The mighty Alexander the Great, would be devastated if he was to return to the Greece of today. After the creditors, the Troika, gave Greece the bail out, after stressing Greece for a year, now demands the fire sale asap. This is the way capitalism works. Greece will end up selling itself for a great bargain. By the map you can see clearly, it was better before….Below from Kathimerini;

The Greek government and the representatives of the European Commission, European Central Bank and the International Monetary Fund, collectively known as the troika, are nearing agreement on the details of the midterm fiscal plan and privatization program but several key stumbling blocks remain, sources told Kathimerini.

Among the issues still to be resolved is whether representatives of the troika will have seats on the independent committee that will oversee the sell-off of state assets and whether these places will come with veto powers.

Sources said that the government has agreed on a number of measures that will be included in its midterm fiscal plan. Among these are further cuts to the benefits received by civil servants and an extension of the time frame in which they can receive a pay rise from two to five years.

The government also appears to have agreed to adjust its hiring policy for the public sector. After prompting from the troika, PASOK had decided to hire one civil servant for every five that leave but this will now be changed to one for every 10 that depart. The public investment program will also be limited to 1 billion euros per year.

Among the other potential measures being discussed is the closure of public enterprises, which will inevitably lead to job losses. Another option is the closure of all or some of the state TV channels, which would be replaced by a smaller public broadcaster.

A sticking point, however, could be the formation of the independent agency that will oversee the privatization scheme, which is supposed to raise 50 billion euros by 2015. The troika has insisted that its representatives have a say in the body’s decisions and that they are able to block any moves they disagree with. They have also demanded that no representatives of the government be allowed to participate in the agency and that any decisions it takes should be protected by law so that they cannot later be reversed by a different government.

Sources said that both sides are looking to wrap up negotiations by Wednesday night. Troika representatives have delayed their departure until Saturday, after which they will deliver their assessment on whether Greece should receive the June installment of its loan package, worth 12 billion euros. This will be discussed at an emergency meeting of eurozone finance ministers on June 6 or 13.

After Silvio Berlusconi’s party lost the local elections, Italy will now be (re)joining the PIIGS again. As the S&P already downgraded Italy’s rating not too long ago, this new instability could make things harder for Italy. Italian Austerity here we come, and get used to protests in Italy asap. While the Americans are enjoying their barbecues, Europe seems to be falling apart. Reuters reports;

Italian Prime Minister Silvio Berlusconi suffered a shattering loss in his northern stronghold of Milan on Monday in local elections that threaten to unbalance his fractious center-right coalition government.

“This is the first defeat for Berlusconi’s center-right coalition since they came back to power, and it sends a clear signal of voters’ disillusionment,” said Maurizio Pessato of pollsters SWG.

“These results make early elections more likely, possibly next year, and I don’t see any chance of meaningful economic reforms being implemented by a lame duck government.”

As the government prepares to bring forward plans to slash the budget deficit by 40 billion euros ($57 billion) after ratings agency Standard and Poor’s cut its outlook for Italy’s A+ rating to “negative” from “stable,” the stakes are high.

Italy has one of the most sluggish economies in Europe, more than a quarter of its young people are unemployed and government policy is constrained by the need to contain a debt mountain equivalent to some 120 percent of gross domestic product.

Italy is the only euro zone economy in which citizens are poorer on average than they were 10 years ago and, although it has succeeded in containing new borrowing, the government has struggled to stimulate the economy.

His last minute television blitz, to which opposition parties were not given the chance to reply, prompted complaints that he was abusing his domination of the media, and magistrates in Rome opened a formal investigation.

Here we go. Another day of protests against Austerity. Greece is in soon to be in total chaos. With politicians, both in Greece, and the ones representing the bail out capital, in total confusion, we expect an escalation of the Greek situation. Until now, the protests have been rather peaceful, but could easily go out of hand and start something bigger. With people in total riot mood, anuthing could happen in Greece. The creditors demands of buying cheap assets at fire sale prices, isn’t calming the Greek people. First they got the Austerity, and now somebody is “stealing” their assets. More to follow. Link to live feed of protests below;
Live Streaming – Sintagma Square, Aganaktismenoi by Dailymotion_gr_live

Last week’s bombing in China didn’t get much attention in the media. Here is some insight by Stratfor, good reading before you go all in China.

On May 26, a 52-year-old unemployed man named Qian Mingqi reportedly set off improvised explosive devices outside three government buildings in Fuzhou, Jiangxi province, killing himself and one other person and wounding at least 10 others. According to Chinese media reports, the man had posted statements to his microblog accusing a local government official of failing to compensate him fairly for the seizure of his property. Though not all the details of the case are available, the man claimed the government had appropriated 10 million yuan ($1.5 million) for land belonging to him and seven other people, but the local official had cheated him out of about 2 million yuan he believed he was owed. In the microblog post, he claimed to have appealed the case for 10 years without any progress due to opposition from the local government and judicial bureau, which he said presented false evidence in court.

Grievances against local governments over land seizures and compulsory demolitions are a long-running and widespread issue in China — an issue that has been exacerbated by the rapid economic growth and urbanization since the 1990s. Local governments are given a great deal of autonomy over land sales and collaborate with developers, investors or other interest groups in pursuing financial interests, shaping a process that is easily manipulated by local officials and developers. This has caused resentment among residents, especially given that they have little legal recourse, with local judiciaries often acting in collusion with officials and developers. According to estimates by the China Academy of Social Science, more than two-thirds of petitions and unrest in rural areas are associated with land seizure. Because these evictions are a main revenue source for local governments, they are certain to resist efforts at reform from Beijing, even as social unrest and acts of violence like the May 26 bombings increase the central government’s concerns about the potential for instability.

Land seizures in recent years have been critical to the rapid urbanization and modernization process in Chinese cities and have been one of the main drivers of the country’s economic growth. While the central government’s gradual tightening of real estate regulations has gained much attention, the tightening policy has succeeded only in slowing the rapid growth of property in some areas and has by no means disrupted the process of local government land seizures and collusion with real estate developers. And because land revenue represents such a large share of local governments’ funding, it is at the center of their resistance to Beijing’s policy changes. A resolution to the issue requires breaking up the incentive structure that leads local officials, judiciaries and developers to force residents from their homes with no compensation or recourse. To this point, Beijing has proved unwilling or unable to make the necessary changes, as they could jeopardize economic growth and leave local governments without the revenue they have come to depend upon.

http://www.stratfor.com/node/195678/analysis/20110527-china-political-memo-building-resentment-over-land-seizures

The Greek situation is getting more chaotic by the day. While the European Union is dragging its legs regarding a sustainable solution for Greece, the Greeks are on the move, withdrawing large sums of money from the banks (before they won’t be able to), taking to the streets and begin talking about a revolution. As the Greek banks are holding a lot of government bonds, the people are getting worried about the banks seizing their cash. Supposedly, close to 2 billion Euros have been withdrawn. The situation is becoming very Lehmanite. Are we about to get a run on the banks?

While the Americans have been busy barbecuing and meeting families, these are some of the developments in Europe, with regards to the Greek situation;

Maybe Sell in May wasn’t that stupid after all? Arab spring is in Europe, irrespective of what we want or think. Look out for further protests, and escalation of the situation in Greece.

With nobody “serious” trading any market on this Memorial Day, we are providing our readers with some serious articles. Below from the Privateer on the Kahn subject;

Osama Bin Laden was simply “taken out” by US armed forces. That’s the official line anyway. IMF head Dominique Strauss-Kahn did not suffer so terminal a fate. He was simply stung, hauled off to jail and removed from his post. As with the Bin Laden episode, the timing could not have been improved upon. Strauss-Kahn was removed just as he was on his way to a meeting with European Union (EU) and Euro zone officials to “deal with” the latest flare up of the Greek debt drama. Presto, the Greek debt drama duly worsened, commodity prices fell some more (for a few days), the US Dollar rebounded and the Treasury’s debt limit was hit without a tremor.

As to Mr Strass-Kahn’s “indiscretion”, the entire thing is peurile in the extreme. In what has been called the “honey trap”, it had little to do with removing him as a potential rival to President Sarkosy of France in the next French elections. The whole idea was to put the IMF in disarray. This served and serves two purposes. First, it removes the “international” aspect of the moves the EU is making to damp down the ongoing Greek (and others) debt crisis. That turns the “sovereign debt crisis” into a strictly European problem and makes sure the headlines keep coming. Second, the stoush of who the next IMF head will be is now predicted to last until (at least) June 30. This takes the spotlight off the winding down of the Fed’s QE2, which is scheduled to end on – that’s right – June 30.

The IMF is usually portrayed in the mainstream media as a “Washington-based” international financial organisation. It is. There is only one nation which has enough voting power within the IMF to torpedo ANY major decision it makes all by itself. That nation is the US. Substantial IMF policy actions call for an 85 percent “approval” vote amongst the member nations. The US voting “quota” is 17 percent.

The only substantial IMF change would be a change in these voting quotas. The US quota has not changed. When the “emerging nations” won an increased vote, they won it from Europe, not the US.

In the run-up to the 2012 election, Republicans are behaving like, well, Democrats. Blind to the road-tested charms of Mitt Romney and Tim Pawlenty, the G.O.P. base is lusting for an upstart savior—the likes of Herman Cain, Michele Bachmann, or the tantalizingly elusive Ms. Palin.

Democrats fall in love, Republicans fall in line” has been an article of political faith and a staple of punditry since the notion was popularized by Bill Clinton, who barbecued Kennedy charisma into a hunka hunka burnin’ love. Like so many political truisms, the conceit that Republicans are from Mars, Democrats are from Venus has a slick, pop-psych plausibility. Republicans: steely, rational, paternalistic, respectful of authority, easy to herd, the party of No. Democrats: sugary, emotional, idealistic, yearning for novelty, hard to marshal, the party of Oh Yeah, Baby, Make Mama Feel Good. In 2008, Barack Obama did get Democrats hyperventilating, whipped up to a creamy froth, while John McCain creaked ahead like a cranky granddad whom Republicans let move to the front of the buffet line, deferring to seniority, as they had in 1996, when Bob Dole turtled to the top of the ticket. But this may have been the last hurrah for the Republican’s hierarchal heirdom. In the Tea Party era, it is the restless conservative Republican who has become passion’s plaything, the toy of impetuous romance, an erotomania only intensified by the lusting for an upstart savior.

Full article,

http://www.vanityfair.com/politics/features/2011/06/james-wolcott-republicans2012-201106

We have argued for a decline in the Chinese market for some time. After the index broke the positive trend line, China has actually had a mini collapse. Index might bounce short term, but we see more risk to further downmoves after the big formation has been broken. Remember, this is the “hot” market, supposed to lead the world higher.

China’s stocks fell for an eighth day, the longest losing streak since December 2008, on concerns interest rates will rise, a property tax may be expanded nationwide and power shortages will cut production capacity.

China Vanke Co., the nation’s largest publicly traded developer, dropped to a 10-month low after the Oriental Morning Post said the government may raise borrowing costs next month. Sany Heavy Industry Co. slumped for a ninth day, leading declines for industrial companies, on speculation power shortages will cut production capacity. Industrial and Commercial Bank China Ltd. surged 3.9 percent on the prospect the shares are undervalued after this year’s stock market slump.

“The market is deluged with negative news,” said Tu Jun, a strategist at Shanghai Securities Co. “Investors seem to have reached consensus that stocks are heading lower while the tightening environment continues.” (Bloomberg)

http://www.bloomberg.com/news/2011-05-30/china-s-stock-futures-fall-on-inflation-slowing-economic-growth-concern.html

Below are some sentiment indicators, all telling us a similar story. The equity market is running out of steam, and indicators are suggesting the top is in. Courtesey The Technical Take.

The “Dumb Money” indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator is neutral but heading lower.

 “A week ago we were talking about a 10-month high number of buyers, but bemoaning the lack of conviction shown by those buyers and the strong conviction being shown by sellers. This past week, market-wide sentiment moved close to neutral as the number of sellers fell more than -28% sequentially and the number of actionable and/or relevant unusual buy events increased. Most sectors saw a moderate to severe decline in the number of sellers, with the Industrial Goods, Consumer Staples, Technology and Utilities groups experiencing the biggest drops. Outside of Financials, however, there wasn’t a strong buy bias anywhere, and in many sectors the number of buyers also fell. Coming from a bull point of view; we like the increase in buying unusual events and the drop in selling, but we’re cautious because the buying was scatter shot and contained to a degree. Insiders, it appears, made a move towards the sidelines, something not expected at this time in the quarter.”

Don’t forget those Derivatives….Bloomberg reports;

Mark Mobius, executive chairman of
Templeton Asset Management’s emerging markets group, said
another financial crisis is “around the corner” because the
causes of the previous crisis haven’t been solved.
     The total value of derivatives in the world exceeds total
global gross domestic product, creating volatility and crisis in
stock markets, Mobius told reporters in Tokyo today.
     “Are the banks bigger than they were before? They’re
bigger,” Mobius said. “Are the derivatives regulated? No. Are
you still getting growth in derivatives? Yes.”
     The global financial crisis three years ago was caused in
part by the proliferation of derivative products tied to U.S.
subprime loans and contributed to the collapse of Lehman
Brothers Holdings Inc. in September 2008.
     The MSCI World Index tumbled 38 percent in the six months
after Lehman’s collapse. The freezing of global credit markets
caused central banks around the world to pump cash into the
financial system to encourage lending.