I wrote this on Thursday, it's about my thoughts on European Debt issues and where I think the focus will be in the next few weeks. I predict a bullish period for equities. That being said, don't all rush to your brokers at once and demand to be 100% invested, always do your own research before you make any decisions, after-all its your money!
Euro Zone Strikes Deal on 2nd Greek Package, EFSF
By: Sydney Forsythe
As of Thursday October 27, 2011, European debt crisis has been somewhat eased; Investors and traders are relieved to hear that the Euro zone struck a deal on the Greek debt issues. The deal will have private banks and insurers accepting a 50% “haircut” on Greek government bonds in efforts to reduce the Greek debt to manageable levels. After over eight hours of negotiations all parties agreed to a deal that would reduce Greece’s debt by 100 billion Euros, making its debt 120% of GDP similar to its levels in 2008 at the start of the Euro zone crisis. There are still ongoing efforts to strengthen the Greek economy; the EU is attempting to put in place a value package worth 130 billion Euros (an increase from 109 Billion proposed earlier) by 2012. To sweeten the deal and improve investor confidence, the IMF (International Monetary Fund) has suggested that it too will increase its activities in the Euro Zone to strengthen the recovery of Greece and other European nations on the brink of default. All this comes on the heels of an announcement from China offering to assist the Greek and European nations. Even though the bail out might suffice the Greek economy for the time being, some skeptics question how Greece will handle its debt moving forward. It is no question that Greece needs to adjust government spending and come up with ways to build capital, failure to rectify these issues in the coming years will prove problematic for Greece in the long run.
The Great news from Europe spurred a market wide rally this week; Investors are hopeful that the issue will finally be resolved. With Europe on the back burner for the time being, investors will now look to America’s debt woes. There has been little talk about the United State’s current debt issues. Problems were brought to light after the US suffered a downgraded credit rating earlier this year from Standard and Poor’s after barely avoiding default on its debts. There have been more talks about another credit downgrade in the near future for America if they fail to do something about their current debt position which is about 89% of it’s GDP. Republicans propose a $2.2 trillion spending cut that will take significantly out of health care, Medicare and Mediaid, while Democrats also put a plan forth to reduce debt by 3 trillion in the long run.
It’s not all bad news in the US; the US economy grew at its fastest pace in a year, as consumer and businesses increased spending. The US GDP grew at a 2.5% annual rate in the third quarter as opposed to 1.7% growth forecasted by analysts. The labour market also seems to be improving as unemployment benefits fell by 2,000 last week. Analysts are looking optimistic going into the year-end, so this might be a great Christmas for investors.
This and other well put opinions can be found on the DeGroote Trading floor Website. You can also find important economic indicators and the date they will be released, these things serve as a great way gauge market sentiments and how investors will react, pay special attention to census v.s actual numbers, If the indicators come in better than analysts predict then we will see rising stock markets.
Stay tuned for Resources Part 2!
All for now
(Pigs get Slaughtered!)
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