Top Advisors Corner

Gene Inger: The Inger Letter - February 17, 2015

Gene Inger

Gene Inger


Inquiring minds - in the days ahead, might start to wander away from what has been 'roses for bulls' and 'thorns for bears' ahead of Valentine's Day, instead contemplate why a quick run-up to new highs. (Details are mostly reserved.)

The late surge was primarily overseas sovereign buying channeled through London. Unaware of that; traders talkied about progress on Ukraine or Greece/ECB; rather than the opposite. Given 'exchange rate' deterrence for most foreign buyers of U.S. assets; plus high foreign credit market buying last week; another explanation is likely. 


Thousands of Government supporters gathered in Athens to proclaim: 'give Greece a chance'; reminding new leaders what they're voted-in to represent (discussion of implications of piling-on more debt and what's likely to occur if they decline). Central banks in most of the world have incredibly worsened the extent of global debt exposure; that's a problem too. 

Bloomberg quoted Germany's Bild-Zeitung; citing Hans-Werner Sins; head of Germany's IFO economic institute; saying that a Greek Euro exit for the most part would boost their economy, causing unemployment to fall within 3 years. And, that Greece could re-enter the Euro-zone later. He mentioned alternatively, that if Greece doesn't exit Euro, it will keep adding new debt it won't be able to repay. Note: a debt write-down is a Euro-exit precondition.

Compromise may occur; as isn't known yet. Instead of asking Brussels to 'give Greece a chance' in a sense it's triggering some Greeks to say 'don't ask, just take the chance'

Bottom-line: it's a world of dangerously rising imbalances; financially; politically and certainly geopolitically. The disingenuous rolling of 50 tanks over Ukraine's border 'as' the Minsk talks were concluding with a 'ceasefire' is telling of a two-faced approach by Moscow. 

Speaking of (reserved); Israel reportedly 'cut-out' of U.S. / Iranian briefings. Said related to the 'to be or not to be' Netanyahu speech to Congress; the real fear is the much promised U.S. pledge 'not' to allow Iran becoming a nuclear power is passed that point; some say Teheran's capable of building a nuke now. 

AND, over in Libya, warnings rising about an oil shutdown again; as ISIS or similar Islamic extremist attacks on oil installations and ports rise; as Egypt attacks in-response to IS beheading of their citizens. (Also we question the idea 'supply' shocks might not be sustainable either.)

Inquiring minds -who read between the lines- are eager to know how all this eye-opening gargantuan, unprecedented central bank intervention will ever be reversed. Many believe that moment will never come; they're happy to drop the question and maintain an edgy complacency. 

(We're bearish; even suspect Tuesday may gap-down; due to Fri.'s phony rally.)

Daily action - fearful of being snookered - by weekend Ukraine events and of Monday's next ECB / Greek gathering; traders tried backing-off optimism as forewarned likely, as late buying (sourced from London, suggesting flight-capital behind it) surged the market to close near or at the highs. That might just have been the peak to it; which of course is still pending (again our bias was to have some 'skin-in-the-game' to be prepared for a down opening Tuesday).

(For the moment this looks more like an 'inverse Head & Shoulders'; but that too is what's wrong with such patterns; they appear thusly, until they do not. If S&Ps crack at the start, rebound then fade anew; traders will question their optimism.)

As to Europe, we've identified reasons for less confidence in both areas (East Ukraine and the Brussels Greek/ECB tussle); including illegal border crossing by Russian tanks and heavy weaponry into Ukraine proper. (More.)

Prior highlights follow:                                                                   

Financial fantasies - frequently find favor for forcing favorable forecasts for earnings, dividends, buybacks, geopolitical resolutions, and basically all but realistic assessments or recognition of 'disconnects' the market increasingly has from reality. Just a (chart) gander at how little has 'trickled down' reflects that.  

On a short-term basis, we knew the market would primarily focus on Greece and the ECB, as well as Ukraine. (Discussion of both issues with members.)

Technically - markets were poised to move higher (we hoped for new highs to fade it); and they did. Indicators (technical analysis noted; via our videos).                                                                  
 
Bottom-line: financial dislocations are at the heart of ongoing concerns; a bit more than worries over Ukraine/Greece. Both topics still front-and-center. 

Rebounds keep occurring because of fear, not optimism. They won't let go; taking us back to: 'something's got to give'. It remains a treacherous time.

Enjoy the holiday!
 
Gene
 
Gene Inger
www.ingerletter.com