It’s been two years.
And the Greek debt crisis is still a problem. It hasn’t gone away.
In fact, the problems are bigger.
It has led the two biggest Eurozone members – Germany and France – to show serious concerns about the debt.
Over the past two years, more than €110 billion has been ‘thrown’ at the problem.
Yet, it still won’t disappear.
The latest attempt to solve the problem was an emergency meeting held on Thursday night. This ended with the Eurozone countries agreeing on another €109 billion in ‘bailouts’.
Yeah, that’ll fix it!
According to yesterday’s the Age:
‘The news has come as an enormous relief to global markets, which have watched the unfolding European debt crisis with increasing concern.’
The ‘enormous relief’ translated into a buying spree.
One look at the major indices in the US shows you the markets clearly liked the bailout:
Source: Google Finance
And it’s not just the US that loves a bailout. The FTSE finished Thursday 46 points higher… after spending most of the day almost 1% down.
But Slipstream Trader editor, Murray Dawes warned his readers this might happen before the bailout announcement:
‘My best guess is that any plan they come up with may see some knee-jerk buying.’
Murray knows the markets. After all, he’s been trading for 20 years!
The agreement to give Greece more money pumped up the markets. But not one to follow a trend, Murray’s already thinking ahead:
‘Whatever plan they have dreamt up will decide the direction of our markets for the foreseeable future. I really want to stress the fact that I am still very wary of the future direction of this market.’
Be cautious about the rally
Murray is cautious for good reason.
The past two years has seen so much fiddling from central banks that it’s distorting the market:
‘Without the constant intervention in the markets I believe we would be trading at much lower levels. If the politicians lose control of the situation then we could quite literally see the markets drop like a stone.’
So, how can you trade the market when the government uses it as a toy?
Murray tells his readers he’s ‘…found the trading environment over the past year one of the most difficult I have encountered.’
Yet that hasn’t stopped him trading.
But tough market conditions require tough and disciplined trading.
The market is easily upset these days. That’s why Murray is trading to take advantage of either side of the market.
But it’s not good enough just to be ready for the market’s swings. You’ve got to have discipline. And you’ve got to know when to exit.
The key to that is managing risk.
If you’d like to get an insight into Murray’s trading strategy for volatile markets, click here to see his free market video update…
Will America be the next to default?
Greece isn’t the only one falling behind.
America is only a week away from defaulting on its debts. You see, the major parties are deadlocked on whether to raise the debt limit. The country already has a debt of $14.3 trillion.
Yet that’s not enough. They want to go into more debt!
The thing is, if America doesn’t increase the debt ceiling the U.S. will default on its loans.
This could be history in the making. America has never defaulted.
But that’s not the only bad news.
Even if all the politicians agree on a debt limit before the 2 August deadline, according to Bloomberg News, ‘Standard & Poor’s have warned there is a 50% chance it will lower the U.S. government’s AAA credit by one or more levels with three months’.
From AAA to…
A drop in the credit rating for the U.S. would rattle the markets.
Christian Cooper is the head of U.S. dollar derivatives trading at Jefferies Group Inc. in New York. His firm is 1 of 20 primary dealers that trades with the Federal Reserve. He told Bloomberg News:
‘It’s an entirely new world that we would be in to even consider a downgrade of U.S. government debt. This is something that would fundamentally change the market’s perception of not only U.S. government solvency but how risky assets around the world are priced as well.’
Both the Greek-debt crisis and the possible default in America have proven one thing. The financial system is fragile.
In the latest Sound Money. Sound Investments, editor Greg Canavan wrote, ‘The market is slowly beginning to realise the post-WWII system of finance is unravelling.’
He goes on:
‘The production of money has become the economic go-to tool. It’s the only response governments have left [after] decades of debt. The problem is it hasn’t worked. It has made things much worse.’
In his letters to subscribers, Greg focuses on sound money principles to investing. In fact, he considers Sound Money. Sound Investments a tool that ‘offers a framework for investing and managing your portfolio in a post-credit investment environment.’
For too long now governments have intervened in the markets. With the intrusion reducing your wealth.
Unfortunately, there’s not much you can do to stop governments playing with the markets.
Shae Smith.
Assistant Editor, Money Morning
