In my last piece I wrote that Greece and
Europe’s issues remain the centre of
attention right now and the source of all market confusion. Europe
didn’t start this financial mess though to be fair, it all originated
in our side of the pond…American banks and institutions laid the
groundwork for what would eventually become a global economic tsunami and it
looks like the waters have reached the shores of Europe.
I didn’t write about the deal
brokered last week because I wanted to analyze it. That deal, like the 15 or
so brokered before it (I’ve literally lost count and don’t care
anymore because they are all meaningless at the stage of the game) gave the markets
hope. The Euro rallied, risk based equities rallied and financials were given
a momentary reprieve of selling.
The overnight news of Greece’s
plans though have sent the markets reeling today.
For those that just got up, Greek Prime Minister George Papandreou decided to
put the latest European Union bailout deal for the country to a public
referendum. European leaders must of had a collective “What the
F*#K” moment as they read that headline.
Greece is a nation full of citizens that
have been protesting against austerity, debt relief, IMF and EU bailout
involvement and now Papandreou wants to put the bailout vote to the people?
That tells me there is something in there that he doesn’t like that may
very well turn out to be the selling out of Greece. I, along with others have
to be scratching our head as to why a man who has pushed everything he could
down his citizens’ throats has now come tot he
realization that this latest deal should be put to his electorate to vote on.
As would be expected, this has now
significantly increased the risk of a forced and disorderly sovereign default
and even the risk of a Greek exit from the euro. Fitch rating agency said the
decision “dramatically raises the stakes for Greece and the euro zone
as a whole.”
Ladies and gentlemen … we may very
well see the fate of Europe come down to a vote by the people of the nation
that gave us democracy. A note vote and we may get the financial Armageddon
that the doom crowd has been hoping for. However, look at both gold and silver.
Both down significantly today. This is why I continually warn people not to
buy the metals for doom and gloom but to buy them as a long term store of
wealth and a hedge against inflation…not a hedge against financial
chaos. As I have mentioned in the past…when the shit hits the fan,
every asset class will be sold.
This news changes the landscape in
Europe in a significant way. WE all know that the people of Greece have long
wanted the bankers to leave and to have their own nation solve their own
problems. The true motive behind Papandreou’s decision is still
unknown. But as I expected when the news of the deal first came out, the
celebrations among Euro leaders wouldn’t last long. History was my
guide. This deal took just 5 days to become unglued. It lasted longer
than any of the dozens prior