Greek Temper Tantrum
Research for Online Investors

by John Dalt

11/16/10

Last night Greece acknowledged they were in violation of the terms of last spring’s International Monetary Fund (IMF)/EU bailout.  They have not cut spending enough.  The country’s deficit was to be under 8.1% for 2010, but is currently at 9.4% of GDP.  The Eurostat statistics agency is auditing Greece’s books to confirm compliance.

Greece argues that their economy and government spending was in much worse condition than thought.  Estimates at the time placed their budget deficit at 13.6%.  Reducing the deficit to 8.1% required cuts or taxes representing 5.5% of GDP.  The deficit was actually 15.4% in 2009.  According to the Associated Press, Greece wants credit for reductions from the 15.4% to count as meeting the “intent” of the requirements.

Bloomberg reports this morning that Austria will not contribute their December trache of $258 million dollars, for Greece, if Greece has not raised the amount of money pledged in taxes. If Austria holds its ground, there could be a real mess develop in Euroland. Greece has skated for years on promises, winks and nods. We could see a temper tantrum in the next few days.

The pressure will build to “do something.” The rhetoric is already pushing the line that the Euro is doomed unless the problems are addressed.  Crazy thing, the dollar is rallying on the Euro mess.  There went Bernanke’s billions.

Ireland needs to take some money!  Eurozone finance ministers are meeting today and tomorrow and want the Irish problem solved before their meetings end.  Spanish and Portugal’s sovereign debt interest rates are rising as fear begins to spread. At present Irish 10-year bonds are paying 5.79% more than German Bunds.

We don’t like to talk about it in polite society, but foreign leaders called President Obama on the Fed’s actions at the G-20 summit.  The U.S. Federal Reserve was manipulating the value of the dollar.  Deny it all you want, more money = cheap money.  Now the Europeans are racing us to the bottom, and winning.  If Congress and the President do not change course, the U.S. will have its turn.

Questions about the Federal Reserve’s policy of quantitative easing have reached the mainstream.  In yesterday’s Wall Street Journal, a group of economists and former finance officials signed an open letter questioning the need and desirability of inflating the money supply.  You can read An Open Letter to Bernanke.

The French have been rioting over President Sarkozy’s proposal to raise the minimum retirement age from 60 to 62 years of age by 2018. Protesters are roaming the streets, almost a fourth of the country’s gas stations are out of fuel as workers at 11 of the country’s 12 refineries are on strike.  Charles de Gaulle Airport advised airplanes to land with enough fuel to reach their next destination as the airport suffered from severe fuel shortages.  The interesting thing about the French situation?  The retirement age had been lowered from 65 to 60 in 1983 under the Socialist President Francois Mitterrand.  I bet they didn’t protest then.

The Tea Party movement provides an interesting dichotomy, U.S. citizen’s protest over too much government spending and benefits.  “WE DON’T WANT IT” seems to be the chant for those who wish to live free.  Where does this leave us when the inevitable cuts to social programs must be made in the U.S.?  It will be interesting to see.

There will probably be protests.  But not by the people that work to pay for the programs, and in many cases those affected.  Leave the protesting to the “community organizers” and those that want a “just” society.  Kind of like a “just” poor bankrupt country.  Those that think, and have any basic understanding of economics know the bottomless money stash is empty.

The market is working its way lower on the economic news that has replaced earnings and rosy forecasts.  Do you have your list of stocks ready, with target buy prices?  Precious metals, commodities and stocks are all getting hit today.  Walmart is the only one I see up, on their earnings report this morning.  Remember; don’t try to catch a falling knife.

To the mailbag:
I saw “Inside Job” this weekend.  It is well done and I recommend people see it.  There were only a dozen viewers when I attended.  I don’t understand people that don’t care about their future.  I enjoy MarketToday and appreciate your candor.---subscriber S.O.

John’s reply:  Thanks.  I try hard to bring our subscribers information they need.  My goal is to help us all be better citizens because we know what is happening, and better investors because we have knowledge to make educated decisions in the market.

I want to cancel the buy sell hold portfolio service. I'd like to hold on a little time before getting back to the market.---new subscriber Y.J.

John’s reply:  We will process your request, if that is your wish.  But I would not make such a decision because the market is off this week.  We anticipated this.  You are up and profitable on both recommendations we have made in the two weeks since you joined (more than the annual cost of our service).  We don't time the market for entry and exit, but we do adjust our approach to maximize our return while being conservative.  Do not let fear drive your investment decisions, or greed.  I hope I have struck a note here, as our goal is to help you make money in the market.

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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