- The unlikely ranking where the U.S. is No. 1 and Greece No. 2
- A profitable sector no matter what the clowns in Washington do
- Countdown: 19 days to a massive profit project. Will you be on board?
- The ghost of George Burns appears in today’s job numbers
- Say we’re wrong and Greece leaves the euro: a thought experiment
- The most wasteful Greece-related spending ever… a reader’s alternative explanation for the present unemployment rate… a license plate that wouldn’t pass muster in the 21st century… and more!
Say this much about the Greeks — they’re no slouches when it comes to defense spending.
For all the “austerity” imposed on the Greek government by its eurozone masters these last five years — the tax increases, the pension cuts and so on — Greek defense spending has remained robust.
The NATO alliance expects its member governments to spend 2% of GDP on defense each year. But in reality, the vast majority of NATO’s 28 nations are content to mooch off Uncle Sam. According to figures NATO released a few days ago, only five nations meet that 2% target. And look who’s right behind the United States on the list…
Indeed, Greek defense spending grew 9.5% in the last year alone.
Within the last 24 hours, rumors emerged the Greek government might consider cutting defense spending as part of its efforts to scrounge under the sofa cushions for money to keep up payments to its creditors.
But the office of Prime Minister Alexis Tsipras quickly issued a statement scotching those rumors: “There is not, there was not and there will never be a proposal by the Greek government to cut defense spending.” Sounds definitive.
Back stateside, Congress returns to session next week… and the one thing Democrats and Republicans can agree on is a $576 billion defense budget.
The details, however, are another matter. The Beltway press is even invoking the specter of another “partial government shutdown” come October.
We’ll spare you the details. From an investing standpoint — and that’s our metier here at The 5 — they don’t matter.
Remember when the “sequester” took effect at the start of 2013? Those were the automatic budget cuts — to be precise, automatic cuts in Washington’s planned rate of spending increases — that Congress imposed after another shutdown drama in 2011.
At the time, hawks in both parties described the impact on defense as “devastating.” But you wouldn’t know it from a chart of ITA — a big defense ETF. In fact, it took off the moment the sequester kicked in as the calendar turned to 2013…
In December 2012, only weeks before ITA began that 71% run-up, our fearless leader Addison Wiggin wrote the following here in The 5….
“In Empire of Debt, we postulated the empire has logic all its own. That logic will bring about events beyond your control. It is far better to understand those events and plan your life and your ‘portfolio’ accordingly… than allow them to blindside you and your family.
“In crass terms, we call it ‘making the empire pay.’ If it suits you better, think of it as channeling some of your tax dollars back into your own pocket.”
With that in mind, we launched a new premium publication in early 2013 — Byron King’s Military-Tech Alert. In addition to his Renaissance-man background as an oil field geologist and bankruptcy lawyer… Byron has three decades of experience as a Navy flight officer, both active duty and reserve, with 1,200 hours of fighter jet time.
Over those three decades, Byron has built up an immense network of contacts at the highest levels of both government and the defense industry. He’s been able to leverage those contacts to recommend select defense stocks aiming to outperform a defense ETF by a wide margin.
But the biggest profit opportunity yet is only 19 days away. It’s right there on a little-known federal website.
Even though Congress is at odds over the 2016 defense budget, the money for 2015 is flowing steadily. If you know how to read this website, you can detect market “tip-offs”… and tap into a massive $156 billion chunk of this year’s defense budget.
Play it right, Byron says, and you could pull down gains of 400%… 2,028%… or even a staggering 8,225%.
The day to watch is July 21. Again, 19 days from now. Two weeks from next Tuesday. If you want to grab a share of that $156 billion, Byron shows you how when you follow this link.
If the Federal Reserve is looking for evidence a “strengthening economy” will justify raising interest rates in September… the evidence doesn’t show up in the June job numbers.
With the government closed for the holiday tomorrow, the Bureau of Labor Statistics saw fit to release the figures a day early. On the surface, it wasn’t awful — 223,000 new jobs.
The unemployment rate, meanwhile, dropped to a seven-year low of 5.3%. Alas, that’s because 640,000 people departed the labor force. It’s safe to assume the number of people who gave up looking for work is rather higher than the number of people who retired with a gold watch.
And with that, the labor force participation rate — the percentage of the working-age population in the labor force — sank to 62.6%. That’s the lowest since October 1977 — when Meco topped the charts with that disco version of the Star Wars theme and the big box-office draw was George Burns in Oh, God!
If it’s wage growth you’re looking for, it’s not in this month’s report either. Average hourly earnings were pancake-flat.
The real-world unemployment rate calculated by John Williams at Shadow Government Statistics held steady at 23.1%.
The few traders who haven’t knocked off early for the weekend have knocked down the major U.S. stock indexes. As we write, the S&P 500 is off a quarter percent, at 2,072.
Bonds are rallying, the yield on a 10-year Treasury note 2.37%. Gold is losing further ground, the bid now $1,165.
The currencies are a mixed bag: The dollar is a bit weaker against the pound at $1.109, a bit stronger against the yen. The dollar index is off a skootch at 96.1. Greece continues to cast a shadow over every market ahead of a referendum on Sunday.
So what if Greece leaves the euro?
True, neither of the people we look to for guidance on this matter think it’ll happen. Jim Rickards said as long ago as 2011 Greece wouldn’t leave, and he’s sticking to it. As for EverBank’s Chuck Butler, “I continue to believe that an 11th-hour agreement will be worked out, and that Greece will remain in the euro club.”
But let’s play what-if for a moment.
“First of all,” says Chuck, “Greece should have never been allowed to join the euro. IF the regulators only knew about the hidden debt that they know about now. So one would think that Greece leaves the euro, and the euro suffers at first, but I see Greece leaving like the slowest buffalo being killed, which makes the rest of the herd faster. If the eurozone doesn’t have to deal with a Greek drama every year, maybe they can concentrate on who’s left and how they can help them prosper.”
Nor does Chuck believe that a Greek departure would create a “contagion” spilling into the other so-called “PIGS” countries. “Spain, Italy and Portugal have made HUGE strides toward getting their ducks in a row and getting their debt paid down. While unemployment is still a BIG problem for these countries, nobody said that going through austerity would be easy. But if you get through it, then you can deal with the collateral damage.”
If another Greek bailout isn’t forthcoming, perhaps crowdfunding offers a solution.
As you may know, crowdfunding sites like Kickstarter and GoFundMe are all the rage. Entrepreneurs use them to raise seed money for gizmos they invent. Musicians use them to help distribute their recordings. Charities use them for worthy causes.
And then there’s this…
The campaign on Indiegogo is the brainchild of a Londoner named Thom Feeney.
On the one hand, it doesn’t stand a chance of raising the 1.6 billion euros Greece owes the International Monetary Fund. On the other hand, over 86,000 people have already kicked in 1.48 million euros. The traffic was enough to crash Indiegogo’s site.
Why people would want to throw good money after bad — or in this case, after the IMF — we have no idea. Although Feeney is promising a 10-euro pledge will get you a small bottle of ouzo and 25 euros gets you a bottle of Greek wine.
Actually, we’re not sure what Mr. Feeney plans to do with the money. At an FAQ, he says, “We promise that all profits will go to the Greek people. Whether that be via the government accepting it or by other means.”
Uh… OK. Whatever you say, dude.
“Why the comments?” a reader muses after we got a slew of mail this week from people questioning our promotional strategies.
“Readers are commenting in order to alter behavior. Isn’t that the root reason for communication? Ladies and gentlemen, Agora will publish what is in their own financial best interests. Sans a significant reduction in subscribers/readers, expect the pitches to continue.
“If you wish to garner entertainment from viewing or hearing other people’s opinions, might I suggest public transportation, public television or, if you have children like myself, the preposterous public education system.
“See how I snuck in my opinion on public education with that one adjective? Clever, no?”
“It took a while to get through my thick cranium,” writes a final correspondent, “but I now realize that the unemployment problem in the USA is due to the masses of out-of-work
newsletter experts.
“And all of these folks gather at The 5 to stay in practice by telling you how you should run your newsletter.
“While these chronic complainers are fun to watch, hopefully, they will find gainful employment soon, which should raise their spirits a bit and put them in a better frame of mind. Are you hiring? Thanks for The 5!”
“So I read the bit by Josh Brown,” a reader writes after yesterday’s episode, “and your comment about rarity of someone under 40 understanding the Dean Martin martini comment and how it impressed The 5, and I thought, Woo-hoo! I got it.
“Then it dawned on me, I’m 43… dammit.”
The 5: Hmmm… Probably just old enough that you’d remember Johnny Carson joking about it.
According to Wikipedia, Martin had a vanity license plate that said “DRUNKY.” We’re reasonably sure that wouldn’t pass the PC test at the DMV nowadays…
Have a good (extended) weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. U.S. markets are closed tomorrow for Independence Day, and The 5 will not publish. But banks will be open and the mail will be delivered.
Saturday is the Fourth… so that’s the day the banks will be closed and the mail won’t be delivered. But we’ll be back to normal with our Saturday wrap-up 5 Things You Need to Know.
