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All Greek to me

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by Peter Switzer

Stocks continue to defy gravity because the smarties who determine market directions know the fear factor we saw in August last year has abated. Even Nouriel Roubini, who is America’s Steve Keen predicting economic and financial hell and debt damnation, is backing stocks will go up, at least for the present.

But the handbrake on the market going up even further is Greece with news that debt talks have hit another hitch.

The Dow was up 5.75 points to 12,883.95 and the S&P 500 put on nearly three points to 1349.96.

Believe it or not but the Dow is only 10 per cent away from an all-time high! That is, the losses of the GFC would be wiped out. That’s a little scary but it does say something about the irrepressible inclination for stocks to go higher. That’s why I like them for seven years out of 10! The other three, they are a proverbial pain in the butt, but that’s why I always keep the focus on the long-term.

Problems in Greece

What I’m seeing tells me that stocks could be in for a nice ride but we need to get Greece out of the way and then see a credible European Union plan for fiscal discipline followed up by some more solid injections of money into the EU economy from the European Central Bank and the various funds created to manage the debt.

Right now, the Greeks are doing what they are famous for — haggling, negotiating and bearing ‘gifts’ that you have to be wary about.

I think the EU would love to get rid of Greece and let them deal with their own issues but they fear the potential contagion effect of other countries becoming the next Greece that could hold the EU, their bank creditors and world financial markets at ransom.

One thing that’s not understood is that Greece is in for a rough time if they buy the EU deal of fiscal discipline. The powerful and the influential of Greece will lose a lot if their country returns to the drachma but their personal debts are still in euro! These people know how to share the pain with less powerful fellow countrymen and so either way, the Greeks are in for a tough time.

I think Kenny Polcari, managing director of ICAP Equities, summed it up neatly on CNBC.

“Once again, Greece continues to hold the keys on at least the short-term trend,” he said. “[Stocks] are stuck in purgatory—the market has acted very well since December and for the whole month of January with no real pullbacks and I think we may have gotten ahead of ourselves even though there’s talk about improving macro-economic data.”

Settle the deal

I can’t wait for a Greek deal to be settled and I’m not alone but unfortunately, the Greeks know they are in a powerful position holding financial markets to ransom and they’re playing it for all they’re worth. I just hope they don’t overplay their hand as it could hurt a lot of the stocks’ progress we have seen so far.

This is why I say, when it comes to the outlook for stocks, it’s all Greek to me!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Thursday, February 09, 2012

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