquis

Bloomberg Top Stories:

*S&P Would Lower U.S. Credit Rating to D on Failure to Increase Debt Limit

(Tell that to the boneheaded GOP who voted to spend but now won’t pay!)

*First-Time Unemployment Claims in U.S. Declined 1,000 Last week to 428,000

*U.S. Index Futures Hold Gains as Jobless Claims Are Higher Than Estimated?

*German Banks Said to Agree With Government on Plan to Roll Greek Debt

*Goldman, Bank of America Among Banks Bracing for Job Cuts as Trading Slows!

*Lloyds Banking Will Cut 15,000 Jobs, Cull Overseas Units to Focus on U.K.

*Banker Pay Rules in EU Create Unlevel Playing Field With U.S., Mercer Says

(TB says so they can pay more? What’s in it for shareholders anyway???)

*Apple Stock Poised for Worst First Half Since 2008 as Growth Seen Slowing!

*Canada High-Yield Outperforms U.S. in Quarter on Growth Outlook

*Six Diseases Will Cost Medicare $36.8 Billion Next Year

*Mining Boom Makes Truck Tires Pricier Than Po4rsches, Condominiums in Miami!

*Tale of Two Visions for Euro Boils Beneath Fight for Fix Greek Debt Crisis

*Citigroup Collides With Death Pursuing Emerging Market Debts in Indonesia

*Obama Assails Republicans as Gulf in U.S. Debt-Limit Talks Remain Wide

*U.K. Schools Shut as Government Workers’ Protest Fails to Disrupt Airports

Volume rose slightly to 3.91B shares with just 913 million traded on the Big Board…with an absence of sellers for a third day. Volume should be high today as mutual funds rebalance for quarterend – at the close.

Dow rose 0.6%%; Transports +0.5%; S&P 500 +0.8%, both Nasdaq indices +0.4%, and Russell 2000 +0.3%. New 52 week highs holding at 188 vs. just 53 new lows. Advance/Declines ran +2.3x on the NYSE and +1.1x on Nasdaq, while Breadth was +4:1 on NYSE but just +2:1 on Nasdaq. Greece is actually the story and if that is a good reason to buy stocks other for a short term trading play, they have some islands they will sell you…gladly!

…let’s stop talking about markets and instead talk about what should be driving markets. First, the GOP wants to ‘selectively’ pay interest on debt to foreigners while withholding it from U.S. entities. Geithner rightly called this insane while S&P not only is threatening to pull our ‘AAA’ rating but to cut it to ‘D’ – as in DEFAULT – if the debt ceiling isn’t increased. What do you think will happen to the dollar and U.S. interest rates…along with the deficit if THAT happens? Have we…and the GOP leadership lost their freaking minds?

Now let’s talk about Greece. An analyst at Morgan Keegan did a little homework and found that IF Greece was a state it’s GDP would be the same as Mississippi! That state ranks 38th in the U.S. Can you imagine the entire world going nuts if Mississippi defaulted? No, because all of their debt isn’t owned by German and French banks among others. Furthermore, the austerity budget is a joke…a ploy to have the EU throw more good money (sic) after bad. No country has had more governments than Greece and there is a good reason for it: the Greeks love government subsidies and they hate paying taxes. So how long do you think Papandreou’s austerity budget will survive…and his government?

Michael Lewis wrote an article on Greece in Vanity Fair and TB strongly suggests you read it…if the EU had they wouldn’t be supporting it…ok, they might be…to protect the Euro. But in the wings we still have a deteriorating Spain…a disaster in Italy and don’t forget about Ireland and Portugal. Erin go bragh!

What Lewis found out is that not only do the Greek’s hate paying taxes, the church (monasteries) holds billions of land assets that are not taxed. Meanwhile, the tax collection system is so corrupt that there are companies who create phony invoices on phony building construction and if audited the taxpayer pays what they should have paid plus a hefty bribe to the collectors. No wonder the majority of Greeks don’t even bother to pay their taxes or grossly underestimate them.

So the question is: Why was Greece let into the EU with such a flawed balance sheet? It is only the magnitude of the problem that is new not a change of fortune. For 13 years TB attended an international bond conference in London. During that period he heard all kinds of speakers on the pros and cons of a Euro and whether in fact it would work, including Nobel laureate Robert Mundell – the father of the Euro! Every year though the question was raised of whether Greece should be included. The answer was yes, to keep out the Turks. The reason for this is that if a country is part of the EU it’s people can live in any one of the countries they choose. Germany has a high percentage of Turkish workers and when the economy slows the workers leave…this would all change and Germany could be swamped with Muslim Turks. So Greece was to be the buffer. With the hatred of the Greeks for the Turks, Turkey would not be included. Sounds childish and in the end stupid but that is what happened. Now it is time to pay the piper. Will the Euro survive? TB doesn’t know but if the GOP succeeds in lowering U.S. treasuries to ‘D’ we are helping them as much as we can.

Double dip may not just be a second helping of ice cream after all.

. . .  – – –  . . .    . . .  – – –  . . .

At least we live in interesting times…right? Is that a good thing?

TB

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