Alexis Tsipris spooks Wall Street

Socialism getting fashionable again. Problem: it's already wrecked Europe. UPDATED.

WASHINGTON, May 9, 2012 – Yesterday was an interesting day for a trader. The morning opened badly, as we predicted here, waterfalling down nearly 200 Dow points before leveling off circa -150. The, oddly, things began to improve in the afternoon. Buy programs kicked in somewhat predictably at about 2:15 p.m. as they often do, and the Dow closed down “only” 76.44 points.

But the high-frequency traders (HFTs) were quietly dumping stocks into this rise near the market close, according to one of our more reliable sources, hiding some of the steady selling they’ve been doing all along.

The HFTs, as usual, have been up to no good, playing against the mutual funds and the few little guys (like moi) who are left in the market. But they’ve been getting a lot of help over the last 48 hours from Alexis Tsipras, a Greek dude who’s not exactly a household name on this side of the pond. Mr. Tsipras, president of Greece’s Synaspismos (“Coalition of Left Movements and Ecology) Party and head of the radical left coalition known as SYRIZA (“Coalition of the Radical Left). By their names, you shall know them.

Alexis Tsipras, head of the Greek SYRIZA Coalition.

Alexis Tsipras, head of the Greek SYRIZA Coalition. More socialism, anyone?

As big winners in Sunday’s Greek elections–his coalition came from seemingly out of nowhere to place an influential second–Mr. Tsipras, 37, was asked to attempt to form a coalition government after the more mainstream conservative party had failed. Mr. Tsipras promptly torpedoed his own attempt to form a government by stating bluntly that, while Greece needed to stay in the euro, they also needed to nationalize their banks and tax the living bejeebers out of “the rich,” which, on the left today, seems to mean anybody who has more money than you do. Oh, yeah, and the Germans needed to keep sending money, but Greece would have no serious intention of paying it back.

That not only put an end (at least for now) to any realistic attempt Mr. Tsipras may have had to put a majority coalition together. Which may mean yet another election in Greece in June to see if the Greeks can find a government again, let alone a way to dig themselves out of the fiscal mess they’re in. Which did mean that Wall Street freaked out at the sheer uncertainty of it all and promptly tanked.

Normally, we pooh-pooh the “cover stories” the financial press likes to put out to “explain” market movements from day to day. But Mr. Tsipras really freaked some traders out yesterday. He became the instant poster-boy for what’s been wrong with Europe for decades. The Europeans’ unsustainable flavor of socialism, unlike the variety that unfolded in the Soviet Union, has, all along, merely been faux socialism. Eurosocialists vitally depend on actually keeping hated capitalism alive.

Eurosocialism operates like certain varieties of parasitic wasps that inject their eggs into the body of a host caterpillar. When the larvae hatch, they burrow into the caterpillar and feed off the living tissue of their host until A. they pupate and turn into more wasps, and B. the long-suffering caterpillar gradually expires in the process.

After WWII, Eurosocialism attached itself to what was left of the continent’s reviving capitalist economies, burrowed in, and slowly strangled its collective economy. Enormous rates of taxation provided bread and circuses and phenomenally early retirements to the average citizen who lapped up the lifestyle. And, when the Eurosocialists started running out of the soft tissue of hard currency, they simply started printing more by running up enormous government debts to keep the party going and the corrupt politicians in power.

Today, the entire continent is in denial over what is now a reality. There’s really no hope that any of this can be paid back. By anybody. And the Greeks are just the worst of an already bad lot. The angry vote by the Greek people on Sunday for Mr. Tspiras and his party is really a vote to bring back the status quo or even more. The big party is over, and the people simply don’t want it to stop. They’d rather maintain the charade.

Hence, Mr. Tsipras’ facile pronouncements. By nationalizing the banks and effectively stiffing the Germans, he’s merely looking for more and bigger hosts to permanently parasitize. It’s not going to work, but nobody wants to hear it.

More to the point, however, is the fact that in spite of this willful naiveté, Mr. Tsipras is addressing the elephant in the room. In all this ongoing mess, Euro bigwigs—politicians and fat cat capitalists alike—are still getting big paychecks, with big bonuses for the bankers and big under-the-table bonuses for the politicians, a reward no doubt for their fiscal acumen. But the little guy—particularly the rapidly dwindling middle class—is getting crushed to death. And none of the relief programs address this issue at all.

In short, the politicians no longer have any connection to their constituents at all. And the people, sated with bread and circuses for years, are finally starting to notice. And the same situation exists right here in the U.S. The only question remaining is: will people notice this in November? And if they do, will the politicians they elect pay any attention? It’s a seriously good question.

Perhaps, in a small way, we got at least a partial answer yesterday in the U.S. In the West Virginia primary, Keith Judd, a convicted felon who’s still incarcerated in Texas, got himself on the ballot for the Democratic primary. He promptly won roughly 40% of the vote against a sitting president, Barack Obama yesterday. It was an astonishing result, technically entitling Judd to seat at least one West Virginia delegate at the Democrats’ Charlotte, North Carolina convention later this summer.

Keith Judd.

Online campaign poster for convicted felon Keith Judd. He won some 40% of the vote in yesterday’s West Virginia Democrat primary vs. a sitting president. Hope and change?

In reality, Mr. Judd probably won’t get a delegate, as he appears not to have filed all the proper paperwork. But the vote still stands. The President has also run into similar headwinds in other states, notably Oklahoma where he lost nearly 20% of the vote to a pro-life candidate. True, the President won these contests. But the large size of these protest votes is significant. Like the Greeks, a lot of people are unhappy with the nonsense over here as well.

Financial advisor Joe Duarte—excerpts of whose excellent work we sometimes are able to read through one of our financial services, had an interesting comment on the chaos recently:

“What we’re seeing is a classic transition from what Sarqar and Batra describe as an Acquisitor Age to a Laborer Stage in the Social Cycle. An Acquisitor Stage is one where the rulers covet money and nothing else and where wealth is so poorly distributed that society snaps. A Laborer Stage is one where disorder is the rule of the day and where economies struggle to meet the basic needs of the people. What follows a Laborer stage is usually a Warrior stage where the military takes over. Just look at Egypt for guidance on that front right now.

“France just went from an acquisitor stage to what could be the beginning of a Laborer stage. Greece has been in a Laborer stage for over a year. The U.S. seems to be in the death throes of its own Acquisitor stage.

“The bottom line is that the Social Cycle is playing out in textbook fashion. Disorder rules before order returns.”

Ranjan Sarkar (usually how it’s spelled) and Ravi Batra are a pair of Indians, with Sarkar the progenitor of the social philosophy Dr. Duarte describes and Dr. Batra (a professor at Texas A&M) the current proponent. Dr. Batra is really describing a kind of Hindu socialist version of the world in which the phases described above function sort of like the Marxian dialectic.

But to bring things down to earth, Dr. Batra is ultimately stating the obvious, but in an interesting and fairly logical way. As Yeats observed, when the center “cannot hold,” things tend to fall apart. Which is what they’re doing right now. This is existential stuff, and the markets simply can’t handle it any more.

Which brings us to this morning’s open. Look for another swan dive down. As of this writing, Dow futures are off 76 points, indicating an awful plunge at the opening bell. Keep your powder dry, stay only in high dividend paying stocks (which will go down, too, but usually slower than the market as a whole). And watch and wonder as the Laborer phase moves from Greece, Italy, Ireland, Portugal, Spain, and France across the Atlantic to New York and Washington.

This movie will not be a pretty one. Stay tuned.

UPDATE/ADDENDA: A reader backchanneled me with a couple of observations/criticisms that justify a brief response.

First, he noted that the Greek pol whose name I spelled “Tsipris” actually spells his name “Tsipras,” according to a majority of sources. Oddly, I had that right in my original draft, but somehow went astray in the final. Due to software issues, “Tsipris” stays forever in the headline, but I’ve endeavored to fix the other appareances of the name. Irritating, in that this is one of the simpler Greek names I’ve had to tackle over the years, spelling wise!

Second, my reader criticized my terming the Syriza as the “winner.” Unintentionally misleading, but not wrong in the sense I intended. Which obviously didn’t work for this reader. Polls I read prior to the election didn’t imagine Syriza would score so well in the final tally, so they were “winners” in that sense but not in the actual sense. I’ve reworded this in the text, hopefully better characterizing Syriza’s finish in the final tally. This column is written every morning very close to market open (9:30 a.m. EDT) hopefully to take in last-minute info which often appears circa 8:30 a.m. Hasty writing can be a bit of a liability. But these days, if you write a daily financial column at 11 the previous night, you’re almost guaranteed to be wrong by market open. In trying to avoid this problem, I will occasionally encounter its opposite—insufficient time to revise. Oh, well…

Third, this intrepid reader, whom I guess didn’t particularly like the column, criticizes this entry as a whole as being “overly simplistic” and “culturally biased.” The column, in fact, is neither. I’m well aware of European history and don’t much like the way it developed after the second world war as Europeans became accustomed to the benefits of a soft socialism that parasitized capitalism while delaying, hopefully forever, the fatal inconsistency of draining a dying corpse for sustenance. This may make me politically biased (which I am) but not culturally biased.

Actually, compared to us, the Europeans seem to have a really swell lifestyle, not much encumbered by striving, overwork, and early heart attacks. Unfortunately, they’ve discovered their funding mechanism for this kind of life was built upon sand. Which the markets now know, much to our fiscal detriment as investors.

The Greek flavor of this phenomenon was peculiar in the extreme, with the government’s parasitic habits made worse by a flagrant (wink-wink, nudge-nudge) habit of keeping a lot of constituents happy by not collecting all the taxes they owed. And then lying about the whole rotten system to gain admittance to the Eurozone, which they now expect to restore their country to its corrupt and radically underfunded faux socialist lifestyle. 

Much of this goes back to Greece’s uniquely unfortunate post-WWII history. People today are quite unfamiliar with the history of that era, unfortunately, but history gives us a clue as to why ongoing developments are the way they are. In the case of Greece, it’s not well remembered that our Soviet friends aided and abetted Greece’s Communists in waging a bloody Civil War (circa 1948) in an attempt to force Greece into the developing Eastern (Iron Curtain) bloc. 

The Rushkies failed, due at least in part to a quiet but vigorous intervention by the U.S. Greece was spared the Iron Curtain, but not until the Greeks had suffered a massive loss of life on both sides. Greece has, at least in this writer’s point of view, remained a weird, fitful democracy to this day, as neither the hardboiled Communists on one side nor the hardline conservative on the other have given up, with some of them acting as if the Civil War’s wounds were still fresh, even today. For the hard left in Greece, some flavor of the Soviet Union still seems to have an appeal. For the right, military dictatorship is always an appealing option, and they favor, with unfortunate overtones, the American approach to things which puts them quite at odds with current European political fashion.

These facts on the ground were brought home to me rather interestingly on a short trip I took to Greece circa 2000, where, wearing my critic’s hat, I reviewed an interesting outdoor production of Handel’s opera, “Hercules,” staged at night within the ruins of a Temple of Zeus quite close to where Hercules had cleansed the Augean Stables.

During my stay, I had dinner in Napflion with some of the opera principals, including the feisty Denny Vachlioti who’d designed the costumes for this production. Ms. Vachlioti (aka Theoni Aldridge later in life) was the Greek-born American costume designer who’d copped an Academy Award in 1960 for the classic film, Never on Sunday. Somehow we got on the topic of the Greek Civil War and she lit up with a fiery rage—she was already about 80—about the deaths the Communists had inflicted on members of her family. Other dinner guests chimed in with more deaths dealt to their families by the right-wingers, and it took awhile to settle things down. But I will never forget the vehemence of this exchange. It was fresh and raw, as if hostilities had only recently ended. But perhaps they have still not.

But until they do, Greece seems doomed to dance this nasty pas de deux again and again. Right now, the lefties seem to be ascendant. But the cycle here is wash, rinse, repeat. Even after 2000 years of post-Jesus Christ history, the human species retains a remarkable inability to extract itself from endless loops created by their forefathers. It’s always remained a mystery to me. It probably remains a mystery to the Greeks as well, which is why they are about to enter another loop we’ve already seen.

These observations are neither “simplistic” nor “culturarlly biased.” They’re an observation and commentary on the way things are. And they’re already long enough that most people will have stopped reading, as shorter web commentary is always preferred to the longer stuff. Hence, everything you read on the web is, relatively speaking, “simplistic.” We live in a society that has little time for dissertations, and no time at all for something that’s only slightly longer than a soundbite. Which is why it’s hard to have discussions anymore.

Denny Vachlioti, BTW, appears to have passed away only recently, in 2011. (Hard to absolutely confirm on the web, as personalities who flourished prior to roughly 1990 get very little documentation on the web.) She was a feisty lady, stout in her opinions, and fearless in expressing them. Along with her go her stories, and soon, I’m afraid, no one will know them and the lessons that go along with them.


(Usual disclaimers apply.)

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington. For Terry’s investing and political insights, visit his Communities column, The Prudent Man, in Business.

Follow Terry on Twitter @terryp17

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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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