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Crisis Driven

May 5, 2010 – 5:21 pm

The last two days have been all about the Greek debt issue as their citizens riot, not wanting the wage reduction and tax increases that are needed. The fear is that it will spread to the other European countries as the Euro falls in value. Actually, the Euro falling helps Europe in the long run. In turn it makes our dollar stronger which will hurt our exports but in other ways it will boost our economy. The situation is not helped when Germany, the leading economy in Europe and the one who is providing funding to the bailout for Greece, is having an election in a few days. The German Chancellor wants to demonstrate her tough Greek debt stand to get votes. On the other hand she is also trying to scare her population about the crisis spreading and Germany’s need to step up to help. It certainly sounds like she is trying to have it both ways. Playing politics ‘during’ a crisis is not too bright. You can play politics ‘after’ the crisis is over. We in the U.S. generally take care of the problem and then play politics afterward.

Regardless of the impact of this Greek issue on our stock prices in the short run, this is a one time event-driven fall in stock prices. Events end and when this one does, as it surely will, the market will rally. So far the correction is about 4%. Expect more turmoil, but it is a short term issue unlike the financial crisis we saw a couple years ago. Could it turn in to something worse? It can, it is just not probable.

Be prepared to buy. If you haven’t already sold it might be too late. It is impossible to time these things.

Good Trading
Steve Peasley

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