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The Game Goes On

June 18, 2012 – 4:57 pm

The result from the most recent Greek election, while not conclusive, certainly gives the nod to the conservatives and a continued path down austerity with the resultant cash flow from the rest of the EU. The election, if it had gone the other way, would have produced chaos with the left wanting to toss the austerity plan but still wanting to remain in the EU and using the EURO. The rest of Europe would not have accepted that plan and it looks like the majority of Greeks realized that.

Of course the Greek election does not solve the EU problem as Spain’s debt broke above 7% and Italy’s around 6%. Those are levels that neither country can sustain and puts continuing pressure on banks, to say nothing of the pressure on the governments. Something has to happen. Can the pressure be released in a controlled way or is it going to result in an explosion?

Frankly, it is impossible to tell. Here in the U.S. our Fed has kept the flood gates of easy cash open and will continue to do so. That has been the smart move so far. It wasn’t that long ago that countries in Europe were raising rates. That was a mistake.

So far the market is neither giving us an all clear sign, nor is it telling us that things will fall apart. Usually the stock market is a very good leading economic indicator. Everyone is sitting on the fence watching the game being played on the field in Europe, Asia and here in the U.S. The outcome of that game is very much in doubt, but it is interesting.

Good Trading
Steve Peasley

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