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For 161 turbulent days, former Sydneysider Yanis Varoufakis was a central player in a crisis that cast a menacing shadow over the world economy.
In January the economist-turned-politician was made finance minister in Greece’s left-wing government led by the Syriza party. The job came with a tough assignment: to strike a deal with Greece’s hard-nosed creditors amid fears the bankrupt nation would be pushed out of the eurozone and trigger global economic turmoil.
It was a world away from the job Varoufakis had teaching economics at Sydney University between 1988 and 2000. Suddenly an intellectual who puts Newtown and Bondi among his favourite places was centre stage. Varoufakis is a dual Greek-Australian citizen and his 12-year-old daughter lives in Sydney.
It wasn’t just his party’s radical anti-austerity platform that put Varoufakis on a collision course with Europe’s financial powerbrokers. His style and intellectual interests set him apart.
Varoufakis describes himself as an “erratic Marxist” and rode his motorbike to work in Athens even after becoming a minister. For years he has been fiercely critical of Europe’s handling of the region’s debt woes which emerged following the global financial crisis. Weeks before becoming Greece’s finance minister Varoufakis dubbed the bailouts for struggling eurozone countries as “fiscal waterboarding” that threatened to turn Europe into “a form of Victorian workhouse”.
Even Varoufakis’ attire raised eyebrows. When he met British Chancellor George Osbourne in February, an editorial in London’s Telegraph noted Varoufakis was “wearing a leather jacket and an open-necked shirt of a brilliant, unConservative, blue”. Continue reading
Michael Lewitt, author of The Credit Strategist, likes to get right to the point. Here’s the opening paragraph of this month’s TCS:
Commodity prices are plunging, the dollar is powering higher, the yield curve is flattening, ObamaCare is collapsing, global trade is plummeting and terrorism is spreading across the globe. The high yield credit markets are sending distress signals and 10-year swap spreads are negative. Energy companies are going out of business faster than you can say “frack” and trillions of dollars of European bonds are again trading at negative interest rates. The world is drowning in more than $200 trillion of debt that can never be repaid while European and Japanese central bankers promise to print more money and the Federal Reserve is being dragged kicking-and-screaming into raising interest rates by a paltry 25 basis points. Accurate pricing signals in the markets are distorted by overregulation, monetary policy overreach and group think. Hedge funds are hemorrhaging and investors, desperate to generate any kind of nominal return on their capital, continue to ignore the concept of risk-adjusted returns. Some market strategists believe this is a positive environment for risk assets; I am not among them.
Michael pays particular attention to the credit markets, and he doesn’t like what he sees. He points out that corporate debt is now much higher than it was on the eve of the financial crisis in 2007, driven by Fed-fueled leverage. This leverage problem is really hurting the energy industry but goes far beyond it, as Michael explains:
Companies in the United States have taken advantage of low interest rates to issue record levels of debt over the past few years to fund buybacks and M&A. This has driven the total amount of debt on balance sheets to more than double pre-crisis levels. However, cash flows have not kept pace, resulting in leverage metrics that are the highest in 10 years.
This month’s issue of The Credit Strategist is sobering, and I hereby forward it to you as this week’s Outside the Box – at the risk of putting you off your Thanksgiving dinner! Michael consistently has one of the most well-reasoned perspectives in the Wide Wide World of Finance, and if you’d like to consider subscribing to TCS, visit his website atthecreditstrategist.com. Continue reading
Submitted by William Bonner, Chairman – Bonner & Partners
War Stories – Richard Russell, RIP
Richard Russell died on Monday.
He was the author of Dow Theory Letters for over half a century and the source of many of the “old-timer” remarks we have referenced over the last 15 years in our daily e-letters.
Richard was a follower of Dow theory. This is a form a technical analysis named after the founder of the Wall Street Journal, Charles Henry Dow. And it reflects his beliefs about the market… which he laid out in a series of editorial columns at the turn of the 20th century.
Richard Russell, the legendary author and publisher of the Dow Theory Letters. His career took off in the 1950s, after Barron’s printed several of his articles. His letter has been the oldest in the entire business that was written continuously by the same person. He has been an indispensable companion of several generations of investors. He has made a number of truly spectacular market calls in the course of his career (such as the 1966-68 market peak and the 1974 low, to name two especially great ones). Richard Russell, RIP.
Photo source: Family photo Continue reading