Greece Situation May be Resolved Today
First there was word of the referendum. After breaking to new highs in celebration of the fact that the EU leaders had finally gotten their act together enough to develop a credible plan to at least try and fight the contagion that was spreading across Europe, the announcement that Greek Prime Minister George Papandreou had arbitrarily decided to let the public vote on whether or not they really wanted the EU bailout sent the markets into a quick 5% tailspin. Suddenly, the fear of a “messy” Greek default was back on the table and it looked like the politicians were going to muck everything up.
But then there was word that the referendum would never see the light of day. It turns out that politicians tend to get pretty teed off when a public leader makes a very big decision without really consulting anyone. As such, political furor from across the continent rained down on Mr. Papandreou and his plan to let his people have a say in whether or not they wanted to be under the thumb of Germany, et al for the next decade. Stocks liked the idea that the powers-that-be would see to it that this idea never made it to the voting booth.
To the surprise of just about everyone closely following the Greek drama, we then got word that the PM was insisting on holding the referendum – and that the politicians in Greece were buying it. Needless to say, this didn’t sit well with the traders in New York who were apparently peeved that their hoped-for year-end rally in stocks had been hijacked by a bunch of politicians whose names they couldn’t pronounce in a country with an economy the size of Denver’s.
But as any good playwright would appreciate, there was yet another twist or three to this dramatic production. There was shouting, fist-pounding, threats, denials, and of course, some good ol’ fashioned political gamesmanship. As a result, trying to decide what to do with your stock investments this week came down to a question of will they or won’t they (hold the vote, that is)?
Four days and countless swings on the DJIA later, word finally made its way from Athens that the parties had struck a deal. Papandreou is out, the bailout is in, the referendum is dead, and everybody seems happy. Well, assuming that Mr. Papandreou’s government, which, of course, is to be basically dissolved, can win a confidence vote set for Friday. Huh?
Yea, I know, it is tough to make complete sense of this situation. But if you want to understand what’s driving the stock market, then you’ve got to stay on top of all the Greek drama. So, here’s the way it is supposed to work (unless of course they decide to change the plan before I awake tomorrow morning at 4:30 am). Cutting to the chase, Papandreou has cut a deal with his political opposition. He has agreed to step down as Prime Minister and to let a non-political interim government run the show until the EU bailout deal is passed. After that, his political opposition is free to hold elections. But first, Papandreou has to win that confidence vote.
So, while it is tempting to stand up and shout, “Can we PLEASE move on now!?!” there is at least one more scene to sit through. Here’s hoping that the 300 politicians involved in the Greek confidence vote do what they are expected to do and vote “yes” for a guy they desperately want to kick out. You really can’t make this stuff up.
Turning to this morning… As world markets have now adjusted to the idea that the Greece situation is likely to be resolved later today, all eyes are now focused on the Jobs report in the U.S… so let’s get to it.
On the Economic Front… The labor department reported that nonfarm payrolls increased by 80K in October, which was below the consensus for +93K. However, the unemployment rate dipped to 9.0% from 9.1%. In addition, revisions to the job totals from August and September saw a total increase of 102K jobs.
David Moenning
Editor: The Daily Decision
