November, Thursday 03, 2011

DOW + 208 = 12,044
SPX  +23 = 1261
NAS + 57 = 2697
10 Yr YLD += 2.06%

OIL - .27 = 94.02
GOLD + 27.00 = 1765.40
SILV + .21 = 34.58
PLAT + 32.00 = 1643.00

Yesterday, Greek Prime Minister George Papandreaou went to Cannes, France whistling a tune about democracy and calling for a referendum on the bailout; let the Greek people vote on the deal; Papandreou trusted the people; he trusted democracy; and then he met with Sarkozy and Merkel. The late night conclusion of the meeting resulted in an admission that Greece might have to leave the European Monetary Union. Nobody knows for sure what that means – best guess is that the European Central Bank and all private and public creditors would have to write off their claims on Greece is one fell swoop. That would be followed by a Lehman Brothers style credit crunch. Money would stop dead in its tracks. The chain reaction would spread across Europe. The contagion would spread rapidly and uncontrollably. Call it Eurogeddon. We would all turn into brain chomping zombies. That was yesterday.

Today, the Greek Prime Minister thinks a referendum is a bad idea.

Democracy is anathema to the markets. It’s simple math. In the markets, money is power. If you have a billion dollars, you have power. If you have 100-billion you have even more power. In a democracy, you have one vote. A poor taxi cab driver in Athens who doesn’t have two drachmas to rub together has the same number of votes as the wealthy investment banker, and he has one more vote than the actual investment bank. There are more poor voters than wealthy voters. In a democracy, the majority rules not the majority of money.

So the Greek Prime Minister has worked out a deal. There will probably be a parliamentary vote of confidence tomorrow. There might be a change in the government or there might be a transitional government. Creditor rights have been asserted and Greece has been pushed into line, even if its sovereignty has been bruised. It does not appear there will be democracy in the Greek government – that idea has been killed.

The wild card is whether the level of civil disobedience rises to the point where the government has to change course. There are serious signs of breakdown: widespread failures to collect trash, frequent power interruption, such reduced schedules for public transportation that it becomes difficult for those who still have jobs to get to work. Of course, the Greek people might still have something to say but whatever it is they’ll have to say it as a mob, not as a democracy. Democracy is dead in Greece, or at the very least it is in a vegetative coma.

At some point we will all wake up to the reality that half of Europe is bankrupt right now. Either the sovereign debts are written off aggressively and the banking system declared insolvent and restructured or the ECB decides to turn on those printing presses and start cranking out the Euros.

But don’t worry, because the European Central Bank is handing out FREE MONEY – or at least nearly free. The central bank cut interest rates by a quarter point to 1.25%.

Meanwhile, back in the USSA, The Federal Open Market Committee has spoken. It expects very high unemployment for at least the next three years, while it expects inflation to be below target, and they forecast slower and slower growth. Here’s what Bernanke had to say yesterday: I certainly understand that many people are dissatisfied with the state of the economy. I'm dissatisfied with the state of the economy. Unemployment is far too high. Inequality, which is not a new phenomenon, it's been going on - increases in inequality have been going on for at least 30 years. But, obviously, that - as that has continued we now have a more unequal society than we've had in the past.

So, again, I fully sympathize with the notion that the economy is not performing the way we would like it to be, and in that respect the concerns that people express across the spectrum are -- are understandable.”

To deal with this, they propose doing…, nothing.  Seriously, we’re four years into a downturn and the Fed, with all its power is going to kick back and wait to see how things shake out.

Things are shaking out in Oakland.

Occupy Oakland flexed its muscle as 5,000 protesters occupied the Port of Oakland and shut down the fifth-busiest port in the country. Then the protests turned ugly. There are differing reports about which side initiated the ugliness but there were tear gas canisters and stun grenades on one side and Molotov cocktails and vandalism on the other side. In an interesting development, the Oakland police officers union expressed sympathy for the protesters. Last week, an Iraqi war veteran named Scott Olsen was critically injured while protesting. The police say they were simply following orders and feel they have been made scapegoats for the events. The police union issued an email saying the police were greatly disgusted by their civilian leadership.

In Seattle, several hundred people marched on the Sheraton Hotel. JPMorgan Chase CEO Jamie Dimon was scheduled to give a keynote speech at an awards ceremony for the University of Washington Business School. Police used pepper spray to clear an entrance to the hotel. Dimon came and went without being spotted on the street. Do you think he’s getting a little nervous?

What happens when you have a bad experience with a mega-corporation? You could just take your business down the street to another mega-corporation. You could get active and form a boycott of the mega-corporation. Wouldn’t that be more civilized than taking to the streets in protest? The reality is that your complaints and threats of boycotts are meaningless. A new study for the WP Carey School of Business at ASU finds the problem of bad customer service is growing, and the result is consumer rage; 90 percent of those customers who complained said they just wanted to be treated with dignity but only 40% felt they got that. The biggest peeve is that we lose time in trying to deal with the problem and that is even more upsetting than the monetary or other wrongs suffered. The situation was especially aggravated when you get ping-ponged from one person to another. The study finds it take 4.4 contacts, on average to resolve a complaint.

Technology to the rescue. Many firms are now using Facebook pages to take complaints. Another study shows 66% of the complaints consumers post on a Facebook page, don’t even get a reply from the company.