No, we’re not talking about 4G phones, nor God, gold, guns and grub. Today let’s look at GE, Greece, and finish with a very interesting Germany and Gazprom. Last week GE shocked the market place by announcing they will sell their crown jewel GE Capital. Why would they do this? Isn’t GE capital their growth engine? Isn’t it their cash cow? What could they possibly be thinking? In my opinion they are “thinking” correctly, maybe a bit too late though.
The plan is to offload the finance division and pay a very large cash dividend to shareholders. In my opinion they are calling “top” to the entire paper bubble now enveloping the world. Maybe some sanity circulated the halls of their Fairfield Ct. home office and they decided the stone has no more blood to be squeezed? Think about the macro situation, can interest rates go any lower from here? What will happen to their “book” when interest rates start to rise? What about their derivatives book? I believe it is possible someone looked at this and figured out either they will be defaulted on or they themselves cannot perform somewhere?
In any case, the decision to “sell” was made. There are generally very few reasons to sell, far fewer than there are when deciding to buy something. Sometimes the decision to sell is “forced” by a margin call or other situations where there is no choice. For the most part, when a decision is made to sell something it is to profit or redeploy the capital elsewhere. In this case the decision is to pay a large dividend and reinvest part back into their other businesses. This will be looked at in retrospect as the final top to the market, I just wonder whether or not they will get to employ this strategy before the market falls apart and spoiling their plans? We will see.
We’ve spoken so much about Greece lately, I don’t want to be long winded here. Greece made their 460 million euro payment last week and were promptly “re” funded 1.3 billion euros via previously pledged funds fro ELA. The important thing this past week in my mind was the change of “tone”. Mr. Varoufakis spoke of next month being “different” and Mr. Tsipras seemed to speak more boldly. One must wonder what exactly was discussed behind the closed doors with Mr. Putin? What did Russia offer if anything? You can bet a pipeline deal was discussed, I would also bet that Greece’s “vote” was discussed. The sanctions which Russia now operates under are set to expire in June. They cannot be extended with Greece voting to make it unanimous. Will Greece leave or even be kicked out of the Eurozone? The other interesting points were the strength of tone used regarding WWII reparations from Germany and the “status” of debt incurred since 2012 which they now term “odious”. Little Greece is becoming more than a thorn in the side of the West.
The main topic for today is Germany and Russian energy giant Gazprom. Germany has apparently just ordered 100 Leopard 2 tanks “to ensure their troops are ready for action in response to Russian assertiveness”. I have to wonder whether the addition of 100 tanks (a giant leap of a 45% increase) is really worth it considering the “signal” it sends. Germany gets roughly 30% of their natural gas from Russia, do they really want to flex more muscle with such a large supplier of theirs? I also wonder what the industrialists are thinking should this sour relations?
Coincidentally, Russian energy giant Gazprom announced they will sell their 10.52% minority stake in German gas supplier Verbundntz gas (VNG). Gazprom’s position when aligned with a 15.7% stake held by Wintershall served as a blocking position. With the stake’s power diminished, Gazprom has decided to sell. The decision was also made last year to discontinue plans for the South Stream gas pipeline in favor of a route through Turkey …and thus ultimately Greece
Please understand the significance of this chess strategy. Turkey is a member of NATO, Greece is a member of the European Union. Doing business with either (or both) puts a potential wedge in NATO’s unison and a “veto power” in the EU when it comes to renewing sanctions. Has Mr. Putin and Russia put themselves in this position purposely or is it just business? In my opinion Russia is simply taking the path of least resistance here which also has the “benefits” attached that come with both Turkey and Greece.
The real head scratcher in all of this is Germany. If you recall, they have been repatriating their gold from the New York Fed’s custody over the last two+ years. It was said they had “total trust” in the Fed but no longer had a need to store the gold outside of their country …and the reaches of the big bad Russians. Now they order more tanks because of the Russian perceived threat. Will they continue to repatriate gold or will they stop and use the Russian threat as their reasoning?
Another area where Germany is in a sticky spot is with Greece. Will they continue to push austerity (which is actually senseless because Greece already owes too much)? How will Germany handle Greece’s demands for WWII reparation? Will they push for a Greek exit from the EU? And of course one must wonder about the pipeline that will most likely go from Turkey towards Germany and Eastern Europe, now they have to wonder about the continuation of Russia selling them the gas and then the transmission through Greece.
Germany now has pressure from so many different directions you almost have to feel sorry for them. If I had to guess, it would not be surprising to see Germany pivot away from the U.S. and toward Russia and the Chinese. This would only make sense as historically Germany and Russia have been very big trading partners and live in the same neighborhood to boot. We may see a hint of what is to come as we approach June, remember, the current sanctions on Russia will run out and need to be renewed to continue. Who does what and when, will be very interesting indeed!
Regards, Bill Holter
P.S. late breaking icing to this cake, Germany’s banks brace for 50% writedowns (losses) from Austrian bank HETA
…and Greece is preparing for an exit from the Eurozone
“They cannot be extended with Greece voting to make it unanimous.”
Or rather, you meant to say: “with Greece voting to make it animous” OR “with Greece voting to NOT make it unanimous”.
do you understand what I was trying to convey?
Bill, you’re connecting the dots quite nicely.
I would appear that TPTB have a tiger by the tail. I wonder how long before they are all hoist by their own petard…
Germany repatriating their gold is a hoot, do they trust the U.S. less than they are afraid of Ivan?
I think Germany developed a terminal case if distrust for the US after the spying incident and the comments by our inept State Department. It wouldn’t surprise me if they entered the Sino-Russian sphere of influence.
I look at this whole situation like a chess game. However, watching Putin against Obama is like watching Garry Kasparov play a spoiled kindergartner. It won’t take long before the youngster is gonna throw all the pieces on the ground and stomp away.
yes BP.
Every day more corporations(though GE joining is almost mind boggling!) and countries seem to be getting thier houses in order for, what would seem to be, something major on the horizon. It’s nice to see something intelligent written about the divide between Germany and Russia. Lately this community listens to Jim Willie and his ramblings about Germany flipping sides to Russia/China. Turkey may very well flip, but we’re still to close to WW2, in my opinion, for German citizens to want to divert from being part of the western society.
Nice article Bill!
Erik
I almost feel the same way about Greece, but thier citizens seem so bitter that thier society may for the transition!
thanks Erik, but don’t be so hasty to believe Germany will not ultimately side with Russia …I mean China.
The greatest lesson of history is…..
People DO NOT learn the basic lessons of history.
That is why the Banksters have been able to enslave us for 100 years.
This same principle applies to Governments.
Society simply cannot get away from the mindset.WHAT IS IN IT FOR ME……
The economic and geopolitical powers of the world are in a state of transition.
We call it .. West to East.
When people make decisions for the short term benefits, that just simply assures that a further decision will eventually become necessary.
Greece will make the best decision for Greece. Just like they made the decision to join the EU because they could borrow from a broader base of lenders so to speak…thus allowing for the can to be kicked down the road.
Now Greece CANNOT repay.. For that matter the USA cannot repay its debt. Especially when and if it loses its reserve status.
Spain is already asking to begin a discussion with its lenders. Italy and Portugal will be next.
BIG PICTURE….the entire world debt issue must be addressed and the sooner the better.
If we do not address the debt soon the debt will be hidden with war.
So in the end… Man must learn from history..If he does not he is doomed.
To be free from a banker is true freedom.
Politicians must be made accountable to us not to corporate sponsors.
Bankers however are prisoners of their masters…the only difference between them and us is they pay themselves well.
http://sprottmoneyblog.com/india-sets-new-precedent-in-gold-market/
This is a time of transition.
Going to be an interesting year 2015
do we make it through the year without a trainwreck?
Bill I am 60 plus years old.
I have had an interest in the big picture my entire life.
Limited education so it took me many years to come to the realization that Governments survived by kicking the can down the road, as well as creating financial instruments and or deregulation that allowed them to destroy the laws of mother nature and maybe even ignore the Rule of Law.
In the last 6 months I have witnessed what I consider to be an increasing velocity of circumstances that cause me to believe that the train is boarded and on route.
Cooperation between Nations is nearly gone.
Every man for himself seems to be the reality.
For that reason I believe the train is only on its final trip with the throttle pushed forward and the train will not slow down until it derails.
My advice to anyone who has not listened to Bill and Andy and find themselves on this speeding train is to JUMP while you can.
The odds of survival are likely better.
thanks Mike.
A Turkey sandwich with a little Greece on it makes for an interesting lunch. Time will tell if those at the buffet will need to go to the restroom.
Hello Bill Holter. You were kind enough to respond to questions on G hunters site. Allen Ols lead me to your post and I am so glad he did. Going into the favorites.