Market Talk

- If everyone’s so concerned about federal deficits, why the record low yields on US Treasurys, wonders FusionIQ CEO Barry Ritholtz. “Part of the answer is the lack of alternatives. Where else are you going to park yield-seeking money? Euro denominated issues? UK debt? Japanese bonds, emerging markets?” he ponders. “Amongst the motley crew of sovereign debt issuers, the US Treasury is the least ugly girl at the dance.”

- “I have and continue to believe this is a trader’s market in which valuations matter little,” Pragmatic Capitalism says. Ultimately, the macro trends are so fierce that the tides will sink or lift all boats.”

- Apple (AAPL) may be poised to update its iMac and Mac Pro computers sooner rather than later. The MacRumors blog tracks in-store pre-order availability and has taken note of depleted stock at several retail stores, suggesting updated models could be in the offing. MacRumors also points out the iMac was last updated in October, while the Mac Pro was last refreshed in March 2009.

- General tone from European analysts digesting the stress tests is “remarkably sanguine,” NYT’s DealBook says. The tests represent “a substantial step forward,” Goldman Sachs says, although notes if Tier 1 capital ratio was lifted to 7% from 6%, it would’ve tripled the number of failed banks from seven to 24.

- Oracle (ORCL) last week vehemently denied it has a five-year, $70B acquisition budget, which President Charles Phillips originally claimed in a Fortune Magazine article. But, as Digital Daily blogger John Paczkowski points out, it’s obvious Oracle doesn’t want competitors to know its strategic plans. “Hard to believe that a company as aggressively acquisitive as Oracle doesn’t have an M&A budget,” Paczkowski says. “But evidently that’s the party line here and by the sound of things Phillips clearly overstepped it.”

- Google (GOOG) introduces Google Apps for Government, a new edition of its package of Internet-based applications specifically designed to meet the policy and security needs of the public sector.

- When digesting the new home sales report, keep in mind the data point is notoriously noisy, Ritholtz says. June’s 24% monthly increase comes on the heels of May’s 33% drop. “Ignore the swings, look at the moving average to smooth out the volatility.”

- June new home sales surged 24% from a month earlier to 330,000. But don’t get too giddy, especially since the sales level represents the second lowest on record since 1963. “Bottom line, while the figure was better than expected, new home sales make up less than 10% of the overall industry with existing homes making up the balance,” Miller Tabak’s Peter Boockvar says. “It’s good to see a pick up in new home sales but an overall market that still has way to much inventory does not need too many new homes built.”

- IAC/InterActiveCorp (IACI) chief Barry Diller tells CNNMoney that his firm has jumped on the Facebook advertising bandwagon, another indication the social network is gaining traction on Madison Avenue. “My company, which spends a huge amount on advertising, we spend every nickel we can on Facebook,” Diller says. “They’re effective. The targeting of the audience is precise enough. The message and the audience are quite aligned.”

- Robert Dudley has quite the to-do list facing him at BP.

Greece has finally put the Castor oil on the table. The question remains can the Neo-Spartans drink it and digest it. And who else is going to have to drink it before this whole drama reaches its denouement? Because what the Greeks are having force-fed to them is the same stuff taxpayers in the United States are going to have to swallow at some point, voluntarily or not.

The Greeks unveiled a harsh austerity plan that includes a variety of tax hikes and pay cuts, designed to save them about $6.5 billion. “The decisions were necessary to be taken. Necessary for the survival of our country, of our economy. For Greece to emerge from the vortex, from the speculators, from the negative publicity,” Prime Minister George Papandreo said.

The measures have already been met with fierce resistance. “Black crows ready to devour country’s wealth and leave half the population jobless,” one newspaper headline said. As we said yesterday, it’s worth considering whether or not Greece can even make this plan work. But they’re pushing it because they have to in order to get the kind of “support” they need from their eurozone partners, and the Germans aren’t going to pony up any money unless they see the Greek’s flagellating themselves for their past profligacy.

Make no mistake, that belt-tightening is the cost of  “support,” from the eurozone and whomever else buys all that Greek debt they have to issue this year to fund their budget (and do so without paying such a high yield that the interest rates alone overwhelms their revenues.) And that’s a cost that might be ringing up cash registers across the globe before this whole great deleveraging wave passes.

Jim Bunning may have been tilting at windmills with his little quest to make Congress actually pay for its spending bills, but Don Kentucky is onto something, make no mistake (perhaps you’d prefer to compare him to King Lear; either way.) Now, the Greeks are trying to cut about four percentage points off their debt-to-GDP ratio. If the United States were to embark upon a similar plan, we’d be looking at cutting something like $500 billion in spending (very roughly.) Those spending cuts would come very dearly. Or perhaps I should say, will come very dearly. Because at some point, we will hit the wall, and that point is coming faster than some reckon.

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Hemlock may become an attractive option.

It’s hardly reassuring when the best the country that basically invented western civilization can say for itself is “we’ve got enough money to get through January.”

Greece is back in the headlines again, after saying it’s looking at any and all options to finance its deficit, but concerns that it won’t be able to are hammering its bond market. The Greek finance minister said the country’s borrowing needs through January are covered. He didn’t get very detailed after that.

The fears are also leading to an exodus out of the euro, which is driving up the dollar. When people were warning about sovereign debt in 2010, this is what they were talking about.

The problem for Greece is it’s got to figure out some way to finance itself, be it new debt or what would likely be very painful cuts to its budget and services (watch carefully, America; this could be you some day, reserve currency or no reserve currency.)

The problem for the rest of the world is this: Greece will not be the only ailing nation to hit the debt markets this year. In fact, it’s going to be a rather crowded marketplace.

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The White House’s Office of Management and Budget expects the US to accumulate larger-than-expected budget deficits throughout the next decade, providing another sobering reminder of how badly the recession has hurt the nation’s finances.

OMB says it now expects the economy to contract by 2.8% this year, a steeper decline that its previous forecast of a 1.2% decline. It also expects growth of 2% in 2010 and 3.8% in 2011, worse than the administration’s previous forecasts. Additionally, OMB widened its 10-year deficit forecast by $2T to $9.05T.

By 2019, the public debt is expected to total $17.5T, or 76.5% of GDP.

“That’s bad, but it’s not horrific either by historical or international standards,” Nobel-prize winning Princeton economist Paul Krugman writes at Conscience of a Liberal, noting federal debt hit 109% of GDP at the end of Word War II, and 49% at the end of the Reagan-Bush years. Instead, people should be focused on the “sheer awfulness of the economic projections,” he says.

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