30 Seconds to Midnight
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2/10/12

Greece’s truculence is on full display today.  Workers are on strike.  Politicians are resigning rather than vote for the austerity measures required to gain access to more funds.  Greece’s largest police union said it would issue arrest warrants for international lenders for subverting democracy.

The leader of LAOS (the smallest political party) vowed not to vote for the ‘harsh austerity program.’  This was one of the leaders that agreed to it Thursday morning!

Greek paper from this morning with a German subtitle “Memorandum Macht Frei” is a reference to the Nazi slogan “Albeit Macht Frei” (Work Makes You Free) that stood over the gates of Auschwitz.  Notice Merkel's arm band in top right.

The eurozone finance ministers refused to endorse the “plan” put forward by Greece yesterday.  It did not meet the guidelines set out and agreed to by Greece and eurozone leaders last year.  It does not reduce Greek debt to 120% of GDP by 2020.  There is also the small matter of the 300 million euro cut in pensions that Greek leaders did not endorse.  They tried to paper over the gap in cuts with a promise to replace the pension cuts with other measures.

Jean-Claude Juncker is the chairman of the European Finance Ministers.  He told Rueters in Brussels last night “In short, no disbursement before implementation.  We can’t live with this system while promises are repeated and repeated and repeated and implementation measures are sometimes too weak.”

A vote is scheduled in Greece’s parliament for Sunday night, or Monday to approve the austerity measures.  The eurozone finance ministers are tentatively scheduled to meet again next Wednesday.  They will consider the commitment of Greece at that time.  They will look at enacted legislation and support from the leaders of all three of Greece’s political parties.

The socialist labor minister along with a member of parliament resigned yesterday.  Ports and public transportation in Greece are closed today because of the strikes.  Airports are open, but doctors and bank employees walked off the job.

Bertrand Benoit, a spokesman for the German Finance Ministry told Bloomberg “The Greek off is not sufficient and they have to go away to come up with a revised plan.”

Luxembourg’s Finance Minister Luc Frieden said “The Greeks understand that it’s not five minutes to midnight but 30-seconds to midnight.”

European officials have told Greece the deal must be concluded in the next few days for paperwork to be done and money advanced in time to avoid a default.  We will see.  Politicians (in Greece and the U.S.) will not do anything until the very last minute).

The market is trying to consolidate the gains from January.  Today’s pullback leaves it vulnerable to “Headline” risk.  I do not expect 1330 on the S&P to hold as support, but it will bring out buyers.  Next week could be interesting.

Editor’s note: While we are cautious and did not fully participate in the January rally, our Long-Term model portfolio gained 6.0% while the S&P 500 was up 4.4%.  We sold into the rally and are ready with dry powder to start buying when presented with the opportunity.  You can join us!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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