More Pain Ahead
We passed the Greek Vote. Great news, but is the future all bright now? The Greek quick fix, is just a short term solution, so the country can survive and pay interest on it’s debt, for some months to come. The Greek mess, both Economics and Politics, is not solved at all. The total lack of growth, and the monstrous debt of Greece, will ultimately force the country to default on it’s debt. Expect some lucrative bargains in this autumn’s fire sale.
With the SPX reaching our short term target, 1305/1310, we expect a pause in this 4 day rally we have seen. As thetrader argued last week, Spx rally squeezes out the last bears? and Charts That Matter, we had reached good support levels in the markets, and “had” to bounce, especially with the Dumb Money Indicator showing a too pessimistic bias in the market.
Don’t forget though, Greece is not our biggest problem…..
The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.
Graph; The Economist