Come Out Shooting

You can find this week's update in The Briefing Room

Later this week could be interesting in Europe.  Within the last few days Greece seems to have changed their strategy.  Instead of acting like the ugly step-child that can't control their finances, they seem to have realized that there is power in the corner they have backed themselves into.  Greece has borrowed themselves into a position that they can't pay their way out of.  They can't simply print more money to pay their bills (like us) since they have an agreement not to do so as being part of the Euro Zone.  Their debt is poorly rated causing its yield to be over 20%.  Borrowing costs for them are outrageous.  The EU would like them to conform to "Austerity Measures", which means suck it up, quit spending, and become responsible.  If you watch the news, you know the Greek people are highly opposed to that idea.  The Greek Gov't owns many businesses.  The EU would like them to sell a bunch of these business and pay off debt.  This is where it gets interesting.  The Greek deputy finance minister just announced they aren't going to be selling anywhere near the amount of assets the EU has requested.  At the same time, the Greek Prime Minister sent the EU a public letter stating Greece has done all that it could and that the EU should meet in a closed forum, with no damaging press leaks, and emerge with a strong, unambiguous message.  

It seems they are going to come out of their corner - shooting.  They know that if they default on their debt, dominos will begin to fall.  The potential for a Europoean debt crisis similar to the one in the US could emerge whose contagion could / would spread to the rest of the world.  The EU may need to begin printing money in a fashion that would make Bernanke jealous.  The EU have scheduled an emergency meeting this Thursday.  We will soon see how the new Greek strategy plays out.

As I said last week, the market reflects the economy.  There are many economies in Europe and around the world that are walking a thin line.  The good news for us is that all this pushing and shoving creates supply and demand in the market, which is trackable.  We are doing that and changing your portfolios as needed.

Please check out the Briefing Room update to get an idea of our thoughts for this week.

Have a great week

John Norquay

Market In Transition?

The briefing room was updated on Saturday, but due to Holiday festivities, I'm just now letting you know of it (it's my excuse, and I'm sticking with it).

The last briefing (June 24th) stated "While we remain defensive at this time, we’ll be watching closely for either (1) further oversold conditions for another short-term trade or (2) a turn on the hourly and daily cycles

which could spark a longer lasting up cycle."  

This week's briefing outlines some of the events last week and the difficulty that we will sometimes have during market transitions.  

As we have mentioned numerous times, investing is a game of patience.  The market never goes straight up and it never goes straight down.  Often times when it changes over all direction, overzealous buyers (in a market transitioning from down to up) will cause the price to go up much quicker and steeper than it will move over time.  We as patient investors choose not to "chase" the price when it is out of its normal boundry.  A well trained dog will not chase cars due to the excessive risk to his health.  We will not chase excessive price due to the excessive risk to our portfolios.

Last week was the end of a month and a quarter.  We will quickly find out if this change in price direction is for real or simply window dressing created by mutual fund managers.