US equity markets are taking the Greek bailout to the bank as the S&P 500 hit an all-time high on Friday. The Nasdaq is back to its Pets.com sock puppet levels back in 1999 during the dot com bubble.
Dollar strength — while driving Corporate America to whine about how profits are deflated due to slack in export revenue — is not the impetus behind the stock rally.
The believe that the EU’s EQE will pump up asset classes just like what the Fed’s quantitative easing accomplished has US and Europe bourses moving higher as the resolution in Greece nears.
I’m not so sure this will happen in an orderly fashion. Come Monday we will see that the meetings between the EU and the new Greek leaders will break down over the terms.
The word haircut will be behind the storm. Should Greece get a cut in its debt obligations, an hour later Italian, Spanish, And Irish governments will be demanding a me-too clause in their debt.
Something the Germans are vehemently against. Remember if the Germans go the grand experiment goes. The only reason the Germans are still there is the fact that the weak euro gives it a great benefit in exports.
This upcoming week will also feature South American economic upheaval, if I read the tea leaves correctly.
Brazil’s economic growth and exports have both faltered on reduced trade of commodities.
Argentina’s government is cratering under a weakening currency, runaway inflation and a President charged with covering up an alleged terrorist attack and possible murder of the investigators.
Venezuela has similar economic as Argentina only with greater hardship to the country’s residents.
Plenty of action in the sovereign debt markets will come this spring as “Beggar Thy Nation” currency plays lead to economic degradation.
I will be taking a break this upcoming week to experience the economic degradation and malaise along the southern tier of Europe. I will return Feb. 23.