Business News

Greek drama a joke

| More

by Peter Switzer

The question is at what point does the world get sick of the Greeks? Well, if their Prime Minister’s latest stunt to put forward a referendum to see if the country will cop austerity measures happens and world stock markets sell off, then the answer is — bloody soon!

George Papandreou shocked Europe with his referendum proposal which will ask Greeks to give the thumbs up to tough measures covering tax, government spending and public servants’ retirement as well as workplace conditions. And even more provocatively he will ask them about the country’s interest in remaining in the eurozone!

Yes vs. no

To put this simply and to explain why financial markets have been hit so hard, if the Greeks vote “no”, then it means default and going back to the drachma. It would be an unmitigated disaster for the banks carrying Greek debt.

Of course, if the Greeks see reason and choose responsibility by voting “yes” then it could create a massive market rebound.

The next question is — can we trust the Greeks to get it right?

Wall Street did not like the Greek news with the Dow down 297.05 points or 2.48 per cent to 11,657.96 while the S&P 500 lost 35.02 points or 2.79 per cent to wind up at 1218.28. And yep fear is up with the VIX around 35 after dropping into the 20s last week.

Down days

News like this speeds up the profit taking from those who made money in October, so brace yourself for some down days ahead.

Also spooking Wall Street was the failure of MF Global, which filed for bankruptcy protection while admitting using clients’ monies when a cash crunch followed taking positions to make money out of sovereign debts in Europe.

To make matters worse, the October ISM for manufacturing slowed more than expected but construction numbers were actually a bit better than predicted.
But everything is a sideshow to this new act of this Greek drama, which is looking more and more like a big joke! Unfortunately, the joke is on us who have failed to understand that globalisation means we are only as financially strong as our weakest link.

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.

Watch more from Peter on SWITZER TV.

Published on: Wednesday, November 02, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Why Aussie stocks lag Wall Street

Kill QE, kill rally? Nope!

Dow to reach 20,000 – can you believe it?

It’s not All Too Hard, it’s More Joyous!

Abbott deserves a Tony Award for that speech!