It’s been two years.
And the Greek debt crisis is still a problem. It hasn’t gone away.
In fact, the problems are bigger.
It has led the two biggest Eurozone members – Germany and France – to show serious concerns about the debt.
Over the past two years, more than €110 billion has been ‘thrown’ at the problem.
Yet, it still won’t disappear.
The latest attempt to solve the problem was an emergency meeting held on Thursday night. This ended with the Eurozone countries agreeing on another €109 billion in ‘bailouts’.
Yeah, that’ll fix it!
According to yesterday’s the Age:
‘The news has come as an enormous relief to global markets, which have watched the unfolding European debt crisis with increasing concern.’
The ‘enormous relief’ translated into a buying spree.
One look at the major indices in the US shows you the markets clearly liked the bailout:
Source: Google Finance
And it’s not just the US that loves a bailout. The FTSE finished Thursday 46 points higher… after spending most of the day almost 1% down.
But Slipstream Trader editor, Murray Dawes warned his readers this might happen before the bailout announcement:
‘My best guess is that any plan they come up with may see some knee-jerk buying.’
Murray knows the markets. After all, he’s been trading for 20 years!
The agreement to give Greece more money pumped up the markets. But not one to follow a trend, Murray’s already thinking ahead:
‘Whatever plan they have dreamt up will decide the direction of our markets for the foreseeable future. I really want to stress the fact that I am still very wary of the future direction of this market.’
Be cautious about the rally
Murray is cautious for good reason.
The past two years has seen so much fiddling from central banks that it’s distorting the market:
‘Without the constant intervention in the markets I believe we would be trading at much lower levels. If the politicians lose control of the situation then we could quite literally see the markets drop like a stone.’
So, how can you trade the market when the government uses it as a toy?
Murray tells his readers he’s ‘…found the trading environment over the past year one of the most difficult I have encountered.’
Yet that hasn’t stopped him trading.
But tough market conditions require tough and disciplined trading.
The market is easily upset these days. That’s why Murray is trading to take advantage of either side of the market.
But it’s not good enough just to be ready for the market’s swings. You’ve got to have discipline. And you’ve got to know when to exit.
The key to that is managing risk.
If you’d like to get an insight into Murray’s trading strategy for volatile markets, click here to see his free market video update…
Will America be the next to default?
Greece isn’t the only one falling behind.
America is only a week away from defaulting on its debts. You see, the major parties are deadlocked on whether to raise the debt limit. The country already has a debt of $14.3 trillion.
Yet that’s not enough. They want to go into more debt!
The thing is, if America doesn’t increase the debt ceiling the U.S. will default on its loans.
This could be history in the making. America has never defaulted.
But that’s not the only bad news.
Even if all the politicians agree on a debt limit before the 2 August deadline, according to Bloomberg News, ‘Standard & Poor’s have warned there is a 50% chance it will lower the U.S. government’s AAA credit by one or more levels with three months’.
From AAA to…
A drop in the credit rating for the U.S. would rattle the markets.
Christian Cooper is the head of U.S. dollar derivatives trading at Jefferies Group Inc. in New York. His firm is 1 of 20 primary dealers that trades with the Federal Reserve. He told Bloomberg News:
‘It’s an entirely new world that we would be in to even consider a downgrade of U.S. government debt. This is something that would fundamentally change the market’s perception of not only U.S. government solvency but how risky assets around the world are priced as well.’
Both the Greek-debt crisis and the possible default in America have proven one thing. The financial system is fragile.
In the latest Sound Money. Sound Investments, editor Greg Canavan wrote, ‘The market is slowly beginning to realise the post-WWII system of finance is unravelling.’
He goes on:
‘The production of money has become the economic go-to tool. It’s the only response governments have left [after] decades of debt. The problem is it hasn’t worked. It has made things much worse.’
In his letters to subscribers, Greg focuses on sound money principles to investing. In fact, he considers Sound Money. Sound Investments a tool that ‘offers a framework for investing and managing your portfolio in a post-credit investment environment.’
For too long now governments have intervened in the markets. With the intrusion reducing your wealth.
Unfortunately, there’s not much you can do to stop governments playing with the markets.
But there is something you can do to protect yourself from it.
Click here to see Greg’s ideas on how you can defend and grow your wealth.
Regards,
Shae Smith.
Assistant Editor, Money Morning
{ 10 comments }
Correction: ‘The US has never defaulted before”
This is incorrect, the US has defaulted on debt 5 times so far, the first being back in 1779 (Ref: Agora Financial)
Also in 1933 when Roosevelt devalued the dollar from $20.68 per oz of gold to $35 per ounce and also welshed on the repayment ofWW1 bonds that explicitly required the repayment to be in gold. (Ref: http://beforeitsnews.com/story/0/204/Has_the_U.S._Ever_Defaulted_on_its_Debt.html)
The US HAS defaulted in the past.
See: http://mises.org/daily/5463/A-Short-History-of-US-Credit-Defaults
This could be history in the making. America has never defaulted.
I think technically America have defaulted, They did it in 1933 when they stole everyone’s gold, Then again when they went off the gold standard in 1971….And now for a third time in the last few years when they announce QE3…..
Offically when they do default, The USD will be worthles. So all the debts that they have been paying with USD will be worthless.
Maybe the yanks need to drop a A-Bomb on China, India, Taiwain and any other country that makes stuff.
That way they can make everything for the rest of the world again, Like after WW2
Whilst we’re on the topic of defaulting, herewith an interesting tidbit on Australia’s rotten and collapsing property market…
Kris is proving to be prophetic!
http://au.news.yahoo.com/today-tonight/video/watch/26011557/
lol @ Abby
Speaking of our stinking property market, does anybody know the URL to Drew’s property blog?
I’ve lost it, but would like to go back there for a read and some comic relief as there’s always a bunch of deniers around – telling everybody the sky is actually purple, despite what you think you are seeing.
Hi JB @ 5,
I actually just finished a new post a few days ago – my first one for a few months.
I got told off for mentioning it here last time, but seeing you asked, here’s the link:
http://aussiehouseprices.blogspot.com/2011/07/definition-of-bubble-part-2.html
The bulls/spruikers have been noticeably absent this time round (so far at least).
But feel free to add your two cents worth – you seem to have a knack for drawing them out of the woodwork
Actually Abby, the market is quite poor, but it isn’t collapsing. It has had a very slight pickup in the last couple of months, but it might also turn down a bit after that. Interest rate movements will set the trend.
It’s a fairly normal correction so far, although I’m sure you will continue to believe the sky is falling in.
PF, the skies actually might be falling. Because now retail outfits are starting to lay off people. After Borders collapse, it is now Just Jeans that will close 50 stores. Myers and DJs are also not hiring.
It appears not just US, but Oz’s credit card has also maxed out.
SV – yes absolutely, employment is very important. That is why Westpac has predicted interest rate reductions, to help with consumer confidence which is down, and hence the retail sales are down. Some of that would be internet related, but not all of it.
You can read their July report here – http://www.brisbanebusinessfinance.com/images/Westpacredbook_july11.pdf where they spend most of their time on analysis of sentiment and housing.
Feel free to disagree…
No question that the ‘property market’ is retracting. But it shows a different face depending upon where you’re looking… softening in some places, collapsing (bubble-burst, if you like) in others. It’s a shocker in some areas (not hard to determine why) and much less so in others. There are multiple reasons for this, and one brief, sensationalist item by one of the plastic TV channels will never do the subject justice.
But anyone who was warning of a coming correction (Kris included) was right, because their logic was right. (as it is for the forthcoming ‘economic correction’). ‘Scuse me, I’m off to buy some silver.
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