Greek drama extended. If Greece were a play, it would be one of the longest-running current production — five years, with shows every day, some with matinees as well as the normal evening shows. Now there’s a special weekend matinee for Saturday as the the main players manage to kick the can down the road for a whole 36 hours or more. That’s the smallest in the five years and indicates just how fraught the situation is. In fact, the best description is “bleak” — no sign of an agreement being close — multiple proposals from the Greeks, increasingly short, angry creditors and a group of EU finance ministers who have had to stay in Brussels for the past five days and face a weekend eating moules frites and drinking Belgian ales. The Saturday deadline was announced after yet another failure to reach agreement overnight Thursday.
Saturday will become Sunday, then Monday and Tuesday, and then the 1.6 billion euros will be due to the International Monetary Fund, which also said overnight that it has no intention of relaxing the rules — the money must be repaid. The Greek Parliament remains in Athens, fuming and scheming, especially left in Syriza, who don’t want any deal at all. They will have their jobs and pay in a bankrupt Greece, not many others will for quite some time as the turmoil roils through the economy, busting banks, companies and governments. But as Greece has no chance of ever repaying its debts, no matter how many bailouts, and seeing most of its loans are from governments and institutions such as the IMF, and the European Central Bank, bankruptcy looms as the most creative solution in the long term. The solution to Greece will be political — not economic — and has been so for the past five years. So hurt now, to avoid 10 years of gnawing, drifting pain. — Glenn Dyer
Now that’s what I call volume. Normally share trading volumes do not concern me (except when they are associated with rapid and unexplained price movements). But tonight on Wall Street there will be an exception when up to US$50 billion worth of shares will be traded just before the close (or rather around 6am Saturday). It’s not a takeover, it’s not a stampede triggered by Greece, or the Fed. It’s the rebalancing of the Russell 2000 Index — the premier sharemarket measure for small-cap stocks on Wall Street (many of whom would be big cap stocks here). Marketwatch and a couple of sharemarket websites say there will be 123 companies dropped from the index and 123 new ones selected. Big investment banks have been assembling packages for weeks now to sell to what’s called index tracking funds (investment funds who simply investment to track the Russell 2000, as others do to track the Dow, the Nasdaq or the S&P 500). Marketwatch says there are around US$800 billion invested in the Russell 2000 tracking funds (that’s half the GDP of Australia).
This rebalancing causes the biggest single trading day of the year in the US. It also tells us how the US market is changing – a couple of newspaper companies are being dropped from the index because they are micro caps, not small caps, and several small-cap healthcare companies are leaving because they have become big caps, thanks to Obamacare (upheld overnight by the US Supreme Court) and the ageing population. A couple of poorly performing retailers are also being dropped because they have contracted. — Glenn Dyer
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Sneaky Review #347. Mirvac, the Sydney-based property developer and shopping centre group, took nine paragraphs of a statement late yesterday to reveal that, as a result of “a review” over the past three months, it was putting the axe through 75 jobs. Naturally, that figure of 75 is what the media focused on, so Mirvac buried it under guff about the results of the review — the loss of one senior executive (who is “staying” while the company finds someone to replace him).
The axing of the jobs was justified by the CEO on the basis of making Mirvac “more agile and better placed to leverage our unique capabilities across the office, industrial, retail and residential sectors”. And 75 people lighter, at a saving estimated at $15 million a year, but not before costing $11 million in redundancies and other charges. The cuts will come between now and next March. Of course the housing boom means Mirvac is raking in the loot at a rate of knots at the moment. And BHP put the axe through 140 jobs in its Adelaide office yesterday, all but ending any hopes for the multibillion-dollar expansion of the Olympic Dam mine in our lifetime. And BHP hinted that more jobs will be cut at Olympic Dam in coming months after 220 were cut earlier this year. It’s ‘reviewing’ mining operations at Olympic Dam. — Glenn Dyer
What price drop? Rare earths miner Lynas is no stranger to big falls in its share price — but they have been getting larger as the share price has shrunk in the past year (a half a cent or one cent fall is much more noticeable when the share price is 4 cents and not a dollar). This week has seen a familiar fall — and a familiar ASX query, and a familiar response from Lynas – which said yesterday it could not explain why its shares had fallen nearly 25% in the past few days. It’s shares were worth four cents on Monday morning, and dropped to 3.05 cents in morning trading yesterday before the ASX query and the reply. That steadied the fall and the shares ended at 3.5 cents. — Glenn Dyer