February 2, 2015
Weekly Market Outlook
By Keith Schneider
Initially, right after the Greek elections the markets surprisingly shrugged off the results that brought in an anti-austerity party and ignored the much higher odds that Greece will leave the EU and default on a huge debt load. However, by the end of last week reality set in and the markets finally cratered after some wild swings. US equity markets are now down -3% for the year, with defensive assets such US debt, the dollar, and gold up sharply.
With Greek Government debt currently standing at something like 315 billion Euros (already reduced) it seems only Plutus, the Greek god of money can help. Considering Greece’s 25% unemployment (youth at 50%) rate, with government debt standing at 175% of GDP and a shriveling economy, only a miracle can save the situation. The only country in the EU that could possibly bring relief and save Greece from its fate is German Chancellor Merkel and she said Fuhgeddaboudit, no more debt relief. Not to be shut out, anti-austerity supporters in Spain gathered in protest, underscoring multiple issues that can lead to an EU unraveling.
The New Greek government is seeking a bailout and debt reduction of 50%. These days, with Merkel and Germany out, it is something that only a company like AAPL could do with its cash hoard of $175 billion and growing by the minute. Tim Cook could play Plutus, buy up Greek Sovereign debt, force a takeover of Greek parliament and turn Greece into a huge Apple store or factory.
Stepping back and taking a look at the big picture, the S&P 500 is stuck in neutral for the last 5 months, trading exactly where is was in late August. In between it had some nasty corrections, snapback rallies, including the 10% swoon and recovery in October. Normally this type of volatility denotes a possible change in trend. However, central banks and the ECB are loaded with cash and are providing plunge protection, so all bets are off as to how far or fast they will let the market move down. An anomaly worth nothing is the market responded poorly after the Fed meeting. The good news is that AAPL, GOOG and AMZN, all reported excellent quarterly results and traded very well after reporting. With that, the key stock indexes are still acting heavy.
The Gold market is percolating and shrugged off a nasty one day sell-off. It seems to be regaining its luster, having far better resiliency than last year. Rumors of missing gold in the Federal Reserve vaults continue to plague the market with something like 30 tons of the yellow metal unaccounted for. Coincidently, this is occurring amid the repatriation of German gold reserves held by the Federal Reserve back to Germany. Considering that Germany has held most of its gold on US soil during the Cold War for safekeeping, this acceleration of moving its gold back home is even more curious considering Russian moves in Crimea and the Ukraine.
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