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How will the Greek elections this weekend impact US Markets?

Short term and long term, how do you see Greece's situation impacting global markets as well as domestic.

Jun 18, 2012 by Ethan from Kenyon, RI in  |  Flag
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The victory of the New Democracy party was anticipated by the big stock market rises in Athens on Thursday and Friday. Key points:

The New Democracy Party is in power but nothing of note has changed. Greece remains corrupt, over-indebted, and uncompetitive. There’s little prospect out of its de facto bankruptcy unless the people of Greece demand and receive real reforms. That is unlikely to happen in the intermediate term.

Notwithstanding promises to essentially renegotiate the memorandum of understanding reached earlier this year with the so-called “troika:” the IMF, the EU and the ECB, the fate of Greece will eventually be decided in Northern Europe.

It boils down to a question: will the Euro-zone become more like a proper fiscal union? There are hopeful signs such as the European Stability Mechanism and the Summit later this month.

But big challenges remain for Europe:

Rich countries need to create a mechanism to deal with Euro-zone imbalances without taxpayers thinking they’re idiots for subsidizing the profligates.

The electorate in Core Countries must buy into the idea that the “whole” is greater than the sum of its parts. That they are all Europeans traveling in the same boat.

What this means for investors:

We believe the odds favor more of the same: politicians continuing to muddle-through this process of defining what it means to be in Euro-land.

Global Stock Markets will remain volatile because these problems require political solutions and this creates uncertainty that investors loathe.

The investment climate remains fearful.

Where to put your money:

Fear and uncertainty is the friend of long-term investors because it lets you buy low. Many great European companies are now selling at valuations not seen since the lows of March 2009.

Comment   |  Flag   |  Jun 18, 2012 from Bryn Mawr, PA

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Ethan - in my opinion, short-term, the Greek election appears to have helped avert a potential disaster scenario as the results suggest less likelihood Greece will withdraw from the EU or the EZ. Long-term, it made little difference as the results did not provide a clear consensus government and do not resolve the more substantive issues facing the European Union and the Eurozone countries. There is still plenty of reason to be a cautious equity investor.

Comment   |  Flag   |  Jun 18, 2012 from Clinton, NJ

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Wow, Ethan! Why don't you ask a HARD question?!?!? I will give you my best answer. 1) Who knows for sure, but quite a bit of the down-side domestically has already been "baked in", apparently. 2) Spain is likely a bigger driver of uncertainty right now, but Greece is keeping this issue off of the front page. 3) It is possible that the Euro-Debt Crisis is worse than we think and that would be a drag on US markets, overall. 4) I don't think this a tradeable event(at least I'm not good enough to do it). 5) The good news is that these events may be the wake-up call our country needs to dramatically change this country's trend toward bigger government, and that change would be a hugely important positive stimulus to the equity markets. In summary, I'd advise against trying to trade these events and manage to your needs. Look for strong balance sheets, positive dividend histories, limited European exposure and be "tough". Also, I would suggest finding a few different sources for information to educate yourself. Do not depend on the network news agenies soley when making your decisions. I hope this helps you.

Comment   |  Flag   |  Jun 18, 2012 from Columbus, GA

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