Finally Some Action

The global stock indexes have been so boring the last few months, at least for me. Finally there appears to be action, and its not only in the stock indexes it is happening in currencies and bonds as well.

I am trying not to get ahead of myself but I think finally there is some economic reality entering into the picture. Of course the market gurus are all saying that we mustn’t compare Greece to Lehman Brothers, and others are trying to dismiss all the current volatility as nothing to be alarmed about.

I have felt for some time that Hyman Minsky’s instability thesis has been gathering fragile energy. Greece in my opinion is a big story as it has archetypal connotations. Greece has been going bust and leaving the Euro forever, but the only way to treat something that is bankrupt on your balance sheet is to accept it is worthless and write it off. We know that creditors with dubious debts simply close their eyes to that reality and make as if it is ok by playing with the terms of the repayment in the hope it will all come good.

I myself have a loan to a company that I value anywhere from zero cents in the dollar to the full amount depending on my mood of the day.  We delude ourselves into believing what we want to believe and what is the most convenient to making us feel good.

Check the sell off of the Shanghai Exchange the last few weeks, I am comparing it to the S&P500 and the FTSE 100. Clearly it has been shooting the lights out over the last year, in fact the last 2 years it has been flying. Could this also be the end of a major cycle.



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