The US stock market returned to its previous high set last Thursday, largely on the basis of better than expected job numbers and a strong revision to January’s reported #s. Oil and gold were both up 0.7% while bonds were mixed. The dollar was up strongly today, too.
After getting 84% participation on the “voluntary” debt swap with private creditors whereby the creditors took a hit of 74% on their bond values, Greece will force the remaining private bondholders to swap their bonds too. That will trigger a default which I have been predicting for many months. European banks have had plenty of time to write down their holdings and this announcement will not really affect them. We’ll see if there is any effect on the other weak sisters of Europe- namely Portugal, Spain and Italy.
The story is not over for Greece either as its shrinking economy and low likelihood of really implementing austerity will bring it back to the trough once again. Its just a matter of time. Time is just what Germany and other stronger countries have been buying with their hundreds of billions of euros thrown at Greece.
Meanwhile, the US economy continues to recover, housing and jobs and manufacturing are all trending higher and stocks are reasonably priced with tons of money on the sidelines, far more than usual. That provides fuel for higher stock prices. There are plenty of skeptics to be converted to bulls.
Still, there issues worth worrying about, not least of which is the prospect of Pres. Obama being re-elected and further budget-busting spending with further rapidly increasing federal debt. Obama-care will push that much higher. The other main worry is the recession in Europe and the slowing of economies throughout the emerging world from South Africa to Brazil to China.
Have a great weekend.