Are we experiencing the beginning of the end for the euro? For roughly three years, it seems as though politicians have been kicking the can down the road, putting off the apocalypse right at the last minute. And investors in the currency have had their patience stretched to the limit, vacillating between no hope and naivety that the Greek problem had gone away.
After Greece came Spain, Portugal, Italy and Ireland, but while the rest have been able to curb the risk and get a grip on things, the Greek problem has kept coming back. Now it seems that we've reached the end, the moment of truth, what investors have been dreading for the last three years – that Greece will eventually default and leave the Eurozone, and that it will spell the end of the euro. But now that the end has come, it seems as though investors have not only learned to live with the idea of a Grexit but to actually want it. The saying goes that you have to hope for the best and prepare for the worst, and more and more voices are indicating that some institutional investors are now hoping for the worst, for Greece to leave the euro. But why? Continue reading "Grexit: Hope For The Worst?"→
It seems like this never-ending, ongoing Greek tragedy is like an Energizer battery as it just keeps going and going and going.
In order for something to qualify as a "black swan event", it has to come out of the blue and be a total surprise to the market. Certainly, Greece cannot claim to have just happened or come out of the blue. It seems like this train wreck of a country has been going on forever without a resolution. The fact that the markets are only down a bit as of this writing and have the potential to close unchanged indicates that most of the US equity markets have already discounted the "Greek Effect".
It was back on 13 April that I highlighted the breaking point for the dollar, which could lead to a dollar correction after a prolonged rally. What was that breaking point? If inflation gauges showed that the strong dollar weighed on the inflation outlook, then the dollar would begin its correction. And so indeed, shortly after, the dollar began to plunge against its European peer, the euro, as investors switched into euro longs and dollar shorts. The reason? Data suggested that the US economy wasn't growing as quickly as expected, and most inflation gauges suggested that inflation still wasn't returning.
And then, two weeks ago, the tide turned once again and investors began dollar buying once more as core inflation nudged up and the Eurozone, with the looming Greek crisis, seemed weak again. But is the dollar correction really over? Don't count on it… Continue reading "Dollar Correction Not Over"→
It just seems to this observer that the Greek kabuki dance is never ending. How can banks keep lending money to a country that is insolvent? That seems a little backward and just stupid to me. What do you think of the situation in Greece?
Here's the reality of the situation, Greece is going to default, the bankers may as well get ready to write off those loans as the money is not coming back. The next question is, whose next, Portugal, Spain or Italy? The next buzzword that is going to come out of all this is contagion. I think when Greece exits the eurozone it will be good for the euro longer-term. Think of it like when a company announces bad earnings and fires the CEO. The stock price has anticipated and discounted all the bad news and for the most part things get better over time for that company. The euro is the same way as pretty much all the bad news is out, except the actual exit of Greece from the euro.
Sooner or later it's going to come to crunch time and time is getting short. Angela Merkel and Germany are going to have to swallow their pride and make some important decisions very soon.
So onto the only economy that seems to be working and that is the US. Today I'm are going to be looking at the major indices to see if they are beginning to tire or getting ready for another upward push.