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Can the Greeks do the right thing?

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by Peter Switzer

Just when you thought it was all going to go to ‘you know what’ — the stuff that often hits the fan! — Wall Street has shot up on optimism that the Greek politicians will sign up to an austerity program.

Adding to the rosier outlook overnight was the news that we have a woman to the rescue, with the International Monetary Fund set to be run by another French person!

However, the big news around this debt drama that helped the stock market was the decision by French banks to agree to turn their short-term loans to Greece into 30-year loans! In the parlance of the debt worriers out there, this is a case of a really big kick of the can down a very, very long road.

To gauge the positive reaction, the Dow was up 145.13 points and the S&P 500 rose 16.57 points, or 1.29 per cent, to 1296.67.

So, is the possible correction phase for the US over? Could be, but I doubt it, and we could see markets buy on the rumour and sell on the fact but this is the first positive catalyst to help the stock market progress to a rally in the second-half of the year.

The next two I’m looking for will be good US profit reporting in a few weeks' time and then better economic data out of the US, which could take a couple of months.

The positives

So what else is happening out there to keep an investor from going too negative?

Try these:

Oil prices rose over US$2 to US$92.89, which can be a sign that pessimism is subsiding about the global economic outlook.
The fear index or VIX fell from around 22 to 19, which is another good sign.
US cities’ house prices went up for the first time in eight months.
CNBC reports that Richard Fisher, the Dallas Fed President, said economic growth could hit four per cent in the second half, which would be double what the first half pace is set to be.
Finally, the hotel-shy, former IMF boss, Dominique Strauss-Kahn, has been replaced by Frenchie, Christine Lagarde, and call me sexist but I think women are better money managers than men, and this has to be a good thing for the global monetary system!

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: Wednesday, June 29, 2011

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