5/20/2010 - GREEK TRAGEDY- PIIGS, TEA BAGGERS & FAT FINGERS

There are so many reasons to be short today I couldn’t come up with a focused story line, but know this. 9000 DOW is near. And single stocks must trade down to get back to reality. Its all EUROZONE, all the time. The Global markets continue to hinge on a tiny island. No not Staten Island. Actually a bunch of tiny little islands 1400 of them to be specific, in the Mediterranean.
Why then does such a tiny spec of land, a flea on the butt of a PIIG, have such a pronounced and significant effect on Global Market Behavior? When a problem is on an island it sounds like it’s easily contained.
Next time you’re lucky enough to head to that other tiny Island of Staten, look off to your left as you cross the Verrazano and you will see 2 islands there Swinburne and Hoffman Islands. They were artificially created to quarantine immigrants who came to the US with Contagious diseases. Simple take all the lepers and build them an island and we stem the spread of disease. http://en.wikipedia.org/wiki/Swinburne_Island
For you sports freaks, Think Revis Island. http://sports.espn.go.com/fantasy/football/ffl/story?id=4707319 A Defensive Coordinator puts DR, out on an island, with the other teams top threat and you contain the problem. LOCKDOWN -- PROBLEM SOLVED. Problem is the EU and IMF combined are not Darrelle Revis, and the contagion is already off the island.
The bigger problem is Greece isn’t just some little island. As I pointed out yesterday on Fast Money http://www.cnbc.com/id/37234521 (video at 9:30 in) the Euro Zone contagion is what has the fate and stability of the global banking system hanging in the balance, the problems of Greece are flowing through every vein, artery and organ of the Euro Zone.
Whys is Greece so important you ask, well let’s starting with the basics, since just about the beginning of time as we know it Greece has been a leader of Global Civilization. http://www.ancientgreece.com/s/History/
Simple little things we can thank Greece for in the development of civilization are:
Oh Greek alphabet, which basically underpins all other languages, and Greece is responsible for our Mathematic principles, Greece was also the original home of the Gods, so think about how they feel when they hear that Greece is insolvent, they are after all Gods. The aforementioned Gods, led by a strapping young fellow named Zeus, founded the first known competitive sporting events, ie the Olympics. Some time around the bronze age, they got around to figuring out a class system, which led to a form of governing their quickly growing empire. He who had the Bronze made the rules and WA-LA representative democracy was born. I often mix up my ages, copper, bronze-neolithic- oh hell, don’t hold me too tightly to the history-onics I’m getting you there as best I can for a guy who took 5 years to get out of St. Johns University.

Easy as ABC—1-2-3
So with the ABC’s and 123’s out of the way, and an educated populous, a system for governing them, a spirited sporting event calendar to pass the free time, they still needed some entertainment. Zeus and his Posse had no ZeusTube or Greece-Book to amuse themselves, so they came up with this whole drama idea. And jeez Louise how us men hate the Gods for this invention. Yea some entertainment. Women have embraced this invention like no other constituency, much to the chagrin of us men. For the most part we men are not typically entertained by said “Drama”. But somehow these supposed Gods who came down to Mount Olympus and bla bla, thought this whole Drama thing was good. No fallible being would create such a blight on man, this creation seems to call into question the fallibility of these so called Greek Gods. Drama can not have its origins in the heavens. But I digress.

When Greek was Great
When the Reign of the Greats like Alexander and the other leaders to follow him were at their peak, the Greek empire stretched from the Mountainsides of Italy to Turkey through the Hindu Kush as far as Egypt and all the way to Pakistan. But upon the death of the last of Great Greek Rulers, there was then as there are now, Greeks fighting in the streets.. Way back when Good ole Alex the Great croaked in 323 BC, different factions of Greeks struggled for power aligning behind Alexander’s Generals. The factional fighting and regional rioting back then lasted for almost a hundred years, so these few weeks of rock throwing outside the Greek Parliament, is childs play compared to the Hellenistic Period.

Wheres Phillip when you need him?
The man who finally ended the unrest was Phillip V, of Macedon . And for a hot minute Phillip looked like he could be the man to right the Greek ship, he righted the ship and united all Greece for the first time in centuries. He controlled all Greece but Athens. And a fine fellow he appeared to be, but his alliance with the Carthaginians led to his overthrow, when Rome defeated Carthage somewhere are 200 BC. Fighting Phil was finished, he was deserted by his allies, and his ship was sunk. What was left of his fleet was surrendered to Titus of Rome, leading to the rise of the Roman Empire.

OK JT, why the Greek lesson, this morning??
The reason I think its important is because to understand the reasons that Contagion is real realists must confront the reality that from the beginning of mankind the tentacles of Greece reach deep into the bowels of the EuroZone. The TRAGEDY of it all is Greece started the flow of trade and origination of trade routes. The credit products that supported early mercantile trade are institutionally and historically intertwined between Greece and the EuroZone. Greeces fingerprints are all over the foundational banking relationships of the EuroZone, and trying to convince the Global Community that this can be contained is a true COMEDY. Other Eurozone banks that are in danger include ING, with 15B in exposure to the Greeks, and Banco Santander (STD) of Spain with 24B of exposure. The short sellers are still sold on the fact that this greek tragedy will infect others.

Souvlakis for Everyone
I was speaking to a short seller yesterday about the National Bank of Greece (NBG), as the stock has come off almost 50% in a short period and they have the backstop of the EU and IMF. Shorts were still on it, but was it possibly a BUY?
And the line of the week to me was when he said “JT I’d rather buy shares in the Souvlaki Cart outside my building right now, than a Greek Bank.” He pointed out that NBG earnings are down 40% in a year, and with a rioting and poor populous who will deposit money in their banks.

NOT TO GET TOO TECHNICAL…..
To us this market goes way lower and soon. Forget not my friends that we are seeing tremendous downside action in an expiration week. Typically markets are up this week, so we are done in a typical uptrend area. I’m no technician, but in regular St. Johns speak this means that when the Expiration action goes away Monday could be reckoning day.

PORNO FOR PYROS
As Global markets fears are on fire based on a group of countries now commonly referred to as a bunch of PIIGS, US Markets are reacting accordingly while both of our political parties are getting Tea Bagged, and gyrations are blamed on the dreaded Fat Finger. Ewww With all these salacious terms my business news cast sounds more like a Porn Promo. Call me crazy but I hear terms like a pack of PIIGS, getting tea bagged and gyrations from getting fat fingered, and I’m thinking there must be a HAPPY ENDING. Yet the Greeks got $1Trillion in bailout bucks, or the equivalent of $100,000 per citizen and still they aint happy?? Somethings wrong.

Their Slip is Showing…..
While everybody’s lookin at Greece, China seems to be wriggling uncomfortably with a set of expectations that just cant be met. The country responsible for tyranny, communism, destruction of human rights and elimination of individual expression has a housing crisis on its hands, but lucky for them the local news teams cant report it. There a great piece in Foreign Policy detailing how housing prices have run up 80% compared to wages. And whole cities of new homes are empty.. http://www.foreignpolicy.com/articles/2010/05/13/bubble_bubble_china_in_trouble?obref=obinsite

Scary Signs from Big Red. The Metals are reflecting the growing specter of China Housing bubble bursting, the clearest. A change in spot ore pricing from an annual benchmark to a monthly is a saving grace in the short run, but the DRY SHIPPERS [DRYS][EGLE][DSX] all look like big downside plays here. The Dry Shippers have run up and are highly reliant on Iron ore and Metals needing to be delivered to China to build houses and building and all that good stuff.
Also BASE METAL Miners [VALE] [RIO] have serious problems if China begins to admit that housing prices are declining. http://www.thestreet.com/story/10761744/3/fast-money-recap-banks-safe.html WATCH OUT.

TOP SHORTS TODAY
-- RIMM—MBI—DB—XLF
Oldie but a Goodie --- Citi continues to be a stock Short Sellers are willing to pay for to get a good Locate, this tells me Citi still has room to go lower

NKOTB---- For the First time ever we see Shorts Interest in XRT the S&P Sector Spdr for Retail. With many retailers relying on Emerging Markets for sales growth the Retailers may be under some pressure Q2-3.


JT