The Bulls have regained the momentum! Anticipation &
initial good news from the European Debt crisis had markets rebounding
from 5 straight months of losses in one of the better months on record.
Europe’s take on its heavily indebted nations for the last 18 months has
been really a policy
of “kicking the can down the road”. The best analogy I heard was they
were not only kicking the can down the road but when they ran out of
road they began paving more road to continue the kicking! As is all too
clear with our own politicians nothing ever seems
to get done until there is a major crisis at hand. This is truly a step
in the right direction for Europe as they are actually trying to
restructure Greek debt with the “voluntary” 50% reduction. Coupled with
other bullish winds of healthy corporate balance
sheets, low interest rates, accommodative Central Banks, and Government
intervention has given strength to the rally.
However one still has to be cautious in a market environment where a
lot of the factors that gave us the summer downturn are still real
& present. Sovereign nation debt is still growing at alarming rates
in the Developed world as Economic Growth sputters
behind. The little economic growth we have had has in fact been showing
signs of slowing since summer. The recession threat might be greater
then what most experts think. The stock & commodity markets have
also shown an amazing amount of correlation to government
and central bank intervention. It was relatively easy to predict this
summer’s market downturn when the market was no longer supported by
Federal Reserve Bank’s QE2 (Quantitative Easing). Lastly the lack of
political leadership to make difficult/unpopular decisions
from the developed world has been troubling. A lot of the structural
imbalances built up over the years in our economy still have not been
addressed.
Predictions of the future however are always difficult and
unpredictable. A balanced approach with emphasis on “playing defense”
during the next 6-18 months in my opinion is still the prudent move. I
am happy to see the European leaders finally coming
to the realization of needing to restructure Greek debts. This is a big
start to dealing with the world’s debt problem but the details of the EU
summit still need to be ironed out. In addition the Europeans will have
to deal with the much larger debt problems
of Ireland, Portugal, Spain, and Italy.Time will tell.
1 comment:
I really like your analysis of the current market. It's good to remember that even though we might run into some bumps now and then, we've had it pretty good lately. Equity Tips
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