Monday, July 6, 2015

Is Greece Only the Beginning?

A while ago, I wrote about how the world financial markets were sliding.  Back in April, the issues seemed to be slowing growth, and lower retail prices.  An additional problem that surfaced since then is an ETF (Exchange Traded Funds) liquidity crisis.  This is creating a dysfunctional bond market. When bonds are dysfunctional, the problems usually spread into stocks.  Bloggers are writing of the possibility of a bond bubble implosion. This is significant.

Other significant problems include Greece's economic melt down and possible exit from the Euro. They also voted down an austerity solution to their problems.  This leaves a fairly large tranche without support.  The US seems to be only indirectly involved in this, but once again bad news travels fast.

The final, and to my mind, largest significant problem is China's stock market implosion. They lost 29% of value over the past 21 days on the SSE (Shanghai Stock Exchange). China went so far as to prevent IPOs (Initial Public Offerings). Many are saying this is not a bubble, but it sure looks like one to me.

Ancillary problems include the potential of a technology stock bubble, real estate prices that are going up too fast in the Portland OR area, smart professionals getting into the Real Estate business, and negative sovereign debt yields.

All these small details factor together into a world economy that has deep seated issues. With both Greece and China having obvious issues, most would wonder if the financial system is getting ready to freeze up again, like in 2008. Even if the problems in China and Greece spread to the US, our government and the central  bank have tools at hand to reverse the trends. They've been successful so far, so the market problems are likely to be solved prior to any type of crash.

I feel like a gold bug; We should have a little bit in precious metals, and have some cash at home too.