Puerto Greek-o


A few things…

The twin debt blow-ups in Greece and Puerto Rico have absolutely captivated the market’s attention this week, despite the fact that they’ve been ongoing issues for years and years now.

The Greek crisis is like a barber shop – everyone gets to talk all the sh*t they want but at the end of the day, someone’s getting a haircut.

As for Puerto Rico, it is an island nation with 3 million or so residents and over $70 billion in face-value debt, or 8 times the amount of outstanding debt as Detroit. The White House has already denied that it is considering a bailout (so, does that mean they probably are?). Long story short, they’re publicly admitting they can’t pay it. Hopefully you’re not a UBS wealth management client who’s been shoehorned into Puerto Rican munis because they’re “triple tax free.” No free lunches. And besides, guess who was the biggest underwriter of PR debt? Read this for yourself, you won’t even believe it.

China’s 20% stock market thrashing isn’t helping, but bear in mind that it’s happening after a gain of 120% in about a year’s time. If the statisticians want to classify Shanghai / Shenzhen as being “in bear market territory”, they’re welcome to do so. Just use a mental asterisk when you hear it.

The S&P 500 hasn’t had a 5% correction so far in 2015 and the last time it’s been down close to 10% from a peak was last October, when ISIS was rapidly expanding across the Middle East and a doctor came home from West Africa, rode the subway and went bowling in Brooklyn, then checked himself into Ebola quarantine.

Panicky sellers were forgiven for mashing the sell button then just as they are now.

If we’re going to get our first real correction in a long time and the proximate cause is going to be Greece, then so be it. I’d rather it be that than the onset of a recession. Because panics based on Greece do not threaten to bring recession to America and recessions are behind every bear market. There aren’t any bear markets without them, in fact.

In the US, there’s no sign of recession. The jobs data is good and the real estate data is great. This spring is the best spring for home sales and building permits in the entirety of the post-crisis period, just as we thought it would be. Consumer spending, access to credit and small business confidence are all kicking ass. Hard to imagine the average American shopper or employer pulling in the reins because of a political problem between European sovereign governments where US interests are simply not a factor.

In the meantime, you’re going to want to keep an eye out for the very worst-behaved commentators, such as the former and pretend hedge fund managers on Twitter. It’s embarrassing how badly they want people to panic. It’s the only way they can justify years of perma-bear fear-mongering and the outflows of AUM they’ve endured (assuming they were ever actually in business in the first place).

There is a perfect inverse correlation between how much you care about the opinions of others and how serious you are about managing money. If you see someone out there obsessively scorekeeping other peoples’ opinions, beating their chest in a red tape, or gleefully adding fuel to the uncertainty fire, remember that they’re not professionals. I don’t know any pros who do this.

Some issues on the backend of my site have prevented me from posting as normal this week. Hope to be back in action soon. In the meantime, try not to get caught up in the nonsense.

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