Greece Roundup

• A “yes” vote in favor of servitude has now reached a slight majority according to some Greece referendum polls. How accurate the polls are is an issue.
• Yanis Varoufakis, Greece’s finance minister, said he would resign if Greeks voted Yes in Sunday’s referendum on the country’s bailout. “I will not sign another extend and pretend agreement”, said Varoufakis.
• Greece to run out of essential food and medicine within days and banks down to last €500 million.
• Daily allowance of cash from ATMs has dropped from €60 to €50.
• Three quarters of business leaders think Greece will be forced to leave the eurozone in the next 12 months.

Vote for Servitude Takes Slight Lead

Reuters reports ‘Yes’ Camp Takes Slim Lead in Greek Bailout Referendum Poll

Supporters of Greece’s bailout terms have taken a wafer-thin opinion poll lead over the ‘No’ vote backed by the leftist government, 48 hours before a referendum that may determine the country’s future in the euro zone.

The poll by the respected ALCO institute, published in the Ethnos newspaper on Friday, put the ‘Yes’ camp on 44.8 percent against 43.4 percent for the ‘No’ vote. But the lead was well within the pollster’s 3.1 percentage point margin of error, with 11.8 percent saying they are still undecided.

Given a volatile public mood and a string of recent election results that ran counter to opinion poll predictions, the result is in effect completely open.

Credit ratings agency Fitch said the banks were already effectively bust and would go to the wall within days unless the European Central Bank increases emergency liquidity assistance to help them cope with a wave of withdrawals.

There has been little time for campaigning but Tsipras is due to address a mass rally of ‘No’ supporters in Athens’ central Syntagma Square outside parliament on Friday evening, while ‘Yes’ campaigners plan a rally at the old Olympic Stadium.

Greek Banks Down to Last €500 Million

The Telegraph reports Greece to Run Out of Essential Food and Medicine Within Days and Banks Down to Last €500m

Greece is sliding into a full-blown national crisis as the final cash reserves of the banking system evaporate by the hour and swathes of industry start to shut down, precipitating the near disintegration of the ruling coalition.

The daily allowance of cash from many ATMs has already dropped from €60 to €50, purportedly because €20 notes are running out. Large numbers are empty. The financial contagion is spreading fast as petrol stations and small businesses stop accepting credit cards.

Constantine Michalos, head of the Hellenic Chambers of Commerce, said lenders are simply running out of money. “We are reliably informed that the cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour,” he said.

Dwindling Food and Medical Supplies

Also consider Food and Medicine Shortages for British Tourists in Greece ‘Within Days’.

British holidaymakers in Greece will be unable to buy food or medicine within days if a deal is not reached to reopen the banks, the head of a leading business body has warned.

Constantine Michalos, president of Athens Chamber of Commerce, said there could be “shortages on the shelves” by early next week and tourists could be left without “basics”.

Mr Michalos warned that shops will begin to close on Friday and not reopen because they are unable to import products due to the bank closures. He said the bank closures had limited the ability of shops to import new stocks because Greece is currently frozen out of a cross-Europe system of money transactions.

IMF Says Greece Needs Another €60 Billion Bailout

Finally, please consider Greece Needs €60bn in New Aid, Says IMF.

Greece needs more than €60bn in new financial help over the next three years and faces decades under a daunting mountain of debt that will make it vulnerable to future crises, the International Monetary Fund has warned.

In a new analysis that lays out Greece’s economic dilemma in stark terms, the IMF on Thursday called for Europe to grant the country “comprehensive” debt relief, arguing for the doubling of the maturities on its debts from 20 to 40 years.

The fund’s assessment is likely to provide succour to the Syriza-led government which is campaigning for a No vote in a referendum on Sunday. But the IMF also blamed it for the country’s deteriorating situation.

What’s It All About?

The old bailout agreement is off the table. The creditors pulled it when Tsipras announced a referendum.

Greece has already been bailed out to the tune of €180 billion or so. However, Greece needs yet another €60 billion “bailout”.

Total eurozone exposure to Greece, counting Target2 liabilities, may top €250 billion depending on how much cash has been pulled from Greek banks in the past two weeks.

Greece cannot possibly pay back €250-€310 billion, and it won’t. Merkel understands this. For political reasons, she cannot say that.

With sentiment in Germany and the other creditor nations against another bailout the only point of a “yes” vote is one of revenge. The creditors will topple Tsipras and likely install another Troika puppet.

That is what the referendum is really about.

A vote either way will not fix a damn thing. A “yes” vote is without a doubt a vote for extend-and-pretend servitude, but a “no” vote without reforms is equally useless.

The question at hand is: Who is the master and who is the slave?

We could have and should have been in this position four or more years ago, with only €60-€80 billion at risk. Bailing out the bondholders cost that much.

Regardless of the outcome, it appears to me the business leaders are correct. About 75% of them think Greece will be forced to leave the eurozone in the next 12 months unless Russia quickly comes to Greece’s aid.

Stranded in Limbo

This all has sort of a surreal nature to me reporting from Iceland where Liz and I are on vacation. Just this morning, Liz overheard a conversation from two Greek citizens speaking in English.

They felt lucky to be able to get on a plane for their vacation, but they are also worried about being stranded here.

If there is no money for jet fuel or critical services, we could easily see vacationers stranded in Greece. And if Greek airports get shut down, Greek citizens could be stranded abroad.

American industrialist J. Paul Getty once said: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

And when the amount is $1.73 billion, it’s everyone’s problem. Greece is officially in arrears for missing its scheduled payment Tuesday to the International Monetary Fund (IMF). Expecting this, American stocks had their largest one-day drop of 2015 on Monday. Market volatility, as measured by the VIX, spiked sharply.

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Investors responded by seeking safe-haven investments such as Treasuries, gold and municipal bonds.

This Sunday, Greece plans to vote on whether to comply with their creditors’ present conditions or to reject the terms, a choice some think could lead to a so-called Grexit from the eurozone. Currently, there’s no such exit clause written into the legal fabric of the currency system other than leaving the entire European Union, an extreme “solution.” No matter how this particular act plays out, there are still more (and even larger) loan payments waiting in the wings, the next one owed to the European Central Bank (ECB) and totaling nearly $4 billion.

German Chancellor Angela Merkel, whose country holds the greatest total amount of Greek debt, officially refused to renegotiate the bailout terms until after the referendum.

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In many ways, the unfolding Greek drama is playing out like a sequel to the Cyprus banking crisis two years ago, which also had far-reaching ripple effects in world markets. But the present situation could potentially have much larger ramifications.

How Cyprus Prevented Capital Flight and Saved Its Economy

Cyprus has climbed most of the way out of its financial hole after making bad loans to—wouldn’t you know it?—Greece, following the 2008 crisis. One of the ways the Cypriot government managed to do this was by implementing capital controls. Cyprus imposed restrictions on how many euros could be withdrawn per day or taken out of the country, and ATMs rationed cash.

Similar capital controls are now in place in Greece. Banks are closed until at least next Monday—the day after the referendum—and no more than 60 euros may be withdrawn from ATMs per day, per account. Greeks traveling abroad also face restrictions. Even parents who have children studying abroad will need to apply for permission to send them money. These inconveniences are forcing citizens to realize the possible, and potentially very unpleasant, consequences of a no vote in the upcoming referendum.

One opinion poll right now shows that a slim majority of Greek respondents are in favor of working out a deal with the IMF and other lenders. Former Cypriot Minister of Finance Michael Sarris—who’s had plenty of experience with debt negotiations—agrees. He urges Greece to vote yes, stating that to do so “takes [them] back to the negotiating table with the chance of a better outcome.”

Among the Greek voters, of course, are pensioners and low-income Greeks who receive government benefits. Fed up with austerity, such voters seem much more likely to vote no. But this way of thinking is precisely what landed Greece in its current situation to begin with. For years the country has been financing its ever-expanding budget with loans from European banks and the IMF, with no plan in place on how to repay them. In fact, Greece has spent 90 of the last 192 years in one financial crisis or another, according to Bank of America Merrill Lynch.

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For this reason and more, MSCI, global index provider, is seriously considering demoting Greece from the emerging market category to the solitary, windswept “standalone” category, which includes Venezuela, Ghana, Zimbabwe and other outliers.

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This past April, Cyprus lifted the last of its capital controls. Although it was a painful process, things are moving in a positive direction. Let’s hope the people of Greece make the right decision so that their country can likewise begin the recovery process.

Greece Unlikely to Leave the Eurozone

Obviously this topic is of interest to our investors, so I’ll be sure to update you on how our investment team is handling the situation. For now, it’s important to know that a Grexit is unlikely to happen. Such a move would be a huge, symbolic blow not only to Greece, one of the earliest members of the fledgling European Community, but also the monetary experiment known as the euro. Even Greek Prime Minister Alexis Tsipras admits that the cost to the EU for kicking Greece out of the eurozone would be too immense.

The uncertainty has sent shockwaves through world markets, prompting investors to seek safety in core investment assets, including municipal bonds.

“It’s clear that the institutions are selling into this market. The distribution count is 8 for the S&P and 6 for the Nasdaq. Thus we are seeing clear distribution pressure on the stock market. Every market must have its trigger. I think the trigger for this market is if and when the Dow breaks 17,000. 

If Transports break below 8,000, I think it will be an ominously bearish move. What are the Transports telling us? The Dow above 17,000 is saying that goods are being manufactured, but the Transports are telling us that these goods are not being sold. They’re not being rolled out of the factories into the arms of the retail public. No, the public is increasing its savings and reducing its debts. I continue to think that we should side with nature and let a bear market clear out the debts and inflation that have built up since World War II.

I have said that in future years, the standard of living of nations throughout the world will decline. But out of the ashes of a deflated world will come a better world than ever. For my subscribers, I continue to advocate holding physical silver and gold, and getting ready for difficult times.

There’s been a huge move into the US dollar, in a flight to safety. As I see it, the dollar is now overbought and overloved. I trust my subscribers are out of the market and holding only physical silver and gold.” – Richard Russell

…..read more commentary from Richard at King World News HERE

Since the October rally ended, the SPX formed what looked like an “extended distribution phase” in the form of a rounding top. This is even more apparent on the Dow Jones Composite Index. Early June, it dropped below its 100-DMA, it slightly breached its December low, but rallied. A second attempt was made to break through which also failed. The rallies found resistance at the 100 MA and last week, a third attempt at breaking the bottom trend line also failed … or did it?

With Greece’s default the Dow Jones index is completing its rounding top/descending triangle pattern by finally making a new low. A Monday morning opening gap to the downside could be the perfect way to end this formation. If so, this could be the beginning of the correction which has long been expected. 

Current Position of the Market

SPX: Long-term trend – Bull Market

Intermediate trend – Waiting for confirmation that the ending diagonal is complete.

Short trend – Neutral

Greece’s decision to hold a referendum on July 5 and not to accept the final offer made by its creditors resulted in a Greek debt default and is currently unsettling to markets. Should that be the case, SPX should follow suit by extending last week’s decline.

This could be the end of the 7-year cycle we talked about, closing its grip on the market by applying pressure which is increasing gradually every week.

USA markets will be closed on July 3. It will therefore be a shortened holiday week of trading. My current concern now is whether or not World equity markets will resume a 10% correction down or more. This period of a cycle that we work with has a very high historical correlation to 10% or greater reversals in the DJIA. The question is whether that decline has already started.

We defer to our models for the confirmation of this move and any other future moves.

Gold fell to a low of 1167.10 on Friday, June 26. . This may be important because Silver fell to a low of 15.45 on Friday, June 26, well below its low of the past three months.

Something big may be in the works. It is ironic that the Greek debt default, the lack of a conclusion of the USA/Iran negotiations and The Supreme Court’s decision to uphold Obamacare subsidies of The Affordable Care Act are ALL historical events occurring at the same point in time is not a random act.

This decision upholding the IRS rule giving all Americans access to premium tax credits, millions of Americans can breathe easier today knowing that there is access to health care.

I believe that The Supreme Court validated President Obama’s massive power grab, allowing him to tax, borrow, and spend $700 billion that no Congress ever authorized. This establishes a precedent that could let any president modify, amend, or suspend any enacted law at his or her whim. President Obama has already creative secret deals that Americans are not yet aware of. I fear that these unchecked political power in the Executive branch will be misused again and again by the President.

At this time, we are currently experiencing a new “socio-politically-economic” revolution. The passing of this Affordable Care Act (aka Obamacare) will continue to bankrupt the county and many of the people in it. It is only affordable for some in terms of lower premiums. The other side of the coin is that deductibles are so high that many still cannot afford health care under this Act. For them, it is anything but affordable.

The yield on the benchmark 10 year note closed last week at 2.26%. This week’s close was 23 bps higher at 2.49%. The 30 year bond yield closed the week at it 2015 high of 3.25%. Current financial market conditions with low levels of interest rates have resulted in negative yields for some Treasury securities trading in the secondary market. Negative yields for Treasury securities most often reflect technical factors in the Treasury markets related to cash and repurchase agreements markets and are at times unrelated to the time value of money.

We had a confirmed signal to exit the ETF “TLT” on June 3, 2015 at 118.39. Today, its current prices 115.23, I am expecting this price to go lower.