Here’s an interesting paragraph from Nomura’s Americas Morning Comment today…

Assuming no shock announcements from Greece (where opinion polls are looking more constructive from a market perspective) or elsewhere, investors who made the right call this week may well looking to book some profits today, especially given the G8 meeting at Camp David this weekend. The chances of something coming out of this that really changes the big picture seems unlikely to us, but we expect supportive noises to be made and it should help the profit-taking vibe which may be settling in. If that does lead to a more meaningful retracement of moves over the course of today or Monday, then there could be an opportunity to set further risk shorts or bond longs, we think.

Indeed, momentum for the left-wing SYRIZA party — which would be in sharp conflict with the rest of Europe on how to proceed — may be stalling out. A couple of new polls have the conservative New Democracy party leading, and a report in Ekathimerini suggests that New Democracy is shoring up its coalition.

The Greeks want change, but they don’t want to leave the Euro, and if it looks like SYRIZA’s leader Alexis Tsipras is overplaying his hand, and risking a GREXIT, then he may get punished.

Still a long time to go before the elections, but every little tilt will have exagerrated impacts on the market… hence the big surge in European banks today.

SEE ALSO: This is what happens if Greece leaves the Euro >

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The benchmark S&P 500 index is not really down by that much from its highs. The decline is on the order of 7%, which is significant, but not a massacre.

However, there are massacres happening in this market if you look at the right places, and especially if you look at some areas which are very economically sensitive.

Check out a chart of BP, which is getting hit by the double whammy of a slowing economy and falling oil.

We’re talking about a third of the company gone.

Or check out how severe the fall in the basic materials stocks have been.

Not quite as bad overall, but pretty brutal lately.

Or check out Morgan Stanley, which was behaving really worrisome last year.

That’s a fall of 39% from the recent highs.

For some international flavor, check out the 27% decline for Brazil over the last few months.

Bottom line again: If you’re just looking at the headline S&P 500 decline, you’re missing some real bloodshed in some key parts of the overall picture.

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Yesterday we wrote about Bankia, the Spanish bank that was subject to reports of $1.3 billion in deposit flights.

Anyway, at one point it was down over 20%, before ending down about 10%.

Well today the mood is different. And the stock… is up over 26%!

That’s redolent of a lot of European banks, which are all booming today.

The amount of optionality in the sector is huge right now. They’re all trading at such distressed levels that just the slightest bit of positive vibes (the sense that maybe the world isn’t going to collapse) sends them all moon-bound. Then of course the next day they collapse again.

Amusing, too, that this comes after last night’s big downgrade of Spanish banks and a report that bad loans at Spanish banks have hit an all-time high. But then that always seems to happen this way.

SEE ALSO: This is what happens if Greece exits the euro >

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Here we go again.  It’s all about Europe.  And now we’re all in wait and see mode on Greece and whether they’ll default and defect and possibly trigger the Lehman 2.0 scenario that so many have been worried about for years now.  In many ways this market has a 2008 feel to it.  I wouldn’t say it’s quite the same because the global economy had been on a 5 year credit binge just waiting for a negative catalyst that came in the form of house price declines.  Today’s environment is a little different.  Back then we were Mike Tyson walking around sticking our chin out and taunting the idea of recession and a knock out punch.  Today, we’re Mike Tyson fumbling around looking for his mouthpiece after the Buster Douglas knockout blow.   We’re barely on one knee.   So kick us over if you want – we won’t fall very far.  In the case of some European nations we’re not even talking about being on one knee.  Spain and Greece for instance, are flat on their backs, barely breathing.  They didn’t get hit by Buster Douglas.  They were hit by a Mack truck that kicked it in reverse and came back to run them over just for good measure. So my decoupling call for Europe is still on.  I just don’t see how they pull out of this tailspin without some sort of unified action….The USA is recovering, but still weak.

I still don’t think the USA is on the verge of a renewed recession, but I know the risks are rising.  My worst fear is that all this chatter of a “fiscal cliff” is paralyzing corporate America to the point where business investment is going to come to a halt from its current crawl.  The one really positive sign in recent quarters has been the continued recovery in business investment paired with the government budget deficit.  This is all part of the balance sheet recession healing process.  But we’re at serious risk of this process coming to a stop.  And recent rhetoric out of Congress regarding the debt ceiling isn’t helping matters.  So I admit that the risks of recession are certainly rising, but the data isn’t there yet to convince me that my long-standing “no recession” call needs to be changed.

As for the markets – it’s a mess out there.  Messier than I thought they’d be.  And that’s coming from a guy who was building a short position all the way up to SP 1420.   But I was a buyer in small bits on Thursday.  My indicators aren’t raging bullish, but I do think we’re beginning to see some fear levels and market action that is generally consistent with a market that is a bit overdone on the downside.  We’re seeing lots of extremes in different markets with the Euro tanking, Treasuries spiking and equities getting bludgeoned in a matter of weeks.  The bears are betting on a worst case scenario and if Europe stays true to their actions of the last few years the bears will once again find themselves on the wrong side of the trade resulting in a rip your face off style move against them.  I wouldn’t get wildly bullish here because the worst case scenario is certainly not off the table.  But from a risk management perspective I certainly feel better about owning equities 8% cheaper than they were just a few weeks ago….

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As we have long expected, the economy is tracing out a trajectory typical of the weak recoveries that follow balance-sheet induced recessions and credit crises caused by highly excessive debt.  This is significantly different from the garden-variety recessions after World War II that were primarily caused by Fed tightening of monetary policy in response to rising inflation and full resource utilization.  In those instances, once the Fed achieved its desired response it eased monetary policy once again, and the economy resumed its normal growth path.

In a balance sheet recession, as is happening now, the dire effects of debt deleveraging overwhelm the efforts of the government to stimulate the economy.  Periods of credit crises are almost always followed by many years of below average growth, high unemployment, anemic expansions and frequent recessions.   Recent examples include Japan’s two-decade period of sluggish growth and the current tepid recovery in the U.S. In our view, working our way out of the mountain of debt, both private and public, that was incurred during the boom will take many years and will keep a solid lid on overall gains in the stock market.

The current economic recovery remains in sharp contrast to any other expansion of the post-war period, and is now showing definitive signs of petering out once more. The recently reported first quarter GDP is a mere 1.3% above the amount reached at the peak of the last cycle in the fourth quarter of 2007. In eight previous post-war expansions, GDP had increased by an average of 13.3% in the 17th quarter following a peak, with the lowest being 10.5%.

Now, even this tepid recovery is slowing down once more. In the last two months the overwhelming weight of the evidence supports this view, as the following indicators have either come in below expectations or suffered an actual downturn: core durable goods orders, the Chicago Fed National Activities Index, new home sales, existing home sales, payroll employment, the NFIB Small Business Index, construction spending, the ISM Non-Manufacturing Index, the Kansas City Fed Index, the Philadelphia Fed Survey, industrial production, the Empire State Manufacturing Index, the NAHB Housing Index, the ADP payrolls, auto sales, real disposable income and the GDP. 

At best, we think the economy will be disappointing in the period ahead. Consumers, who account for about 70% of GDP, are hamstrung by debt. In addition they have kept up their spending only by running their savings rate back down to 3.8% of disposable income, only the fifth month below 4% since 2007. Other limiting factors are low wage growth, high unemployment, the large numbers of workers who have dropped out of the labor force, declining home prices, higher tax payments and a flattening out of transfer payments.  Therefore it no wonder that consumer confidence still remains at recessionary levels.

Still ahead is the so-called “fiscal cliff”, another conflict as we approach the debt ceiling again, a contentious election, and the continued inability of a dysfunctional congress to get anything done. All in all this is not a political outlook that is likely to give investors any confidence in the period ahead.

Adding to the headwinds is the worrying state of the global economy. Europe is plunging into recession with the fragile consensus unraveling with the fall of the Dutch government, the election of a left-of-center government in France and the indecisive results pending the new election in Greece.  For more than two years the goal of European leaders has been to prevent the Greek crisis from spreading to other southern-tier nations.  After innumerable meetings, agreements and bailouts, that attempt has seemingly failed with the increased vulnerability of the Spanish financial system.  Most of Europe has now plunged into recession, an event with global implications, as Europe is the largest source of Chinese exports. 

China is dealing with a speculative housing boom and a major political scandal prior to a change in leadership to a new generation.  Even the suspect official economic statistics have been indicating a slowdown in the economy, while other evidence indicates that the situation may be worse than the official numbers show.  China’s economy is heavily based on exports and is extremely vulnerable to slowdowns or recessions in other major economies.  India is experiencing a similar deceleration of growth.  In the last few years China and India have accounted for the lion’s share of global growth, and any slowdown has major implications for the overall global economy.

We believe that the numerous headwinds to economic growth are creating substantial downside risks to the economy and corporate earnings that, until  recently,  were not being appropriately discounted by an increasingly euphoric stock market. We believe that the correction is only the beginning of a major downturn.  At current levels the downside risks are still far greater than the potential upside rewards.

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A rare occurrence. Markets aren’t going down much yet.

After several days of bloodshed, Europe is not falling too much by which we mean, Italy is slipping 0.15% and Spain is down 0.05%, and Germany is down 0.6%. Greece is actually up 0.4%.

US futures are ticking modestly higher ahead of that huge IPO that everybody knows bout.

Other than that, there isn’t too much news. Italian industrial orders came in surprisingly strong.

Stepping back a moment, it was very bad in Asia: Japan fell 2.99%, Hong Kong lost 1.4%.

Meanwhile, European banks (especially Spanish ones) are having a huge day >

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Markets are tanking early in the Asian trading session.

This follows a big sell-off in the U.S. on Thursday.

After the U.S. close, Moody’s downgraded 16 Spanish banks.  To make things worse, the world continues feel uneasy about a possible Greek exit from the Eurozone.

See Also – GET READY: This Is What Happens If Greece Exits The Euro >

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Tungsten doesn’t get enough press.

“Due to its extreme properties, it has become crucial in many areas of industry,” writes the folks from Visual Capitalist.  “Substituting another material for tungsten in many of its applications would result in increased cost or a loss in product performance.”

From our friends at Visual Capitalist:

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ATHENS, Greece (AP) — Greece swore in 300 legislators for just one day before it dissolves Parliament and calls new elections, among them 21 lawmakers from Golden Dawn — arguably the most far-right party to be involved in a European national legislature since Nazi-era Germany.

Formerly a shadowy fringe group, Golden Dawn vehemently rejects the neo-Nazi label, insisting it is a nationalist patriotic party, but its meteoric rise from a largely marginalized outfit a few years ago to one that won nearly 7 percent in recent elections has alarmed many in Greece and in Europe.

In the traditional Parliamentary swearing-in ceremony Thursday, Golden Dawn legislators refused to stand as two Muslim deputies took their oaths on the Quran instead of the Bible.

“Beginning today Golden Dawn is officially in Parliament to speak the language of truth and to express all Greeks,” said Ilias Kassidiaris, who was elected into Parliament and is also the party spokesman.

But the party, like all others, will be tested once more at the ballot box next month. The May 6 election left no party with enough votes to form a government after Greeks furious over the handling of the country’s financial crisis deserted the two formerly dominant parties, the socialists and conservatives. They turned instead to smaller groups to the right and left of the political spectrum, including those on the extremes.

Coalition talks collapsed after nine days, leaving no other option but a repeat election. A caretaker government has been appointed, to be led by a senior judge, and the newly sworn-in Parliament is to be dissolved Friday so an election can officially be called, expected for June 17.

Golden Dawn gained from both a protest vote from people angered by increasing hardship ensuing from austerity measures imposed in return for billions of euros in international rescue loans, and from a backlash against an illegal immigration problem that has spiraled out of control.

“People say they are trouble, they might hit people and do other things, but there are some people that were helped by Golden Dawn,” said Athens resident Mattheos, who would not give his surname. “They are not right about everything, about land mines on the border, but they are right about one thing – immigration.”

Golden Dawn campaigned on an anti-immigration platform, promising to expel all illegal immigrants and clean up crime-ridden neighborhoods, while also delivering care packages of food and clothing to needy Greeks. It also advocated planting land mines along Greece’s border with Turkey to stop any more illegal immigrants entering the country.

While rejecting the neo-Nazi label, some of its members have openly admired some of Hitler’s policies, saying he worked to better the lot of his people. Party leader Nikolaos Michaloliakos caused a backlash in Greece earlier in the week when he claimed Nazi concentration camps did not use ovens and gas chambers to kill prisoners during the Holocaust.

Its members have also been blamed for violent racist attacks in the center of Athens and elsewhere.

“We are now in a world in which we should not be afraid. We will face the problem face to face. We will deal with it with democratic means, with dialogue,” said Mike Matsas, head of the Jewish Youth of Athens. “I think people and society, with their sanity, will understand sooner or later what they (Golden Dawn) are and will take appropriate measures.”

In the run-up to the last election, there was a backlash against the party in Greece and abroad. Since their strong showing at the polls, politicians and civil rights groups have criticized them as an extremist party with no place in Parliament.

“The Golden Dawn party is a dark stain on European politics. For the first time in over six decades a seemingly long hidden Nazi ideology returned to power,” said Moshe Kantor, president of the European Jewish Congress. “The Golden Dawn party is not a far-right wing party, it represents a neo-Nazi vision and ideology that many believed was isolated. Their political rise should have sent shock-waves through Europe and we expect politicians to openly reject this new-old danger.”

The party has been sidelined by Greece’s politicians.

Michaloliakos, who came to prominence a few years ago when he gave a fascist salute during his first appearance as a newly-elected member of the Athens City Council, was not invited to power-sharing talks in the aftermath of the May 6 vote.

None of the other parties sought out Golden Dawn’s support, and Greek President Karolos Papoulias, who brokered the last efforts at breaking the political deadlock, didn’t invite Michaloliakos to negotiations over a potential technocrat government. Michaloliakos then stayed away from the final meeting called to decide on a caretaker government, where constitutionally all parties with parliamentary representation must be invited.

“We haven’t seen that brand of a far-right party entering a national parliament but I wouldn’t divorce it from a broader trend,” said Matthew Goodwin, an associate fellow at Chatham House, explaining that extremist right-wing groups have been on the rise since the 1980s, long before the current financial crisis, and don’t just try to win seats in legislatures but have active cells, defense leagues and other grassroots activities.

Opinion polls in recent days have shown a distinct fall in support for Golden Dawn, although it might still gain above the 3 percent threshold needed to enter parliament.

“The party of Golden Dawn is small and will probably decline in its electoral influence,” said political science professor Dimitri A. Sotiropoulos. “If it has an influence, this will not be in terms of affecting parliamentary politics of our country. It will be an influence on matters of foreign policy.”

Greece’s 16-member caretaker Cabinet, led by Council of State head Panagiotis Pikrammenos, a 67-year-old judge, was also sworn in Thursday to lead the country to next month’s election.

Giorgos Zanias, a senior Finance Ministry official and top negotiator in the nation’s huge debt write down deal concluded earlier this year, has been appointed caretaker finance minister. Veteran diplomat Petros Molyviatis was named foreign minister, a post he also held in 2004-06.

The temporary government will not be able to take any internationally binding decisions, and its sole aim is to lead the country into the new elections.

____

Karel Janicek in Prague, Vanessa Gera in Warsaw and Annita Mordechai in Athens contributed.

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Peter Schiff, the head of EuroPacific Capital weighed in on recent economic data in an interview with KingWorldNews.

Schiff, a vocal gold bug and dollar bear, is profoundly skeptical of the recovery. 

From the interview:

“Well, we keep getting more weak economic data, which is validating my perspective that we never really had a recovery at all.  We simply juiced the economy up on stimulus, and as the stimulus high wears off, the hangover sets in.”

“We’re seeing that today with weak jobless numbers.  We also have the weakness of the Philadelphia Fed Study.  So the market is just rolling over as it’s coming to grips with the fact that the fantasy investors believed in is just that, fantasy.  It’s not reality.

Schiff goes on to claim gold is oversold, QE is “heroin” for the economy, and the dollar will collapse.

Read the full interview at KWN.

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