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Bad news for doomsday merchants

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by Peter Switzer

Well the doomsday merchants have been talking this up, well, maybe it has been down, but the Greeks look like they have at least 85 per cent of bondholders backing the Greek debt bailout deal. This is a great sign that they will avoid a messy default.

We will have to wait to get the final acceptance but what is aimed for is to reduce Greek Government debt by 46.5 per cent by getting private lenders to the Greeks to swap their old Greek bonds for new ones. So the new ones will be 53.5 per cent less valuable, attracting less interest and they will mature over a longer period.

It’s the debtor’s deal from heaven or maybe it’s mammon!

The big news

The Dow was up 70.61 points or 0.55 per cent to 12,907.94 while the S&P 500 put on 13.28 points or 0.98 per cent to 1365.91
The big news overnight was the bond swap deal with private investors. Over 85 per cent of bondholders have said yes to the bond swap deal.
This is all good for the overall deal and it meant European stocks greeted the news by spiking higher.

How good was the news? Well let’s just look at the market response with the UK’s FTSE up 1.18 per cent, the German DAX up 2.45 per cent and the French CAC 40 a whopping 2.45 per cent higher!

I advised earlier this year that if the news flow showed that the good news was beating the bad news then we were going to be off to the races with stocks this year and that is exactly what’s happening.

Positives and concerns

Europe is getting some wins with the European Central Bank lending close to a trillion euro to the important banks of the EU for three years at low interest rates, on top of the pledges for fiscal responsibility from the governments of the Continent added to this pending Greek deal. These have worked to add to the positivity coming out of the recovering US economy.

Sure there are other issues such as Iran and the price of oil, a possible war between Iran and Israel, looming elections in France and even Greece on top of a US election but these all make up the wall of worry that always goes with stocks.

By tomorrow morning we will see the latest reading on US jobs and more good news is expected. If this comes in as expected then the stock market could easily spike higher.

The number to watch is 210,000 new jobs and if this is topped, it will not only be a great effort, it will really fire up stocks.

I never thought I’d write this but — go the Greeks!

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: Friday, March 09, 2012

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