GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper and website. He has introduced video and audio into the editorial products and is the public face of the company at many community events. George regularly chairs industry roundtables and conducts video interviews of participants for use on the San Diego Source. He writes two daily columns, "Money in the Morning" and a daily stock market wrap-up.
George, a long time resident of North County, lives in Vista with his wife Terry.
Hard to believe but we are now halfway through 2015 and it has been a bit of a grind. Looking back at the first six months we find the major stock market indexes were little changed with the Dow industrials down 1.1 percent, the S&P 500 up 0.2 percent and the Nasdaq composite posting a decent gain of 5.3 percent thanks to some hot biotech stocks. Where we go from here this year is uncertain. We know it is only a matter of time before the Fed confirms it will begin a slow but steady increase in short-term interest rates. Even though the Greece situation is likely to move to the back burner it will continue to be a festering situation. But one thing is sure: The U.S. economy is picking up some serious momentum.
Nowhere to run, nowhere to hide. That was the situation yesterday when the turmoil in Greece reached a fever pitch, sending the U.S. and global markets into a downward spiral. The Dow industrials dropped 350 points and the other major indexes were all down about 2 percent. Bond markets in Europe saw massive selling, pushing bond prices sharply lower. Of course, as always happens in a situation like this, global funds flowed into U.S. Treasury securities, considered the safest investment, pushing up prices and lowering yields.
Six months ago, the betting money on interest rates would have gone down on the side of a hike by the Federal Reserve no later than June at the latest.
Looks like push has finally come to shove. The European Union and other creditors have been pushing the Greek government to accept certain austerity programs in order to receive additional time to work out a new debt repayment program. Now Greece has told the EU and others to shove it. As a result, all the banks in the country will be shut for at least a week and people will be able to access money only through ATMs with withdrawal limited to small amounts. And, since the banks are closed, the ATMs will not be reloaded when they run out of cash. The government has scheduled a referendum vote for next Sunday to ask the people how they wish to proceed in the country where democracy was founded.
Kick the can. The latest report this morning on the situation in Greece is hardly a surprise. As expected, the country's creditors will likely suggest a plan to provide more than $17 billion in rescue funds -- to be used to pay interest on loans, benefits to pensioners, and wages to workers -- and extend negotiations for five more months. In other words, they are simply kicking the proverbial can down the road again. A meeting is scheduled for tomorrow, actually an extraordinary meeting, to work out the details. Of course, Greece continues to refuse any reform programs as a condition in the negotiations, and will probably have the same attitude five months from now.
Although the official start of summer, the summer solstice, was more than a week ago, the Fourth of July is considered the real start of summer for retailers across the country.
Once again, the financial markets are ignoring very good economic news to react negatively to the mess in Greece. Stocks plunged 178 points on the Dow industrials yesterday and early trading today has the markets little changed. The end of the Greek tragedy should be at hand. The deadline for a settlement between the country and its creditors is next Tuesday and if nothing is resolved, Greece will not be able to pay billions in interest payments or pay wages to government workers as well as benefits to retirees.
Turns out the economy in the first quarter of 2015 wasn't as bad as first reported. The Commerce Department today issued its final revision of the gross domestic product -- the total of all goods and service produced by the nation's economy -- was down just 0.2 percent in the first three months of the year. It had been reported the GDP fell 0.7 percent but, once again, consumers came to the rescue. Household spending during the period was up 2.1 percent despite absolutely terrible weather across a third of the country in the first quarter. The original reading showed spending was up 1.8 percent. Many analysts are suggesting this could set the stage for a big jump in the economy when we get the readings for the second quarter, which ends next Tuesday.
Stop me if you think you've heard this one before. The financial markets were moved yesterday because of the situation in Greece. The good news is there was no bad news, as negotiators appear to be narrowing in on an agreement to avoid an economic crisis. The day of reckoning is a week from today when Greece is scheduled to make billions of dollars in interest payments on loans to the EU and IMF. The only problem is they don't have the money. Most likely there will be an extension on the payments but only if the Greek government agrees to austerity concessions. Stay tuned.
Hope springs eternal. Once again, there appears to be some movement in the negotiations between Greece and the European Union as well as the IMF to avoid a financial crisis. An important meeting is scheduled for Thursday and preliminary negotiations indicate Greece is willing to make some concessions regarding its massive pension debt. Of course, if any part of the deal involves reduced payments to existing retirees or an increase in the retirement age, there will be rioting in the streets and the possible ousting of the country's leadership.
"Nasdaq's new high could be the bull's last gasp." I probably don't have to tell you where that headline comes from. Yes, MarketWatch.com really started circling the wagons yesterday after the delayed-reaction rally took the Dow industrials up 180 points and lifted the Nasdaq to a new all-time high. Marketwatch.com, of course, didn't stop there. How about another headline saying, "Stock market could pay the price for its hubris if 'all hell breaks loose'" It must be so frustrating to watch investors rebuff every attempt to drag the stock market lower and use down days as a buying opportunity. The permabears are all so sure the situation in Greece will be the straw that triggers a big sell-off but it still hasn't happened. By the way, the "all hell" article ended with this warning: "There could be some serious wobbling in the days to come." Oh no, not wobbling!
Sometimes the best investments are found right in your own backyard.