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Can we trust the Greeks again?

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by Peter Switzer

Monday is D-Day, which stands for debt bailout day for Greece, and there’s a very high expectation that the deal will be done and the key parties will sign off on this dragged-out debt drama. Whether we can trust it happens is in the lap of the gods, as history warns us, but the US market continues to be buoyed by the prospect of a long overdue Greek solution.

The Dow was up 45.79 points, or 0.35 per cent, to 12,949.87 and it’s now up 5.99 per cent for the calendar year after rising 1.16 per cent for the past week.

The S&P 500 is at 1361.23 and is now up 8.24 per cent for the year while the Nasdaq is up a whopping 13.31 per cent for the year!

Meanwhile, our local S&P/ASX 200 is up only a measly 3.4 per cent! You can blame our tight monetary policy and the related strong Aussie dollar for that.

US vs Europe

And while a lot of that improvement in US stock prices was sheeted back to a continuing improving economy, the news out of Europe about Greece and the ECB has really helped create this solid start to the year.

I think a lot of this was neatly summed up by Brian Battle, vice president of trading at Performance Trust Capital Partners, talking to CNBC. "No one wants to risk staying short if there is really a deal in Greece over the weekend," he said. "But the sustainability of the rally is another question."

Hope for a deal being signed off happened once the Germans relented on a tough part of the deal, and this helped European stocks finish higher on the belief that a deal will be done on Monday.

The Yanks are on a public holiday tonight — Presidents Day — and so our stock market is on its own until the Europeans react to this expected good news out of Greece.

Meanwhile, inflation was up a tick in the USA and leading indicators rose again to a three-and-a-half-year high, which again is another good sign.

What’s ahead?

Ahead for the week, some info on home sales in the US and consumer sentiment will be released. Locally, the RBA minutes will be dissected and this usually creates a whole lot of speculation.

My only concern is that a selloff in shares is bound to happen sooner rather than later but given our paltry increase in the index, it worries me that we could lose nearly all of this year’s gains pretty easily.

Of course, the rest of the world is dining off loose monetary policy and this explains why their stock markets are up so solidly. You have to hope that our cautiousness and responsibility will pay off in the long run as it’s not in the short-term.

And for the short-term we are, again, in the hands of 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: Monday, February 20, 2012

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