- Whatever you do, don’t call it a default
- A surprisingly resilient sector despite the Greek drama…
- … and the safe way to play it
- Need someplace to park cash? Crowd-sourced solutions await
- High-end chalk aficionados in a panic… why we can’t BLUF our way to a sale… back by popular demand after a four-year absence… and more!
“By declaring Greece in arrears, the IMF avoided using the term ‘default,'” says this morning’s New York Times.
If you read yesterday’s 5, you already knew that’s what would happen. The Greek government missed a $1.7 billion payment to the International Monetary Fund. But don’t call it a default.
The U.S. finance industry played this game a few years ago. Millions of mortgages were more than 90 days in arrears, but banks often refused to foreclose because then they might book a loss. Couldn’t have that — not until they shored up their balance sheets a bit.
The whole thing has reached slapstick level. Yes, eurozone finance ministers refused to extend Greece’s existing bailout. But they say they’re open to a new bailout, good for the next two years. That’ll show ’em!
“Greece has never been a good credit risk,” writes Josh Brown, right-hand man to Barry Ritholtz at Ritholtz Wealth Management, and a prolific blogger in his own right.
For 2,600 years, Greece has been a train wreck — certainly since modern Greek independence in the 1830s. “In this roughly 200-year period,” Brown writes, “Greece has been in default to its creditors during roughly 90 of these years, or half the time. To a person with any historical awareness, being told that Greece is on the verge of a default is like hearing Dean Martin is on the verge of a martini.”
Props to Mr. Brown. Almost no one under 40 would understand that line, much less write it — but he’s under 40 and he wrote it. Color us impressed…
It’s taken a day and change, but the major U.S. stock indexes have recovered about half of Monday’s Greece-driven losses. At last check, the S&P 500 stood at 2,076 — a mere 2.6% off its record close in mid-May.
“Going into the open this morning,” says Greg Guenthner of our trading desk, “the S&P is essentially flat on the year, the Dow down a cool 1% in 2015 and the Nasdaq charging ahead of the pack with a whopping 5% gain. Not great — but not a disaster either.
“Wait a minute, what gives?” says Greg, interrupting his own train of thought.
“Common sense says the biggest, ‘safest’ stocks in the world should be leading the market if we’re heading into a crisis, right?
“But that’s not the case at all. In fact, it’s the ‘riskier, tech-heavy Nasdaq that’s way out in front. You thought markets were predictable? Please…”
Among this week’s most resilient sectors is one that’s typically the most volatile — biotech.
“Here’s a stat that’ll knock your socks off,” says Greg: “70 biotech stocks are in the green so far this week — a week where almost every single S&P 500 component was in the red on Monday afternoon. That’s some incredible strength considering the circumstances.”
But what if you’re too freaked out by events this week to put any idle cash to work?
“I think a mini mutual fund with three large-cap biotech stocks is a great place to put it,” says our high tech and biotech maven Stephen Petranek.
Stephen recommends three names he’s confident will return more than 15% a year over time — “perhaps far more than that. I suggest you split that lazy cash into three piles and put it equally into Johnson & Johnson (NYSE: JNJ), Bristol-Myers Squibb (NYSE: BMY) and Gilead Sciences (NASDAQ: GILD).
“Gilead, flying ever higher off its hepatitis C viral cures, has in excess of 25 drugs in its pipeline. JNJ recently announced the development of 10 drugs it is calling blockbusters over the next 10 years. BMY is closing out all its peripheral research projects to focus on one strategy — immunology and cancer. That is likely to pay off handsomely.”
[Ed. note: If this week’s events haven’t spoiled your risk appetite, we direct your attention to an opportunity Stephen says has far greater potential than 15% a year.
When we first saw the picture on this page, we had to look at it twice just to be sure it was real…
And once we knew it was, we were certain you’d want to see it too.
Why? Five reasons:
1. It could save your life.
2. It could save the life of someone you love.
3. It could change the entire concept of medicine as we know it.
4. It could grow your money up to 17 TIMES in as little as 5 years.
5. Greece be damned, we’re putting almost $1 million on the line to prove it to you.
Click here now to see the picture and why it could be so important.]
With traders snapping up stocks, other asset classes are suffering today. The 10-year Treasury yield is back above 2.4%. Gold is back below $1,170. And crude is down nearly 3%, at $57.88.
Among the currencies, the euro is back below $1.11 as traders digest the latest Greek minutiae. The dollar index sits a hair below 96.
OK, what if blue chip biotechs don’t float your boat as a place to park cash?
“This is a really good question and one I sometimes wrestle with myself,” says our Chris Mayer. “Usually, I just hold the cash.” Understandable, since Chris’ laser focus these days is on unearthing 100-baggers — stocks that can turn a $10,000 investment into $1 million.
Still, Chris got some interesting crowd-sourced ideas about cash from his astute readership.
“My own preference is in SHY — the short-term Treasury ETF,” wrote one. “No default risk, very little interest rate risk and completely liquid. I also use PLW, which is a laddered Treasury ETF. This one is more volatile than SHY, but it has a yield of 2.27% right now.”
“I like Mohnish Pabrai’s idea of a ‘place holder’ position,” wrote another. “It’s essentially a low-risk, high-dividend stock that you use to earn a market return until you find something more compelling.” Pabrai’s preference is Berkshire Hathaway (NYSE: BRK), but the reader currently opts for Exxon Mobil (NYSE: XOM) — “a below-market multiple and high yield and a bet that oil won’t go much below $40.”
“For those who may not need to touch their cash for a couple of years,” suggests a third, “they might consider Vanguard’s short-term investment-grade ETF, VCSH. Only thing to bear in mind is that short-term investment-grade bonds can take hits. They usually come back before too long, but they can take a hit now and then.”
Says Chris, “I have a couple of other interesting ideas that came my way, and I may have more to say about this soon.”
Times change, and the maker of the world’s greatest chalk is going out of business.
The Fulltouch Chalk made by the Japanese firm Hagoromo is the ne plus ultra of chalk. Or so says Satyan Devadoss, math professor at Williams College — “a chalk so powerful that mathematics practically writes itself; a chalk so amazing that no incorrect proof can be written,” he enthused on his blog five years ago.
It’s thicker than ordinary chalk, and its wax coating keeps the dust off your fingers. “Almost every math conference I go to, I would bet 95% if not more adore using a chalkboard,” Devadoss tells Public Radio International.
No ordinary chalk…
Alas, math whizzes aren’t enough to keep Hagoromo going in an age of whiteboards and PowerPoint — to say nothing of declining student enrollment in Japan. It’s closing up shop after 82 years.
Hagoromo Fulltouch aficionados are stocking up. We see a box of 72 on Amazon can be had for as little as $48.99 including shipping from a third-party seller. While supplies last, as they say…
“I agree with the person’s comments on unbearably long, inane sales pitches,” reads another entry as a familiar topic has resurged in recent days. “Get to the point — quickly.
“Also, the old adage still holds, ‘There ain’t no free lunch.’ Please spare us from the continuing ‘free’ offers. The ‘free’ item is being paid for!”
“I’ve been meaning to make a suggestion regarding this for quite a while that might help some of your readers, or at least myself,” another offers — “something I learned in the military called BLUF – ‘bottom line up front,’ which is used a lot in decision briefings to senior officers.
“In other words, give me a summary of (1) what you are selling and (2) how much it will cost. Shouldn’t be more than a bulleted list of the items being advertised along with a very brief single-sentence description (only if absolutely necessary due to a nonintuitive title) and then a final bullet to give me the asking price. In a PowerPoint presentation, this should fit easily in a single slide in larger, easy-to-read font. This accomplishes the following:
“1) The potential customer can, at a glance, get a good basic idea of what the product is and how much you intend to pry out of his/her pocket. Saves a lot of time if product/price are not in budget or of interest.
“2) It provides context for the rest of the presentation, making it much easier to understand and get to the details needed to make a final go/no-go decision on product purchase.
“3) Sometimes, the BLUF can get attention from some folks better than your rather lurid headlines, which I tend to brush off as puzzling hyperbole in more than a few cases — by using both, you can catch the attention of more ‘personality types,’ if that makes sense
