By Matt Scuffham
LONDON (Reuters) – Britain’s banks have called upon the government to phase out the bank levy, saying it is damaging the competitiveness of the industry and causing them to lose business to overseas rivals.
The levy was initially introduced in 2011 not only to raise money but also to discourage banks from risky borrowing, replacing a previous one-off tax on bankers’ bonuses by the Labour government following the 2007-9 financial crisis.
Its emphasis has changed to focus on generating revenue with Britain’s finance minister George Osborne saying in March banks needed to make a greater contribution to repair the country’s finances.
Osborne increased the levy in March to 0.21 percent of a bank’s assets from 0.16 percent previously. That lifted the amount the government aims to raise from the tax to 3.4 billion pounds ($5.3 billion) a year from 2.5 billion.
Anthony Browne, chief executive of the British Bankers Association, said in a letter to Osborne on June 23 that the government should consider ways of reforming the tax.
“Proposals to consider could include the levy to be capped in terms of its rate and a sunset clause introduced so that banks can begin to plan for a future without the levy,” he said.
The Chancellor will outline his economic plans in an emergency budget on Wednesday following May’s general election. The Treasury would not comment on whether he will address the issue of the levy, which was a pledge in the Conservative party’s election manifesto.
Europe’s biggest bank HSBC
“The levy is already causing damage,” Browne said in his letter to Osborne. “For example, activities are being booked outside London and marginal investment decisions are seeing activity placed outside the UK.”
Browne said banks wanted more certainty around the issue and assurance that banks were part of broader plans to make sure the UK remained competitive on taxation.
“This is important not only from the perspective of the location of international banking and capital markets activities, but also in terms of impacting upon the provision of credit to the domestic economy,” he said.
Osborne struck what some bankers believed to be a conciliatory tone in his annual speech to bankers in the City of London last month, saying he wanted Britain to be the best place for global banks to be headquartered and talking of a “new settlement” for the industry.
Other suggestions for reform of the levy have included the possibility of making it a tax on UK banking assets only, which would mean those with a high proportion of overseas assets, such as HSBC and Standard Chartered
($1 = 0.6402 pounds)
(Reporting by Matt Scuffham; Editing by Elaine Hardcastle)
By Leika Kihara and Stanley White
TOKYO (Reuters) – Japanese policymakers on Monday pledged to work closely to guard against financial market volatility after Greek voters rejected euro zone austerity measures.
“The direct economic and financial relations between Japan and Greece are limited. But government and Bank of Japan officials have held discussions early this morning” to ensure Japan responds smoothly to any market response as needed, BOJ Governor Haruhiko Kuroda said in a statement.
Finance Minister Taro Aso also said that while Japan was in close contact with overseas policymakers on the Greek referendum, it was confident that Europeans have sufficient safeguards in place to respond to market disruptions.
“I understand that European countries … are calling on the Greek government to act responsibly” in the wake of the referendum results, Aso said in a statement.
The yen rose against the dollar and euro in early trade after Greece voters rejected European bailout terms by a wider margin than expected.
Japanese financial institutions have very limited exposure to Greek debt, while Japan’s direct trade with Greece is also minimal.
Both Kuroda and Aso did not mention how Tokyo may respond if developments in Greece jolt markets. But the central bank’s first line of defense would be to inject massive liquidity to calm markets, sources have told Reuters.
(Reporting by Stanley White; Editing by Chang-Ran Kim & Shri Navaratnam)
Sixty-one percent of voters backed Prime Minister Alexis Tsipras’s rejection of further spending cuts and tax increases in an unprecedented referendum that’s also taken the country to the brink of financial collapse.Years ago we discussed how endless austerity and depression would eventually be rejected in a democracy. Know one knows what will happen next. The best policy would be to ease up on austerity – let Greece start growing again – and write down some of the debt. Unfortunately the best policy seems unlikely since many of the creditors will not admit their policies have failed.
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Many users of Microsoft Corporation’s (NASDAQ:MSFT) Xbox 360 console faced the Red Ring of Death (RRoD) at some point in the life of their console. Peter Moore, from Electronic Arts Inc. (NASDAQ:EA) worked for Microsoft at the time. This is his take on how the issue went down with the company.
Peter Moore describes, in a podcast at IGN, how he found the Red Ring of Death was caused by the console overheating. He found telling Microsoft’s then CEO Steve Ballmer somewhat daunting because of the $1.15 billion hit the company would take to cure the RRoD.
“The moment I'll never forget, I said to Robbie, we've got a business review meeting in Building 34, with Steve Ballmer. I said, we've got to tell Steve, here's what we have to do: we need to FedEx an empty box to a customer, who had a problem – they [are expected to] call us up – with a FedEx return label to send your box, and then we [will] FedEx it back to them and fix it. Either keep your hard-drive or send it to us.
I calculated with my finance team, Dennis Durkin (now the Chief Financial Officer of Activision Blizzard Inc. (NASDAQ:ATVI)), Doug Ralphs (then Senior Director of Finance at Microsoft's Interactive Entertainment Division)… $1.15bn, right out there. I always remember $240m of that was FedEx Corporation (NYSE:FDX). [Its] stock must have gone through the roof for the next two weeks.” Moore said.
Mr. Moore said of the meeting with Steve Ballmer “And, I am trembling sat in front of Steve, who I love to death, but he can be an intimidating human being. Steve said, ‘okay, talk me through this.’ I said, ‘if we don’t do this, this brand is dead.”
Without that meeting, Xbox could have died from the RRoD. Xbox One wouldn’t have happened. The corporation would have faced greater losses than $1.15 billion had he and Mr. Ballmer not taken action.
To fix the problem, Microsoft changed the console’s heat sink design, gradually moving to chips made on a smaller fabrication level to eradicate it altogether. Its repair and replacement program was considered the best solution to a large consumer PR embarrassment for the organization. Much of the blame was placed on the the use of lead-free solder to make the XBox 360 conform to EU safety standards. It didn’t help that Microsoft skimped on a cooling solution for the earlier versions of the game console.
Greece is celebrating this evening after the nation overwhelmingly voted “No” – or “OXI” – in the country’s bailout referendum. The nation has rejected its European creditors’ demands and now it doesn’t have enough money to pay back its debts.
My colleague Mike Bird reported live from Athens that the win for No was dramatic — over 60% of the country backed the government’s proposal to reject the agreement negotiated with the country’s European creditors – and thousands of people streamed into Syntagma Square, the centre of Greek political life, to celebrate the enormous rejection of the country’s bailout deal.
However, Greeks may find themselves a little bit more upset tomorrow when it’s likely that Greece will keep its banks close and cut the cash withdrawal limit, according to IHS Global Insight’s senior economist Diego Iscaro.
“All eyes will now be on the European Central Bank tomorrow. We expect the central bank to continue providing liquidity to Greece’s financial sector, although the small chance of the ECB increasing the cap on the emergency liquidity assistance this week has disappeared with the referendum result,” said Iscaro in a note this evening.
“This significantly raises the probability of banks running out of cash over the coming days. We estimate it is very likely banks will not reopen on 7 July as currently expected. Moreover, the limit on bank withdrawals, currently at €60, may also need to be reduced.”
One week ago Greece’s government shockingly announced the bailout referendum for Sunday July 5, and subsequently announced that the banks would remain shut until after voting and restrict cash machine withdrawals to prevent the nation draining the banks dry.
It has led to crazy long queues, pensioners crying on the streets, and panic that people will lose their life savings because of the likelihood that Greece will exit the euro and turn to its old currency the drachma.
On July 3, the head of the Greek Banks Union admitted that Greece’s ATMs will run dry by Monday unless Europe steps in and loans it more cash. The day before, my colleague Myles Udland reported that the banks were down to their last €500 million (£355.6 million, $555 million).
From the sounds of it from IHS Global Insight’s Iscaro, it could take a while for Greece’s government to turn the taps back on at the Greek ATMs and open doors at the banks, as it starts negotiations effectively from scratch as of Monday July 6.
“Negotiations will resume over the coming days but the probability of a deal is distant. (Prime Minister Alexis) Tsipras’ argument is that he can now go back to the lenders in a stronger position,” said Iscaro. “However, we believe it is unlikely the creditors’ proposals will be significantly relaxed as a result of the “no” vote. It will now be impossible for the SYRIZA-led government to accept the deal currently on the table, which means that the risk of a total collapse in the negotiations has increased significantly.
“In our view, the only hope of a deal may rest on the IMF convincing Eurozone governments to include a clause promising debt relief in the future, conditional to Greece meeting certain targets. This will be extremely difficult but lenders may come to the conclusion that it is the only way to avoid Greece leaving the eurozone.”
Greece has effectively voted to default on its debt to the IMF and the EU, and it is a massive defeat for Germany’s Angela Merkel and the troika she led, which insisted there was no way out for Greece but to pay back its massive debts.
The vote is huge lesson for conservatives and anyone else who thinks this is about a dilettante government of left-wing idealists who think they can flout the law while staging some kind of Che Guevara-esque dream:
This is what capitalism is really about.
From the beginning, Merkel and the EU have operated from the position that because Greece took on debt, Greece now needs to pay it back. That position assumed — bizarrely, in hindsight — that debt only works one way: if you lend someone money, then they pay it back.
But that is NOT how free markets work.
Debt is not a guarantee of future payments in full. Rather, it is a risk that creditors take, in hopes of maybe being paid tomorrow.
The key word there is “risk.”
If you’re willing to take the risk, you’ll get a premium — in the form of interest.
But the downside of that risk is that you lose your money. And Greece just called Germany’s bluff.
The IMF loaned Greece 1.5 billion euros, due back in June, and Greece isn’t paying it back. Greece has another 3.5 billion due to the ECB in July, and that looks really doubtful right now.
This is how capitalism works. The fact that it took a democratically elected government whose own offices are adorned with posters of Lenin, Engels and Guevara to teach this lesson to Germany is astonishing.
More astonishing still is that Merkel et al knew Greece could not pay back this debt before these negotiations started. The IMF’s own assessment of Greek debt, published just a few days ago, states: “Coming on top of the very high existing debt, these new financing needs render the debt dynamics unsustainable …”
“Unsustainable”! Germany’s own bankers knew Greece couldn’t pay this back. And yet Merkel persisted.
Take a look at Greek GDP. In order to pay back debt, you have to have a growing economy. That’s a basic law of economics. It’s how credit cards work. It’s how mortgages work. And it is how sovereign/central bank debt works. But Greece’s economy was never in a position to benefit from debt, because it has been shrinking for years:
There is another key fact that the Greeks are keenly aware of (but which everyone else has forgotten). This debt was initially owed to private investment banks, like Goldman Sachs. But the IMF and the ECB made the suicidal decision to let those private banks transfer that debt to EU insitutions and the IMF to “rescue” Greece. As Business Insider reported back in April, former ECB president Jean-Claude Trichet insisted that the debt transfer take place:
The ECB president “blew up,” according to one attendee. “Trichet said, ‘We are an economic and monetary union, and there must be no debt restructuring!’” this person recalled. “He was shouting.”
The result was that the ECB made this catastrophically stupid deal with Greece, according to our April report:
And so there was no restructuring agreed for Greece. The country paid off its immediate debts to the private financial sector — investment banks, basically — and replacement debt was laid onto European taxpayers. The government agreed to a package of harsh government spending cuts and structural reforms in exchange for loans totalling €110 billion over three years.
Trichet made a colossal, elementary mistake. The right place for risky debt by definition is in the private markets, like Goldman. The entire point of private debt investment is that those creditors are prepared for a haircut. The risk absolutely should not be borne by central banks who rely on taxpayer money for bailouts.
In fact, had Trichet made the opposite decision — and left the Greek debt with Goldman et al — then today’s vote would be a footnote rather than a headline in history. “Goldman Sachs takes a bath on Greek debt.” Who cares? Goldman shareholders and clients, surely. But it would not have triggered a crisis at the heart of the EU.
Now Italy, Spain and Portugal are watching Greece closely, and thinking, hey, maybe we can get out of this mess too.
Now, before we all start singing “The Red Flag” and breaking out old videos of “The Young Ones” in celebration, let’s inject a note of realism. Greece isn’t actually a country full of crazy socialists who don’t understand how the FX markets work. In fact, a huge chunk of its tax collection problems stem from the fact that there are two and a half times more self-employed and small business people in Greece than there are in the average country. And small businesses are expert at avoiding tax, Greece’s former tax collector told Business Insider’s Mike Bird recently.
Conservatives who hate paying taxes and who urge small businesses to pursue tax avoidance strategies take note: Your dream just came true in Greece.
If Greece was more socialist — more like Germany, with its giant corporations that have massive unionised workforces paying taxes off their payrolls — then tax collection would be a lot higher in Greece.
Greece is now likely an international pariah on the debt markets. It may have to start printing its own devalued drachma currency. It will have no access to credit. Sure, olive oil, feta and raki will suddenly become incredibly cheap commodities on the export markets. Tourism in Greece is about to become awesome. But mostly it will be awful. Unemployment will increase as Greece’s economy implodes.
But the awfulness will be Greece’s alone. Greece is now on its own path. It is deciding its own fate.
There is something admirable about that.
NOW WATCH: 11 mindblowing facts about North Korea
I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece. For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July.
Dijsselbloem, who is the president of the Eurogroup, which consists of the eurozone’s finance ministers, has been perhaps the biggest hard-liners throughout the Greek debt drama. And this vote did not go his way.
General Electric Company (NYSE:GE) stock has received a lot of investor interest since the beginning of the year, due to the company’s plans to divest a majority of its financial businesses and focus on its industrial segment. However, headlines over the recent past have caused a sell-off in the company stock.
On a year-to-date (YTD) basis, the stock has posted a gain of 5.98%, as the company has been selling a majority of its financial businesses since the beginning of the year. Simultaneously, the company has been taking steps to expand its industrial segment – through acquisitions and mergers.
As part of its strategy to focus on those businesses at General Electric which show high growth and have high margins, the company decided to sell its appliances segment to Electrolux last year. The appliances segment at General Electric was valued at $3.3 billion. However, the US Justice Department filed an anti-trust lawsuit against the acquisition last Wednesday, asking for it to be blocked.
The department said in the filing that with American consumers having spent over $4 billion on cooking appliances in 2014, the acquisition would curb competition in the market, which “has benefited American consumers through lower prices and more options.”
Furthermore, the company had been successful in reaching a deal with Alstom, as a part of which the former would be acquiring the latter’s energy assets for a total of $17 billion. The deal was announced last year, and has since been subject to approval from European Union regulatory authorities. However, the company has been facing difficulties in getting the said regulatory approval, with the EU having reportedly sent a list of concerns regarding the acquisition to both companies earlier this year.
In an effort to secure the regulatory approval, company executives have come on record and hinted at possible intellectual property rights sales to sway the pendulum in the companies’ favor. Moreover, company officials were reported to have met with EU antitrust regulators Thursday. The officials are hoping that they would be able to convince regulators that following the acquisition, competition in the region would not be hampered with only two gas turbine players left in the region.
The recent impediments being faced by the company have taken their toll on General Electric company stock. Over the course of the month of June, the stock has lost 2.57% of its value due to such headlines, in addition to the weakness exhibited by the broader equity markets during the period – due to uncertainty surrounding the Greek economy (S&P500 traded down by 2.1% in the same period).
In addition to facing problems in streamlining its industrial business, the company has been in the headlines for facing problems in offloading some of its financial assets in Australia. According to a New York Times report, the company’s capital division’s commercial lending business in Australia is facing low acquisition interest. The report suggested that potential buyers – including Macquarie Group, along with private equity firms Blackstone Group, Kohlberg Kravis Roberts, and TPG Capital – believe that the financial assets under the business are too risky due to the level of diversification.
Much of the division’s portfolio consists of small business divisions, with small clientele and employment, which private equity firms would struggle getting funding for. Considering General Electric stock’s growth had been driven by the announcement of the capital division divestitures, and the strides that it was making in strengthening its Industrial segment, the recent events are likely to darken investor sentiment – at least in the short run.
Disappointment in retaining any one of the two deals under question at the moment could lead to substantial downside for the company stock, hence we at Bidness Etc advise investors to remain cautious of the stock.
Greece has voted “No” in a referendum on whether to accept the latest bailout terms from its European creditors.
So what happens next?
In a note to clients on Sunday afternoon, Brean Capital strategist Peter Tchir writes simply: “We are entering new territory here.”
The future for the euro, Greece, and what happens in the next day, week, month, year is all up in the air now.
No one really knows.
So what comes next?
I don’t really know. I have read about 10 different reports, laying out something like 35 different scenarios, and most seem unlikely at best, will take time to play out in any case, how markets will react to any given one seems difficult to estimate as well.
In a post on Sunday, Allianz’s Mohammed El-Erian wrote that we are likely to see markets sell off on Sunday night and Monday as a result of the Greek vote. But this market reaction would just be more or less a rehash of what we saw last Sunday and Monday after the surprising announcement 9 days ago that there would be a referendum.
Looking longer-term, Tchir — who has been all over the Greece story this week with some of the best commentary we’ve seen on Wall Street throughout the crisis — thinks that investors need to be wary of a number of risks in the market and recall the last time things were really dicey.
But recalling the market’s favorite rhetorical question associated with big external events — “Is this a Lehman moment?” — Tchir thinks it’s wise to really think about what happened in markets back in the fall of 2008.
“Lehman was NOT a ‘moment,'” Tchir writes. “Lehman took over a week before the market really started to sell off.”
Tchir adds: “Since so many missed the opportunity to sell in the days following Lehman, look for the market to be more cautious as it tries to figure out what it might be missing… the general desire to buy the dip will be tempered by the realization that Lehman took time.”
And so, sure, we’re likely to see an immediate reaction to the Greece news, but it’s worth keeping in mind that this will take time to work itself out.
Greece has voted a resounding “No” in its referendum on whether to accept the latest bailout proposal from its European creditors.
And for Nobel Laureate and New York Times columnist Paul Krugman, this is a win for all of Europe.
“Tsipras and Syriza have won big in the referendum,” Krugman wrote on Sunday, “strengthening their hand for whatever comes next. But they’re not the only winners: I would argue that Europe, and the European idea, just won big — at least in the sense of dodging a bullet.”
Krugman, who last week wrote that he would vote “No” if he were voting in the referendum, argues in his post on Sunday that Greece’s vote against the bailout program Greece’s creditors were seeking to impose on it strengthens the case for democracy in Europe.
Krugman writes that, “we have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.”
And so with the Greek people shooting down the vision that other Europeans had for their economy and future prospects, Krugman believes that all Europeans — as voters and participants in democracy — won on Sunday.
As for whether this means Greece will leave the euro, Krugman says there is a decent case for a “Grexit” now, but says that no matter if Greece stays or goes, Sunday’s vote shows that, “democracy matters more than any currency arrangement.”
SEE ALSO: Prepare for a market sell-off …
SEE ALSO: What Greece means to the US
With 85 per cent of votes counted, the No camp had won 61.5 per cent and was leading in every region of the country, a remarkable political exploit by Greek prime minister Alexis Tsipras. But it is also likely to plunge Greece deeper into turmoil as it tries to prevent the collapse of a financial system that is rapidly running out of cash.Congratulations!
“As of tomorrow, with this brave ‘No’ vote, we will call on our partners to find common ground,” said Yannis Varoufakis, Greek finance minister.
But the response from Berlin was scathing. Sigmar Gabriel, deputy German chancellor, said Mr Tsipras had “torn down the last bridges on which Greece and Europe could have moved towards a compromise”.
“With the rejection of the rules of the euro zone … negotiations about a programme worth billions are barely conceivable,” he told Tagesspiegel newspaper.
In Athens’ Syntagma square, No supporters were jubilant at the scale of their victory.
“Now we will be free from the Troika, from Mrs Merkel, from them all. This is the right result,” said Irma, a 45 year old civil servant. “I love my freedom. I do not want to keep having that taken away.”
Rating agency Moody’s Investors Service recently changed its outlook on BP plc (ADR) (NYSE:BP) from negative to positive. Following the revised rating, the company stock was up 5.17% Friday, and is expected to move further in a positive direction when trading resumes Monday.
The agency announced that it now has a positive outlook on the A-2 long-term debt and Prime-1 commercial paper ratings of BP and its guaranteed subsidiaries. The revised outlook came shortly after the company's announcement pertaining to its Mocando accident and oil spill which occurred in 2010.
BP announced that it has come to an agreement for the settlement of all major federal, state, and municipal claims pertaining to its subsidiary for a total of $18.7 billion. The major portion of the settlement will be paid during a period of 15 to 18 years, while the settlement will be guaranteed by BP Corporation North America and BP, which will leave no further need for bonding, collateral, or letter of credit.
The breakdown of the sum to be paid includes: $5.5 billion to be paid to settle the Clean Water Act fines and penalties to be paid over a period of 15 years, $7.3 billion to be paid to the governments for damage to natural resources, and $4.9 billion for the settlement with all five Gulf Coast states. The cost for the settlement with the local municipalities may reach up to $1 billion.
The settlement agreement is still subject to public comment and a final sign off is still needed from the District Court of Louisiana. Moody’s is however of the opinion that the agreement seems to be secure given the fact that all the major parties involved were part of the preliminary discussion. It added that any change in the settlement deal will require it to reconsider the ratings.
The firm has mentioned the upward and downward risks to the ratings, stating that the ratings may move up depending on the company’s achievement of cash flow neutrality, its execution of strategic plans, and its ability to leverage its large cash position. The downward movement in the ratings can come about provided that the settlement plan is revised in a negative way, failure in execution of strategic plans, or inability to utilize the large cash position.
– Standard & Poor’s has a negative outlook for the company with an “A” rating for Long Term Foreign as well as Local Credit Issuer loans, and a rating of “A-1″ for both Short Term Foreign and Local Issuer Credit.
– Fitch has a negative outlook for the company with an “A” rating for Long Term Issuer Default and Senior Unsecured Debt, and a “WD” rating for Short Term and Short Term Issuer Default Ratings.
– DBRS has a stable outlook for the company and a Long Term Issuer Rating of “A.”
– Egan-Jones Ratings Company has rated LC Senior Unsecured and FC Senior Unsecured Ratings “A-” and LC Commercial Paper and FC Commercial Paper “A1.”
Greece doesn’t mean a lot to the US economy.
However, the tiny country in the periphery of the eurozone has hijacked the headlines with its financial problems. With Greece now missing debt payments while edging closer to exiting the euro currency, the story has never been more compelling.
But economists agree: Greece is not a big deal to the US.
“[T]he risks of contagion to the US economy and financial system are small,” Capital Economics’ Julian Jessop explained. “The direct links between the US and Greece (whose economy now accounts for a trivial 0.3% of global output) are obviously tiny. However, even exports to the EU as a whole only represented 1.5% of US GDP last year.”
BNP Paribas’ Paul Mortimer-Lee estimates that US exports to Greece account for about 0.006% of the US economy.
Importantly, the financial ties are also minimal. This is reassuring as hidden exposures sometimes pop up on bank books.
“Bank for International Settlements Figures show that the exposures of US banks to Greece amounts to $12.7 billion, or just 0.04% of total cross border claims,” Mortimer-Lee wrote in a research note.
“The collapse of one or more large European banks could have a major impact on the US, but we would expect that risk to be much smaller than in 2012, when Greece was last close to the brink,” Jessop added. “US financial institutions are now in better shape and have had plenty of time to mitigate their exposure.”
So, it’s pretty clear that the impact of Greece’s worst-case scenarios would hurt the US economy by that much.
But would even a small impact affect monetary policy? This is an important question as the Federal Reserve is preparing to tighten monetary policy with interest rate hikes. Here’s Jessop:
“The Federal Reserve is preparing to tighten monetary policy as the US economy has recovered substantially since the financial crisis. But could turmoil in the eurozone triggered by Greece cause the Fed to balk? Here’s Jessop again: “The Fed would, of course, be reluctant to hike rates for the first time since 2006 in the midst of another global financial crisis triggered by Greek exit from the euro. However, we do not expect contagion from developments in Europe to be severe enough to prevent the US central bank from pressing ahead with a September lift-off, provided domestic fundamentals continue to strengthen… [T]he Fed’s decision will ultimately depend on domestic economic data and fundamentals. The labour market is buoyant and wage and core price pressures are picking up, meaning that it is increasingly hard to justify keeping rates at emergency lows of close to zero. A crisis in far-away Greece is unlikely to change this.”
Some folks might actually argue turmoil in Greece could actually be a good thing for the US. Should things deteriorate across the eurozone, there may be more demand for safety in US Treasury securities, which could help keep US financial market liquid and long-term interest rates low.
Ultimately, while the Greek story is a fascinating one, it just doesn’t really move the needle in the US economy.
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Today, I got on the phone with Brian Whitmer, editor of our monthly European Financial Forecast.
Brian has been preparing his subscribers for the Greek crisis for a while. Listen to his latest thoughts.
Europe is in the world spotlight this month, with Greece's future hanging in the balance. But Greece is just one part of the problem. Enjoy an excerpt from Brian Whitmer from the June European Financial Forecast to see just how precarious Europe's financial situation has become.
-Midwest is wetter in southern areas today. Showers in far southern areas through the weekend will maintain wetness concerns. However, wetness should ease a bit in central and northeastern areas. The 6-10 day outlook is unchanged. The 11-15 day outlook is wetter in northwestern areas, and drier in central and southern areas. Temperatures are unchanged.
-Plains are drier in central and southern areas in the 6-10 day period. Showers in central and northern areas will slow harvesting a bit, but amounts should not be heavy enough to increase wetness again. The 6-10 day outlook is slightly drier in central and southern areas. Temperatures are unchanged. The 11-15 day outlook is drier. Temperatures are unchanged.
-N. Plains/Prairies are wetter in the Plains today. Showers should remain too light to ease dryness in the central and western Prairies, and moisture will continue to decline in the northwestern Plains as well. However, some improvements are expected in the northeastern Plains and eastern Prairies through the weekend. The 6-10 day outlook is wetter in the southern Prairies and northern Plains. Temperatures are unchanged. The 11-15 day outlook is wetter. Temperatures are unchanged.
-Delta is drier in northern areas in the 11-15 day period. Abundant rains in northern areas through the weekend will maintain wetness concerns for corn and soybeans. Wetness should ease a bit in southern areas. The 6-10 day outlook is unchanged. The 11-15 day outlook is drier in northern areas. Temperatures are unchanged.
-No changes for Argentina. Showers in southeastern Buenos Aires and western Cordoba should improve moisture slightly, although amounts should be rather light. Dryness will continue in central Cordoba, southwestern Buenos Aires, and La Pampa.
-No changes for Brazil. Rains in central areas through the weekend will maintain moisture for wheat, but will slow safrinha corn harvesting.
-No changes for Europe. Dryness and heat continue to build across north central and western areas, which is significantly stressing summer crop growth. Heat should build across northeastern areas through the weekend into next week. Rains in northwestern areas next week should result in only minor improvements.
-No changes for FSU. Showers in west central Ukraine and Belarus yesterday did little to improve moisture supplies, and stress will continue there on corn and sunflowers. Also, stress will persist in southwestern Volga Valley, northern North Caucasus, and western Kazakhstan. Winter wheat drydown and early harvesting should progress well.
-No changes for China. Rains in southern Yangtze Valley and Northeast China will maintain wetness, but wetness should continue to ease in northeastern Yangtze Valley. Dryness will persist in northern North China Plain, which will maintain some stress on corn and soybeans.
-No changes for India. Additional rains in eastern Madhya Pradesh will continue to improve moisture, but moisture will decline in western and southern areas as rains there remain very limited.
-Australia is wetter in South Australia next week. Showers in southwestern Western Australia today should be too light to significantly improve moisture. Some slight improvements are possible in South Australia next week.
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For Tomorrow, we have the Employment Situation, Jobless Claims, Factory Orders, EIA Natural Gal Report, a 2 and 10 year Note Auction, and a 30 year Bond Auction.
Everything closes early tomorrow except for the S&P’s.
Greek concessions at the last minute.
We need to see some back and fill action.
I think the S&P is going to close strong.
Watch this video for the PitBulls new trading range…
Euro area end Greek negotiations until Sunday’s referendum.
HIGH: 2074.20 Early
LOW: 2060.00 Late
LAST: 2062.00 UP 7.6 Handles
TOTAL VOLUME: 1.3 mil ESU, and 6k SPU traded in the pit.
I want to discuss today an investment strategy combining stock and options that takes great advantage of time decay. It is absolutely a bullish options strategy with limited downside protection and some upside risk. I am illustrating this strategy, which is quite popular with Dutch asset managers, among others, as a way of lowering the investment cost of a stock by selling both puts and calls.
Basically, the strategy calls for selling the at the money (ATM) straddle and buying half the amount of stock under it. I’ll say again, it is a 100% bullish options strategy, make no mistake about that. As such, I am neither advising for nor advising against this strategy but simply functioning in my role here as an options educator and illustrating an investment alternative.
Just like yesterday, let’s use AT&T (T) as an example. At this writing T is trading at 35.75 and will pay a $.47 quarterly dividend in September.
We can buy 500 shares of T at 35.75 and sell the October 36 straddle 10 times at 2.70 (.75 in the call, 1.95 in the put). After we collect the dividend if the stock is higher we can sell the stock and buy back the straddle closer to expiration after time decay has done its work or if the stock is below 36 on expiration we then take delivery of an additional 1000 shares at an effective price of 33.30 leaving us with 1500 shares at a 34.72 average price giving us a nice annual dividend yield of 5.41% (dividend note: T has increased its dividend every year since 1985). Then, if so desired, you can do yesterday’s strategy and collar the stock.
So we see that if one is bullish on a stock this strategy is a cost effective way of investing. One final note of caution: Because the strategy leaves one net short 5 calls it is unwise to do this in any stock that may be a takeover candidate.
Read the article in its original format at TheLissReport.com
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