November 6, 2011
Weekly Market Outlook
By Keith Schneider
by Keith Schneider
It’s not so easy to lend a few hundred billion euros if you expect to get paid back in full. The Toga party resulting in a rescue plan for Greece and culminating in a 1900 point rally in the DOW came to an abrupt halt last week. You can party all you want but when you stumble back home the reality sets in. By the time the Greek Prime Minister woke up the next morning, an ugly hangover set in and the deal was off the table. The market tanked 500 points.
The choice of austerity versus default is not so cut and dry. Several countries have defaulted and come through it better and faster than where there were a long term repayment plan. It’s theoretically true what an old acquaintance and former Chairman of Citibank, Walter Wriston, once said in the midst of negotiating the Latin America debt crises-” Countries don’t go bust”. However a quick retort from a central banker stated something really true “Just their bankers do”. Ask John Corzine.
The 20% decline into bear market territory that was quickly reversed by the end of October might be setting up for another retest of the lows and more. This week we moved back under the 200 day MA in all indexes but QQQ. On the flip side, don’t count out another round of misinformation boosting the markets again. We also have a presidential cycle which has generally been a good bullish indicator. Meanwhile, the economics here are at least not falling off a cliff with unemployment slightly improving. Capitol Hill is still gridlocked while we all watch the Greek Drama unfold. Don’t lose site of the economic crises here.
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