Get used to it
Wall Street reacted to fears about Spain and the new possibility that maybe Greece will be dumb enough to vote for a party that will take them out of the eurozone.
Dumb enough? With unemployment at 22 per cent, wouldn’t anything be better than what the Greeks have now?
Well, no, the alternative was painted in a picture by the central bank of Greece. This is what it came up with if the country voted in a left-wing government, which ditched the euro. Try these:
- Greeks’ annual incomes would be halved.
- The new currency would be devalued 65 per cent.
- A financial contraction of 22 per cent and this would be on top of the 14 per cent of reduction of GDP, which has happened over 2009 to 2011.
- Unemployment would go to 34 per cent.
- And inflation would go from two per cent to 30 per cent.
I reckon it’s better the devil you know than the one in the deep blue sea of a new age drachma.
So, what’s going on?
The Dow dropped 160.83 points or 1.28 per cent to 12,419.86 while the S&P 500 gave up 19.1 points or 1.43 per cent to finish at 1313.32.
This was driven by eurozone fears and a bad housing number. Pending home sales slumped 5.5 per cent in April but the experts tipped a 0.1 per cent gain. Last month the figure was up 4.1 per cent.
The new fear today was Spain and its banking problems but it also came as the European Union (EU) says a banking union, eurobonds and measures to boost growth are needed. This didn’t help and we will see these swings over the next few months. The really big shows will be the Greek election on 17 June and a couple of weeks later there’s a crucial EU Summit, which will set the course for the eurozone in the wake of the Greek election.
For the rest of the week the US will look closely at economic data with the jobs report a biggie for the market.
In case you’re looking for some early relief from this high anxiety, I have a few words of advice — get used to it.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published: Friday, June 01, 2012blog comments powered by Disqus