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