#333 Summer Travel Tips with Peter Greenberg


Yes, this is still here, and it will be for a while longer to serve as a reminder that there's a new place for Jill on Money content - YouTube!  Seems like a no-brainer, but sometimes it takes a little outside help (h/t to JOM friend, Joe A!) to recognize the obvious.  So don't freak out.  Going forward, we're going to put all our radio and podcast content on YouTube! It'll be easier for you to navigate and listen to past shows, because everything will be in one place.  Just click any of the links below and you'll be able to listen to this week's show as well as anything else you see that might interest you, including all the Better Off podcast content if you haven't been listening. Let us know what you think by emailing us at


July 22 Download Hour One Here

We started the show with Scott from San Francisco who asked about Social Security and withdrawal strategies for his IRA.  Some basic questions that turned into a very interesting conversation, so we kept him around for a couple segments.

After Scott we continued to purge the email inbox...we're making progress but still have a ways to go...please be patient!


July 22 Download Hour Two Here

Summertime is officially upon us which means millions of Americans will be hitting the roads and taking to the skies to enjoy their summer vacations. Whether you like long walks on the beachbeach, blaze a trail off the beaten path or explore one of the major tourist destinations, there’s a smart way to do it.  That’s where Peter Greenberg, our guest this week in hour two, enters the picture.

Peter, the Travel Editor for CBS News, has tips and suggestions to help you get the most bang for your buck as you plan and book your trip.

Where to go? Where not to go? Drive, train or fly? From South Africa to Chile to Tokyo and Thailand, as well as hidden gems here in the States, we circle the globe with Peter and provide you with useful tips to easily reach your destination, with a few bucks left in your pocket.

This one may be hard to believe, but despite all the travel related websites out there, Peter insists that even in 2017, the best thing to do is to pick up the phone and have an actual conversation with the airline or hotel.  But it’s not just a conversation for the sake of having one.  There’s a way to do it and certain questions to ask.  It’s a process.  So much so, that we did a little role playing to help guide you guys through it!

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

5 Big Money Stories of 2015


Now that the Fed’s long awaited for rate hike is behind us, the financial year is essentially over. Sure there will be data over the next couple of weeks, but none of it is likely to be market moving. That means it’s a perfect time to reflect on the year that was and to look back at the big stories that shaped the financial world. Of course this is much easier than the futile attempt to predict the future at the beginning of the year, but in the spirit of full disclosure, I am going to note when I made the right call and when I missed the boat:

China: 2015 began as China was in the midst of a stock market boom. The steep ascent started in mid-2014, after the Chinese government urged small investors to enter the market. “Policy makers and state media continued to trumpet the rally even as prices rose well beyond most reasonable estimates of fair valuation,” according to Capital Economics, as a full-blown bubble formed.

By the June 12th peak, the Shanghai Composite was up over 160 percent from the 2014 lows. Chinese officials stepped in to try to prick the bubble that it had fostered. Unfortunately, as is the case with most bubbles, pricks often lead to pops and the market tumbled by over 40 percent, before recovering some of the losses.

Economists were less concerned with the stock market and more worried about the waning pace of growth in China. The world’s second largest economy had seen 10+ percent growth for the past three decades, but in 2015, downshifted to a 5-6 percent pace. While China slowed down in 2015 and the stock market tanked, there was no catastrophic “hard landing” as many had predicted. However, the Chinese slowdown, combined with a strong U.S. dollar, made 2015 tough for U.S. manufacturers, who experienced their worst year since 2009.

JS CALL: While I thought that the Chinese economy would slow, I did not predict that the government would intervene in both the stock and currency markets.

Greece: Another year, another flirtation with disaster for Greece and the euro zone. After an election, a snap referendum and lots of political gamesmanship, Greece accepted the harsh terms of yet another European bailout. The Greek Tragedy might be mistaken for comedy, if the human stakes were not so high.

JS CALL: The game of chicken between Greece and the euro zone went on far longer than I thought. I did not think the euro zone (led by Germany) would be as harsh as it was.

U.S. stock market correction It took four years, but U.S. stocks finally dropped by more than 10 percent in August. The main driver was the aforementioned Chinese economy. Investors feared that the slowdown in the world’s second largest economy, in addition to the cooling of once-hot emerging economies like Brazil and Russia, would negatively impact the rest of the world.

The swoon was notable for its brevity - depending on the index; it lasted for a few days to a couple of weeks. Investors were long overdue for the sell-off: according to Capital Research and Management, through 2014, 10 percent corrections occur about every year and 20 percent bear markets occur about every 3 ½ years, so we are also due for one of those—the last one ended in March 2009.

JS CALL: I thought that the correction would occur, but I had no idea that China would be the driving force. Instead, I thought it would occur as a result of the Greek debt stand off.

Oil Plunge: After a 46 percent drubbing, which pushed crude futures down to $53.27 per barrel at the end of 2014, oil managed to trade above $60 early in 2015. But as news emerged that China was slowing down, the bears took hold. In addition to softening demand, global production remained high. Whether it was the U.S.-based frackers, OPEC nations, Russia or Brazil, the oil spigots remained wide open. As a reminder of Econ 101: weak demand + strong supply = lower prices. The savings at the gas pumps was supposed to propel retail sales in the US, but most Americans chose to save those extra pennies, rather than spend them.

 JS CALL: This is one call that I completely blew…I had counted on OPEC nations curtailing output to push up the price of oil and to keep it in a range of $50-$70.

Federal Reserve Rate Hike: In 2015, the U.S. central bank did something that it had not done in over nine years: it raised short-term interest rates. With the economy growing at a decent, though not great 2.25 percent annualized pace, monthly job creation averaging 210,000 and unemployment sitting at a seven-year low of 5 percent, Fed Chair Janet Yellen and her cohorts decided to hike rates at their last policy meeting of the year. Future Fed actions should eventually return rates to the vicinity of 3.5 percent over the course of the next three years, but how markets will react to the normalization of policy is unknown. After all, this was the first increase in over nine years, competing the longest stretch without a fed hike in 25 years. To say that the economy and markets are in uncharted and choppy waters may be the understatement of the decade.

 JS CALL: I predicted that the first hike would occur in September, not in December, so not too far off!

MARKETS: The Dow Jones Transportation Average entered a bear market for the first time since August 2008. The index finished the week down 20.1% its Dec. 29, 2014 record close. Those who subscribe to the “Dow Theory” believe that the 20-stock index that tracks the largest airlines, railroads and trucking companies, can presage broader stock declines.

  • DJIA: 17,128 down 0.8% on week, down 4% YTD
  • S&P 500: 2,005 down 0.3% on week, down 2.6% YTD
  • NASDAQ: 4,923 down 0.2% on week, up 4% YTD
  • Russell 2000: 1121, down 0.3% on week, down 7% YTD
  • 10-Year Treasury yield: 2.20% (from 2.14% a week ago)
  • Jan Crude: $34.73, down 2.5% on week
  • Feb Gold: $1,065, down 1% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.00 (from $2.01 wk ago, $2.45 a year ago)


Mon 12/21:

8:30 Chicago Fed

Tues 12/22:

8:30 Q3 GDP (final estimate, previous reading: +2.1%)

8:30 Corporate Profits

10:00 Existing Home Sales

Weds 12/23:

8:30 Personal Income and Spending

8:30 Durable Goods

10:00 New Home Sales

10:00 Consumer Sentiment

Thursday 12/24:

1:00 Stock Markets Close Early

Friday 12/25: Christmas Day-Markets closed

Greek Deal Done: Will Tsipiras Lose His Job?


"22 hours and all I got was this lousy deal!" That's the tee shirt that Greek Prime Minister Alexis Tsipiras will likely have to wear, when he heads back to Greece and tries to convince the Greek Parliament to approve a three-year, €82-86 billion bailout deal ($91 billion to $96 billion). While the 22-hour marathon negotiation allows Greece to remain in the common currency zone, it does so at a steep price. Price tag = €82-86 billion: The first thing to note about the deal is that it is larger than the €53.5 billion the Greeks had requested and the reason is clear: In the past month, while Tsipiras was messing around with trips to Russia and a snap referendum, the Greek economy ground to a halt, further crippling commerce. The upshot is the Europeans believed that the Greece asked for too little in its third bailout request.

Austerity: Greece will immediately implement tax increases, tough pension reforms and privatization of certain industries, like energy transmission. Additionally, Greece agreed to changes in labor laws and administrative overhauls.

New €50 Independent Fund: Greece will transfer €50B of state-owned assets into a fund, which will be sold off or wound down to help pay down the country’s debt over the coming years. Because there is no trust in the Greeks, the Europeans will supervise the fund.

U-Turn on Greek Legislation: When Tsipiras came into office at the beginning of the year, he enacted legislation that tried to ease up on austerity, including rehiring of some laid off public employees. The new bailout requires that Greece undo those measures.

IMF IN: Greece asked for the IMF to be excluded from a deal, but the Europeans liked the concept of an adult in the room, so the IMF will continue to monitor the Greek’s adherence to its bailout commitments.

Greek Banks: The Europeans will earmark €10 - 25 billion to recapitalize the banking system, though it is unclear when the banks will be able to reopen.

Re-Profiling debt: Europe will not write down Greece's existing debt, but will consider "re-profiling" it, which essentially means that after Greece passes its first review, the Euro group might potentially elongate the terms and reduce the interest rates applied to various loans.

Deadline: The Europeans said that the Greek Parliament has until Wednesday to approve the deal, which could mean that Tsipiras will have to cozy up to become "frenemies" with some right wing legislators.

Tsipiras Out?: The parliamentary process could  trigger fresh elections and Mr. Tsipiras could find himself not only as the architect of a lousy deal, but an unemployed one as well.

BOTTOM LINE: Although the Europeans may have won the battle, they will likely lose the war. Yes, Greece will remain in the Euro zone, but the deal just kicks the can down the road. Without a significant write-down of the now more than $350 billion in debt, the Europeans are unlikely to see total repayment and Greece may ultimately have to leave the Euro zone. For the Greek citizens, this lousy deal will amount to even more suffering.


Time Running Out for Greece


As of this writing (Sunday 10:35ET), there is no deal yet for Greece. What we know is that with little fanfare and as the clock ticked towards the Sunday deadline, Greece’s newly minted Finance minister Euclid Tsakalotos submitted a formal request for a new three-year 53.5 billion euro ($59.4B) aid package from the Euro zone. In return for the much-needed cash, Greece would immediately commit “to a comprehensive set of reforms and measures to be implemented in the areas of fiscal sustainability, financial stability, and long-term economic growth.” In other words, we need the money so much that we will now agree to tax and pension reform, two of the stumbling blocks that prevented a deal over the past six months. What happened to all of the tough talk about standing up to the Europeans, not to mention the big victory at the polls last Sunday? A funny thing occurred during the fortnight since Prime Minister Alexis Tsipiras called for his referendum: markets were pretty calm and contagion to other markets barely materialized. That fact strengthened the Europeans’ bargaining power. After all, if the markets were basically fine, given all of the uncertainty surrounding Greece, maybe a Grexit wouldn’t be the worst thing in the world, right?

But as Mark Spindel of Potomac River Capital said, “Just because I might be able to survive walking across a major interstate, doesn’t mean I should undertake that experiment.” Even if global markets could withstand Greek’s departure from the Euro zone, wouldn’t it be preferable to mutually engineer and manage it? And does Europe really want to help create a destabilized country, where tens of thousands of Syrian refugees are already knocking on the door?

Perhaps that was the nature of Treasury Secretary Jack Lew’s calls to both European and Greek officials over the past few weeks. While the U.S. is not involved with the negotiations, Lew may have dusted off his history book to review “The Truman Doctrine,” which established that the U.S. would provide political, military and economic assistance to all democratic nations under threat from external or internal authoritarian forces.

The Truman Doctrine arose in 1947, after the British Government withdrew military and economic assistance to the Greek Government in its civil war against the Greek Communist Party. Truman asked Congress to support the Greek Government against the Communists. Of course it was not a coincidence that Tspiras, a far left socialist (some say he is Marxist), went to Russia to meet with Putin last month-it was a not-so-subtle signal that he would be willing to turn to any port in a storm.

Presuming that nobody wants to see Greece adrift, both sides will have to feel some pain. Olivier Blanchard, the IMF’s Economic Counselor and Director of the Research Department summed it up succinctly: “At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?” Blanchard has been vocal about something that few Europeans want to hear: The total amount of debt will have to be cut in order for Greece to get on a sustainable path of progress. And the longer that they wait to write down the debt, the bigger the necessary write down will be. As economist Mohamed El-Erian notes, “Every day that goes by intensifies the Greek economy’s economic and financial implosion…the deeper the economy sinks, the larger the reform and financing requirements to restore its vitality.”

Meanwhile, time is running out for Greece, as cash reserves dwindle and anxiety increases...

CHINA: As if Greece were not enough, gyrations in the Chinese stock markets have prompted some to wonder whether the real contagion risk is centered in Beijing, not Athens. First, some context: Chinese stocks started a steep ascent in mid 2014, after the Chinese government urged investors to enter the market. “Policy makers and state media continued to trumpet the rally even as prices rose well beyond most reasonable estimates of fair valuation,” according to Capital Economics.

The government did a good job of encouraging small, retail investors to enter the fray with gusto. They pushed stocks ever higher until a full-blown bubble formed. At its height on June 12th, the Shanghai Composite was up over 160 percent from the 2014 lows. Not only had prices become completely disconnected from fundamentals, margin debt tripled over the course of a year.

At that point, Chinese officials stepped in to try to prick the bubble that it had fostered. Unfortunately, as is the case with most bubbles, pricks often lead to pops. By last Wednesday morning, the index had tumbled by over 32 percent. Before everyone goes too nutty, it’s important to note that even at the mid-week lows, the Shanghai Composite was up 70 percent from a year ago.

Although the US markets had not been affected by the drop, when Chinese officials halted trading in over half of all listed securities there, US investors got spooked and sold off US companies. (That the rotten day occurred when the NYSE shut down for three and a half hours was pure coincidence.) The quick reasoning went like this: roughly a third of global growth comes from China; if their markets plunge, the Chinese economy will take a hit (that’s why copper dropped to six-year lows); if China slows, then it will be bad for the US exporters; and maybe Greece IS going to be a big deal; so SELL MORTIMER, SELL! The Chinese selling reversed course by the end of the week, allowing all three US indexes to also gain ground on the week…crisis averted!

Federal Reserve: The situation in Greece and the gyrating Chinese market may come up during Federal Reserve Chair Janet Yellen’s semi-annual testimony before Congress this week. Will the central bank stay on course for a September lift off amid international uncertainty?

MARKETS: Existential question: What if the NYSE halted trading and nobody cared? The outage was attributed to a technical glitch and despite being off line; traders had plenty of opportunity to execute orders of NYSE-listed stocks on other electronic platforms, like the NASDAQ.

  • DJIA: 17,760 up 0.2% on week, down 0.35% YTD
  • S&P 500: 2076, down 0.2% on week, up 0.9% YTD
  • NASDAQ: 4,997 down 0.2% on week, up 5.5% YTD
  • Russell 2000: 1248, up 0.3% on week, up 3.9% YTD
  • 10-Year Treasury yield: 2.41% (from 2.38% a week ago)
  • August Crude: $52.74, down 7.3% on week
  • August Gold: $1,157.90, down 0.8% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.76 (from $2.77 wk ago, $3.63 a year ago)

THE WEEK AHEAD: As if the news cycle isn’t keeping investors busy enough, we are starting second quarter earnings season. According to FactSet, year-over-year earnings for the S&P 500 are projected to decline by 4.4 percent. The last time the index reported a year-over-year decrease in earnings was Q3 2012.

Sun 7/12 Greek Deadline

Mon 7/13:

Tues 7/14:

J&J, JP Morgan Chase, Wells Fargo, Yum! Brands

8:30 Retail Sales

8:30 Import/Export Prices

10:00 Business Inventories

Weds 7/15:

Delta, Intel, Netflix

8:30 PPI

8:30 Empire State Manufacturing Index

9:15 Industrial Production

10:00 Fed’s Yellen Semi-Annual Testimony to House

2:00 Federal Reserve Beige Book

Thurs 7/16:

Citigroup, eBay, Goldman Sachs, Google

10:00 Philadelphia Fed Activity Index

10:00 Housing Market Index

Fri 7/17:


8:30 CPI

8:30 Housing Starts

10:00 Consumer Sentiment

Greece Votes No: Here’s What Investors Should Do


In the hours after Greek citizens voted NO to more austerity, the two most frequently asked questions that I fielded were: (1) What’s next? (2) What should investors do? Five years ago, the European Central Bank (ECB), the European Commission (EC) and the International Monetary Fund (IMF) funneled billions into Greece not out of the kindness of their hearts, but to provide a backdoor bailout to its own financial institutions, which had lent Greece gobs of money over the previous decade. If Greece had defaulted then, it could have taken down the entire European banking system.

Five years later, with banks back on their feet and the European economy strengthening, Euro group leaders assumed a tougher negotiation stance on the restructuring of Greek debt. In order to unlock about $8B of much needed rescue funds, Europeans said that Greece must agree to more taxes and an increase in employee pension contributions (“austerity”).

Greece’s Prime Minister Alexis Tsipras called for a national referendum, where Greek citizens voted on the euro group’s demands, which he believed were draconian. The ECB subsequently turned off the spigots, leaving Greece without a lifeline and forced the closure of banks and the imposition of capital controls, limiting Greek citizens to withdrawals of $67 per day. Not surprisingly, the country missed a $1.73B payment to the IMF, putting it into a dubious club that includes Cuba, Zimbabwe and Somalia.

When Greeks overwhelming voted NO on the referendum (61.3%), it armed Tsipiris with a mandate, which essentially said, “austerity has hurt the Greek economy (GDP has contracted by 25% in the past five years) and caused widespread suffering (25% unemployment overall and 50% for the youth population). We want to stay in the euro zone, but we want a more humane deal.”

Now both sides return to the drawing board, trying to regain lost trust. The first step may have been the resignation of controversial finance minister Yanis Varoufakis, after Europeans indicated “a preference for his absence” when new negotiations begin.

But the hard work lies ahead. The Euro group’s total outstanding loan balance to Greece is $270B, a large chunk of which is keeping the Greek banking system afloat and the rest is in the form of longer-term Greek bonds, which require a $3.9B installment on July 20th.

If Greece misses that deadline, it would be in full-fledged default and the ECB would be hamstrung by its own rules: it can only lend to banks that are solvent and it’s hard to say that Greek banks are solvent if the government is not paying its bills. Without access to more money, Greece would have to issue temporary IOU’s to its creditors. Ultimately, it may be forced to create a new currency, which would mean a widespread devaluation of whatever money is left in the Greek banking system and a lot more suffering for Greeks.

While a deal between Greece and its creditors may finally emerge, it would likely just kick the can down the road. Economists say the real solution is simple, but not easy: the Europeans must admit that they will never get all of their money back and write down the loans by half. Doing so will allow Greece to emerge from the crisis on firmer footing. The alternative would be a Greek exit from the euro zone and a 100 percent write down.

Now to the second question: What should investors do?

Sit still and do nothing. Be disciplined and stick to your game plan and don’t try to guess the next move up or down in the markets. In fact, if you are still contributing to your retirement account, you should be rooting for a further sell-off so you can buy shares at lower levels! If you are retired, you were hopefully wise enough to create a balanced portfolio that limits market volatility.

Greek Referendum: Oxi or Nai?


In the “Beware what you wish for” category, Greek Prime Minister Alexis Tsipiris’ hastily called referendum on whether or not (“Oxi” is "No", “Nai” is "Yes") the country would be willing to accept European demands of more pension cuts, a reduction in government jobs and higher taxes, had clear results: a hefty 60 percent of Greek citizens -- especially younger ones -- voted no, meaning that they simply could not abide more austerity. (Greece's youth unemployment rate has remained at about 50 percent.) [If you need a primer on Greece, check out this 60 second video!] If the referendum was meant to show that Greece was serious and as a result, the European officials would ease up on their demands, Tsipiras was thwarted. If anything, the vote seemed to steel Europeans, who were undeterred by the closure of Greek banks; the imposition of capital controls; a missed IMF payment; and the expiration of the existing bailout.

With the results in, Greece's Finance Minister Yanis Varoufakis said that officials would be heading to Brussels ASAP to restart negotiations, but there's one wrinkly: Eurozone finance ministers are not planning on an emergency meeting tomorrow. German Chancellor Angela Merkel will travel to Paris for talks with France's President Francois Hollande on Monday evening, presumably so that the two largest economies of the euro zone can hash out a game plan.

If/when they do talk, the big question is: Will the Euro group be willing to cede ground and agree to the last deal that Tsipras offered on June 30th? Chances are looking dim for a quick resolution. The BBC reported that German Chancellor Angela Merkel privately told MPs that, as far as she is concerned, Alexis Tsipras has simply driven his country into the wall. Additionally, Senior German Conservative MP Hans Michelbach said "now one has to question whether Greece would not be better off outside the euro-zone." That doesn't sound like the parties will be strumming Kumbaya any time soon.

Yet with little cash on hand, the Greek government is running out of options. Varoufakis told The Telegraph, "Luckily we have six months stocks of oil and four months stocks of pharmaceuticals," but the country still need the European's cash and time is crucial, because Greece must make a $3.9 billion bond payment to the ECB on July 20th.

If not, the country would no longer be in technical default, it would be in full-fledged default. At that point, the ECB would be hamstrung by its own rules: it can only lend to banks that are solvent and it's hard to say that Greek banks are solvent if the government is not paying its bills. If the NO vote starts a downward spiral towards leaving the Euro zone, Greece will have to create a new currency, which would mean a widespread devaluation of whatever money is left in the Greek banking system and a lot more suffering for the Greek people.

EXPECT A ROCKY START TO TRADING ON MONDAY!!! Almost every large investor that I spoke to over the past week, assured me that a NO vote was "not gonna' happen" and sure it was a risk, "but a very, very long shot risk," against which they would not be trading...

Besides action in Greece and the euro zone, investors return from a long holiday weekend, looking to the release of minutes from the Fed’s last policy meeting. Will the Fed take into account events across the pond? Are they seeing broad-based signs of economic advancement in the U.S.? The last FOMC meeting occurred before the June employment report, which provided a mixed view on the labor market’s progress.

The economy added 223,000 new jobs, making June the 15th month of the last 16 when the economy has added more than 200,000 jobs. The unemployment rate edged down by two tenths of a percent to 5.3 percent, the lowest level in seven years (April 2008). Unfortunately, the rate dropped for the wrong reason: 432,000 people dropped out of the labor force, which pushed down the labor-force participation rate to 62.6 percent, the lowest reading since October 1977.

It seems that every time there is a good employment report, it is followed by a so-so one. Maybe these kinds of inconsistent results occur when the economy only grows by 2.2 to 2.4 percent for three consecutive years (2012, 2013 and 2014) and is on track for a fourth year of the same. For investors, the negative parts of the labor report might be seen as good news: with a shrinking labor force and wages rising by just 2 percent from a year ago, the Fed may rethink a September rate increase and instead opt for December or even early 2016.

MARKETS: Global markets slid last week, but given events in Greece, there were no apparent signs of contagion—US stocks had one bad day and European stocks are still up 15 percent on the year. Lost in all of the hoopla surrounding Greece was the second-quarter results: The S&P 500 fell 4.8 percent, snapping a nine-quarter winning streak, though that doesn't seem too bad compared to Chinese stock indexes, which have plunged a whopping 30 percent in the past three weeks.

  • DJIA: 17,730 down 1.2% on week, down 0.5% YTD
  • S&P 500: 2076, down 1.2% on week, up 0.9% YTD
  • NASDAQ: 5,009 down 1.4% on week, up 5.8% YTD
  • Russell 2000: 1248, down 2.9% on week, up 3.6% YTD
  • 10-Year Treasury yield: 2.38% (from 2.47% a week ago)
  • August Crude: $56.58, down 4.5% on week
  • August Gold: $1,167.60, down 0.8% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.77 (from $2.78 wk ago, $3.66 a year ago)


Sun 7/5 Greece Referendum

Mon 7/6:

9:45 PMI Services Index

10:00 ISM Non-Mfg Index

Tues 7/7:

8:30 S&P International Trade

10:00 Job Openings and Labor Turnover Survey (JOLTS)

3:00 Consumer Credit

Weds 7/8:

2:00 Federal Reserve Minutes

Thurs 7/9:

Fri 7/10:

12:00 Janet Yellen speaks in Cleveland

Greek Fatigue


Greek Fatigue: Condition affecting investors and news junkies, caused by five years of reporting on the exact same topic. Symptoms include weariness, eyes glazing over and sleepwalking through broadcasts/columns/blogs predicting doom and gloom. (See: “US Debt Ceiling” and “The Boy Who Cried Wolf”.) I know you don’t want to hear about Greece again, but we’re getting down to it. Euro group leaders (the European Central Bank (ECB), the European Commission (EC) and the International Monetary Fund (IMF)) were banking on weekend progress to restructure outstanding loans to Greece, which would unlock €7.2B of the total €15.3 billion in rescue funds. Without that money, Greece will not be able to make a €1.54 billion ($1.73B) payment due to the IMF on Tuesday. In order to get the lifeline from the Euro group, Greece must agree to more taxes and an increase in employee pension contributions.

THEN, in a twist worthy of a Broadway “11 o'clock number” (“Rose's Turn” from Gypsy being hands-down the best, ever!), in the wee hours of Saturday morning, Greece’s Prime Minister Alexis Tsipras went on television and called for a surprise referendum for July 5th, where Greek citizens will have the opportunity to vote on the euro group’s demands. Tsipras called on Greeks to vote “no to the ultimatum” and at the same time, sent his Finance Minister Yanis Varoufakis into the Euro group meeting to ask for a one-month extension on the talks to allow time for the vote. European officials quickly rejected the request, saying there was “no support for that.”

Over the weekend, Greek Prime Minister Alexis Tsipiris stunned the world with an announcement of a surprise referendum next weekend, where citizens will have the opportunity to vote on the euro group’s demands for an increase in taxes and pension contributions. Concurrently, Greece asked the euro group for a one-month extension to the negotiations, which officials quickly dismissed.

Then the European Central Bank announced that it would not increase short term funding which has allowed Greek banks to meet withdrawal demands. Without the lifeline, Greece had no choice but to announce that banks would be closed for a week and to impose capital controls, which limit how much money citizens can withdraw from the banks (€60/day, though no limit if drawing from a non Greek bank card, so foreign tourists are not affected) and transfer out of the country.

Barring a last minute-effort, Greece is now likely to fall into technical default on the IMF loans, though not necessarily on other debts. That puts the country in a dubious club that includes Cuba, Zimbabwe and Somalia, but it would not immediately lead to cascading problems. That is, unless Greek bank depositors make a more fervent dash out of the banks and investors get antsy, during the week leading up to the vote.

The total outstanding amount extended to Greece is nearly $270B, of which the European Central Bank’s exposure stands at about $170 billion. About 80 percent of the ECB’s money is keeping the Greek banking system afloat and the rest is in the form of longer-term Greek bonds, which require a $3.9B installment on July 20th and the remainder must be paid by the end of August.

I know that it’s easy to paint Greece as the screw up, prodigal son in this story, but Irish economist Karl Whelan wants to set the record straight. Whelan cited the EC’s report on Greece from last year, which found that total public sector employment declined over 25 percent from 2009 to 2014. During the same time, Greece reduced its fiscal deficit from 15.6 percent of GDP to 2.5 percent, according to the OECD.

Perhaps because Euro group members are not willing to discuss the progress that Greece has made or the pain that ordinary Greeks have endured, Tsipiras and many within Greece’s ruling Syriza party are balking at even more austerity, which the party had promised to bring to an end when it successfully won seats in parliament in January.

The defiant Greek posture only inflames emotions more, leading many in Europe to posit that a default and exit from the euro zone, combined with a new (and much devalued) currency and structural reforms, would be best for Greece in the long run. The Financial Times Martin Wolf is not so sure: “Far more likely is a period of chaos and, at worst, emergence of a failed state…Neither side should underestimate the risks.”

While a deal between Greece and its creditors may finally emerge, “it still looks unlikely to include the substantial debt relief needed to end the crisis and eliminate the risk of Grexit”, according to Capital Economics. That’s a shame, because the answer seems so clear: European financiers pushed the ultimate drug into Greece—cash. Now that the addicted country is coming off the stuff, it would be foolhardy to go cold turkey.

US Jobs Report in a holiday-shortened week: Here in the US, there continues to be evidence of economic improvement. New and existing home sales reached 6 to 7 hear highs; personal income and spending jumped in May; and sentiment came in at a 5-month high. The better than expected results overall is prompting some economists to increase their projections for the June employment report from 215,000 to closer to 250,000. And there may be even more progress on wages: “Adjusting for inflation, disposable income for the first five months of the year is up a strong 3.6 percent compared to the same period last year,” according to Joel Naroff. Just a reminder, the report will be released on THURSDAY at 8:30ET, due to the Friday observance of Independence Day.


  • DJIA: 17,946 down 0.4% on week, up 0.7% YTD
  • S&P 500: 2101, down 0.4% on week, up 2.1% YTD
  • NASDAQ: 5,080 down 0.7% on week, up 7.3% YTD
  • Russell 2000: 1279, down 0.4% on week, up 6.2% YTD
  • 10-Year Treasury yield: 2.47% (from 2.27% a week ago, highest yield in 9 mos)
  • August Crude: $59.63, down 0.6% on week
  • August Gold: $1,173.20, down 2.4% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.78 (from $2.80 wk ago, $3.68 a year ago. AAA predicts that 35.5 million people will drive over Independence Day weekend, the most since 2007 and they will pay the lowest price at the pump since at least 2010)


Mon 6/29:

10:00 Pending Home Sales

10:30 Dallas Fed

Tues 6/30:


9:00 S&P Case Shiller Home Price Index

9:45 Chicago PMI

10:00 Consumer Confidence

Weds 7/1:

Motor Vehicle Sales

8:15 ADP Private Sector Jobs Report

9:45 PMI Manufacturing

10:00 ISM Manufacturing

10:00 Construction Spending

Thurs 7/2:

8:30 June Employment Report


Greece, Jeb! and Stock Corrections


European leaders will convene yet another emergency meeting in Brussels on Monday to discuss how and whether to restructure Greece’s debt. This may all sound like déjà vu all over again, but contrary to five years ago when the Greek drama started to unfold, today investors are less concerned that a default would take down the euro zone or the interconnected global economy. It could however, create a bout of panic in the markets. If officials do not come to an agreement, they will have no choice but to come up with a Plan B, which would likely include capital controls to limit withdrawals from Greek banks and prevent a classic run on the banks (see “It’s a Wonderful Life” for the best explanation of a bank run). In fact, about €5 billion of deposits reportedly left Greek banks last week alone. Instead of a well-orchestrated Grexit, there could be what the FT’s John Authers calls a “Graccident”, where a default would lead to a messy and de facto Grexit. Plan B would also likely include the European Central Bank’s extension of emergency loans to Greek financial institutions and Greece’s preparation of a new currency or IOU system.

As the tragedy that is Greece continues, investors seem more interested in the Federal Reserve. Last week, Chair Janet Yellen elegantly threaded the needle: Yes, the central bank would most likely raise short-term interest rates this year (probably two quarter of a percent increments), but the pace of increases will be gradual. Complicating matters for the central bankers was the first quarter, when the economy contracted by 0.7 percent. Sure, most of the slowdown was due to transitory factors, like weather, the West Coast port shutdown and $40 crude oil, but far be it for this Fed to err on the side of snuffing out potential growth.

The government will provide a third update to Q1 GDP this week, which may show marginal improvement, but most have already set their sights on the rest of the year, which should improve steadily. Because Q1 was such a stinker, growth for the total year is likely to be 2.5 percent, matching the pace of the past few years.

I usually quote the post World War II rate of growth, which is about 3.3 percent, as a benchmark, but according to the New York Times that longer term average may overstate the expected growth rate today. The reason is that “Over the last 40 years, the American economy has grown at an average of 2.8 percent per year,” which is considerably slower than the 3.7 percent average from 1948 to 1975. Additionally, the higher rate includes “two favorable trends that are now over: women entering the work force, and baby boomers reaching their prime earning years.”

The downshift in growth expectations might come as a surprise to newly minted presidential candidate Jeb Bush, who in a speech last week said that his goal for economic growth was 4 percent. The Financial Times called this figure “Fantasyland” and the NYT chimed in, saying Mr. Bush’s 4 percent goal has “close to 0 Percent Chance” at success.

MARKETS: While the NASDAQ and Russell 2000 indexes were making new highs last week, two other indexes weren’t so fortunate. The Dow Jones Transportation Average entered correction territory (a drop of more than 10 percent) for the first time in nearly four years and the Shanghai Composite lost 13.3 percent for the week, the worst week since the financial crisis and the second time this year it has fallen into correction territory. Additionally, last week brought the biggest outflows from bond funds in two years, triggered by the possibility of not one, but two, interest rate hikes later this year. These events were just more fodder for those worried investors who are convinced that the next leg for the broad U.S. market is down.

  • DJIA: 18,015, up 0.7% on week, up 1.1% YTD
  • S&P 500: 2110, up 0.8% on week, up 2.5% YTD
  • NASDAQ: 5,117 up 1.3% on week, up 8% YTD
  • Russell 2000: 1284, up 1.6% on week, up 6.6% YTD
  • 10-Year Treasury yield: 2.27% (from 2.39% a week ago)
  • August Crude: $59.61, down 0.6% on week
  • August Gold: $1201.90, up 1.9% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.80 (from $2.80 wk ago, $3.68 a year ago)


Mon 6/22:

8:30 Chicago Fed

10:00 Existing Home Sales

Tues 6/23:

8:30 Durable Goods Orders

9:00 FHFA Home Price Index

10:00 New Home Sales

Weds 6/24:

8:30 Q1 GDP – final reading (prev = -0.7%)

Thurs 6/25:

8:30 Personal Income & Spending

Fri 6/26:

10:00 Consumer Sentiment

Pokey Q1 Growth is History


Another first quarter, another lousy reading for growth…for the third time in five years, the US economy contracted in the first quarter of the year (2011, 2014 and now 2015). If the first time was chance, the second time a coincidence, is the third time indicative of a pattern? “The evidence of a seasonal quirk in the first-quarter GDP growth figures is pretty overwhelming,” according to Paul Ashworth of Capital Economics. While conspiracy theorists maintain that the government is manipulating the data (why on earth would they want to show slower growth?), the larger and more important issue, says Ashworth is “whether real GDP growth (and consequently productivity) is being mis-measured.” Some economists believe that the larger role that technology is playing in the economy is not reflected in the GDP report.

We’ll probably need a few more years of data to understand whether or not the government needs to adjust its models. At this point, it’s fair to say that the combination of bad winter weather, the West Coast port shutdown and shrinking investment in the energy sector due to lower oil prices, did a number on Q1 growth.

This rationale is consistent with Fed Chair Janet Yellen’s recent assessment, “my guess is that this apparent slowdown was largely the result of a variety of transitory factors that occurred at the same time…and some of this apparent weakness may just be statistical noise. I therefore expect the economic data to strengthen."

Hopefully, like in past years, after a rough first three months of the year, the subsequent three quarters will show improvement. With the first quarter now behind us, and two months into the second quarter, there are some encouraging signs that growth has snapped back, with estimates running at about a 3 percent annualized pace. That’s not exactly a breakneck pace, but we’ll take it.

Growth needs to continue to accelerate in order for employers to add to their payrolls. This week, the BLS will release the May employment report and analysts expect that the economy added 225,000 new jobs and that the unemployment rate will remain at 5.4 percent. Once again, all eyes will be on average hourly earnings, which only increased by 2.2 percent from a year ago, as of the April reading. Economists are waiting to see whether the employment cost index, which showed acceleration, will finally show up in average hourly earnings.

Greece is the word…again: Five years after the first bailout, Greece, euro zone and IMF officials must find a way to restructure $1.74B in debt before June 19th. Although Greek Prime Minister Alexis Tsipras said that a deal could come over the weekend, IMF Chief Christine Lagarde said that a Greek exit from the euro zone remained a possibility. While international markets are in better shape today than they were five years ago, a Greek default/Grexit would most certainly cause global financial tremors.


  • DJIA: 18,010, down 1.2% on week, up 1% YTD
  • S&P 500: 2107, down 0.9% on week, up 2.4% YTD
  • NASDAQ: 5,070 down 0.4% on week, up 7% YTD
  • Russell 2000: 1246, up 0.2% on week, up 3.5% YTD
  • 10-Year Treasury yield: 2.1% (from 2.21% a week ago)
  • July Crude: $60.30, up 1% on week
  • August Gold: $1189.80, down 1.2% on week
  • AAA Nat'l avg. for gallon of reg. gas: $2.73 (from $2.74 wk ago, $3.66 a year ago)


Mon 6/1:

8:30 Personal Income and Outlays 9:45 PMI Manufacturing Index 10:00 ISM Mfg Index

Tues 6/2:

Motor Vehicle Sales

10:00 Factory Orders

Weds 6/3:

8:15 ADP Private Sector Job Report

8:30 International Trade

9:45 PMI Services Index

10:00 ISM Non-Mfg Index

2:00 Fed Beige Book

Thurs 6/4:

8:30 Productivity and Costs

Fri 6/5:

8:30 May Employment Report

3:00 Consumer Credit

El-Erian: “Income Inequality is Horrific”


There is nothing better than an hour spent talking to Mohamed El-Erian at the annual LinkedIn Finance Connect event. El-Erian has a unique ability to break down hardcore economic concepts into digestible, easy-to-understand analogies. For example, when I asked him about his prediction about worldwide growth this year, he said, “imagine if you were a elementary schoolteacher and I told you that overall, your classroom would be better this year than it was last year. Unfortunately, that slightly better classroom that still has troublemakers." Those rambunctious troublemakers include: Russia/Ukraine, Greece, Brazil, Venezuela, Nigeria – any one of them could disrupt global economy and threaten the progress of the “limping along” economies of Japan and Europe, as well as the improving U.S. economy. One bright spot for El-Erian is China, which is clearly downshifting from 10 percent growth over the past three decades, to a more sustainable 6-7 percent rate. Although many have predicted looming disaster for the world’s second largest economy, El-Erian believes that China will be able to make a soft landing.

He’s less sanguine about Greece, where the probability of three possible outcomes is:

  • 45% Greece and Eurozone officials muddle along
  • 50% Greece leaves Eurozone (“Grexit”) and a massive dislocation in financial markets ensues
  • 5% Greece wades through and comes out better

As Greece teeters on the edge of disaster, other European countries (Germany, Switzerland, Sweden, Denmark) are seen as bastions of safety. In fact, some investors are actually paying countries to hold their money. Mohamed says that there are two types of investors, who buy bonds with negative interest rates: (1) Those who are willing to pay up to ensure that their money is safe and (2) those who are betting that negative returns get more negative. Although negative interest rates have persisted longer than El-Erian though they would, he does not believe that the situation will last.

The US economy should continue to expand this year at a 2.5 percent annualized rate and El-Erian is hopeful that monthly job creation will average over 200,000. The combination will prompt the Fed to increase interest rates at its September policy meeting, but El-Erian noted that this is likely to be “the loosest tightening in history,” so it will take a considerable period of time before conditions look normal again.

As far as the labor market is concerned, while job creation should pick up, stagnant wages are limiting growth. “Income inequality is horrific,” and while this is a decades long trend, in the six years since the official end of the recession, only a small percentage of Americans seem to be back or better off than they were before the recession. El-Erian said, “100 percent of the total income growth during this recovery has gone to the top 5 percent of earners.”

While some companies are actually doing more to help narrow the income gap, El-Erian would like to see an overhaul of the corporate and personal tax systems. On the individual side, lawmakers should consider raising the minimum wage and eliminating some of the benefits, which wealthy taxpayers enjoy, like not paying tax on carried interest and the mortgage interest deduction.

[The April jobs report did not show much progress on the wage front. While the job market recovered in April after getting roughed up in March, the Bureau of Labor Statistics said 223,000 new jobs were added last month and the unemployment rate ticked down to 5.4 percent, the lowest level since May 2008. This time around, the unemployment rate slid for the right reason: 166,000 additional workers entered the labor force and snagged jobs. Average earnings were up 2.2 percent from a year ago, up from 2.1 percent in March - a tiny improvement, but a far cry from 3 percent annualized rate seen during the last expansion.]

Last year, when I interviewed El-Erian, he said that the US economy was approaching a “T-Junction”, where it could veer in one of two directions: (1) growth accelerates, justifying current stock prices; or (2), growth remains sub-par, central bank policy loses effectiveness and stocks tank. This year, he said that the US is moving up the neck of this critical junction and continues to believe that the odds are 50-50 for either outcome. With even chances, the disconnect between markets and economic reality is the biggest risk facing investors and according to El-Erian, you may want to hold a little more cash in your portfolio, just in case the more negative scenario plays out.

MARKETS: In a volatile week, the bulls won out and pushed indexes within striking distance of all-time highs.

  • DJIA: 18,191, up 0.9% on week, up 2% YTD
  • S&P 500: 2116, up 0.4% on week, up 2.8% YTD
  • NASDAQ: 5,003 down 0.04% on week, up 5.6% YTD
  • Russell 2000: 1234, up 0.5% on week, up 2.5% YTD
  • 10-Year Treasury yield: 2.15% (from 2.1% a week ago)
  • June Crude: $59.39, up 0.4% on week
  • June Gold: $1188.90, up 1.2% on week
  • AAA Nat'l avg for gallon of regular Gas: $2.66 (from $2.61 week ago, $3.66 a year ago)

THE WEEK AHEAD: With earnings season mostly winding down, investors are turn their attention oversees, where once again, problems in Greece and Russia/Ukraine pose risks.

Mon 5/11:

Tues 5/2:

Greece is due to make a 750M euro payment to IMF/Euro Finance Ministers meet

9:00 NFIB Small Business Optimism

10:00 Job Openings and Labor Turnover Survey

11:00 Household Saving and Debt Report

Weds 5/13:


8:30 Retail Sales

Thurs 5/14:

Kohl’s, Nordstrom

8:30 Producer Prices

Fri 5/15:

8:30 Empire State Manufacturing

9:15 Industrial Production

10:00 Consumer Sentiment