Germany gets her way and enslaves the Greeks
Paves the way for markets to go higher this week
When you read news articles this week you will read that the Greek parliament succumbed to the E.U.
It is a misprint.
The Greek parliament succumbed to Mario Draghi and the German Union. Anyone telling you the European Union is a group of independent states come together for common economic good has the blinders on. The European Union was fraud and always has been. It was set up so the strongest state in Europe could survive and thrive in an environment where the only thing common about the European Union was the currency and common trade between countries. Germany has had a decided advantage over the rest of Europe operating in an environment where the only thing that changed was a much weaker than normal currency for trade in allowing German industry to flourish where it once had to compete against high the high cost of exports. When the EU came into fruition, it gave Germany overnight a decided advantage over the rest of Europe. Just over a decade later and Germany is on the verge of controlling 3 European states….Greece, Ireland and Italy. When Germany runs your country, you are in for some pretty severe times while they try and streamline a nation’s economy like 20% cut to the minimum wage. The Germans live in a country with no minimum wage.
So would you expect any less?
I have no opinion on how minimum wage affects the economy. It I do know is that minimum wage raises the standard of living for the poorest people in society. Canada has one of the highest minimum wages internationally while Germany has none. Greek minimum wage is not the problem as the dutch have double the Greeks minimum wage and is 66% of those in who live in Canada.
Super Mario…? Suuuure… The bond vigilantes were his dogs.
Someone give this guy a medal for calling off his own dogs. Where some are calling Draghi Super Mario for supposedly arranging financings that got rates down in the peripherals, we all know better at Beat the Market. As soon as Germany had her German Sachs people in place in the Italy, Greece and the EU. The bond vigilantes suddenly disappeared. Coincidence? I don’t think so.
Nice to know you can hire out rouge American financial institutions out to target your enemies’ financial paper and force them to into submission.
This is 21st century warfare and you just saw the 21st century of financial blitzkrieg across Europe, done by none other than the German Sachs, and the Goldman Union.
The good news with the Greeks passing their austerity measures to secure payments is that markets can now ignore Europe and let them muddle in mess while the rest of the world returns to growth.
What depresses this picture even more is you don’t like the way Germany is going about taking financial control of Europe, but after it is said and done and if countries like Greece survive the pain, there may be economic benefit to being ruled by a country like Germany who gets what it takes to be a leading global economy. There will be benefit from having streamlined economic policies, something Greek politicians refuse to do.
The even better good news… No one really cares as long as Europe remains a stinky smelly pile of poo across the sea.
Let’s just applaud Germany for finally doing what they couldn’t do 100 years ago and give them even more kudos for not using tanks this time.
Trading patterns (Algo) indicate typical bull market activity
One thing I have noticed in this market is a strong pattern of selling worries and news and then having the market grind higher. This is a typical bull market sell-off. The underlying fundamental scream you want to be long this market and the action confirms… sell the jitters and buy the reality. There will be no liquidity event in 2012.
This market remains extremely cheap with the US markets in a recovery mode and China about to bottom…
A china bottom is what we are waiting for on the TSX and materials stocks. Without a China bottom, the TSX will never have the 1,000 point premium it commanded less than a year ago for the last 5 years.
The TSX remains a screaming buy. I don’t expect the TSX to lead the market anytime soon as the American markets are doing that leading the recovery, but I do see very good value on the TSX. The TSX has traded a premium to the INDU and I expect that premium will come back as commodities come back in vogue. This won’t’ happen until China starts heating up, but the smart money has been driving many copper stocks back up in January meaning that someone is expecting a Chinese recovery. Is Doctor Copper right? With copper stocks leading the way in 2012, many are expecting a bottom in the Chinese markets.
For now, momentum remains firmly entrenched in the US markets with investors searching for yield, value and growth, which there is a lot of it in the American markets at the moment.
With the S & P 500 at record earnings and the lowest multiples in the last decade except for 2008, a higher multiple for the markets will drive this market to and through a breakout this spring. A multiple which I think this market deserves at this point in the US recovery. Currently the market receives earnings multiples of 13 times earnings which puts the SPX at around 1350 for the year. Just on increased earnings multiples to 14 or 15… that alone could see our markets hit 1400 to 1500 by the end of the year if the US recovery continues to pick up steam.
46% of companies’ earning’s misses a sign of capital spending and hiring… not an economic slowdown
One negative sentiment I see in the headlines is that companies are not beating this quarter estimates like they did in last few quarters for which some bears are taking as evidence of a turnover and a top in the markets. I see things much differently as both hiring and capital spending will eat into the bottom lines of corporate profits. So for some who say there is evidence that we are at a top… I say this is evidence that we are finally seeing the long awaited jobs recovery and capital spending hit the books. This is good and will reinforce another 12 to 18 month bull market. After all is said and done it’s not earnings beats that drive the economy and GDP growth, it is hiring and capital spending. With the USD at relative lows compared to global currencies and rising labor costs in the developing world. The outsource decision is often not a choice and what you will see in over the next decade is companies repatriating profits and focusing on spending in the US with the USA being much more competitive manufacturing block than it has been in decades.
Technically speaking…
This market wants to go higher. Everything the markets is doing, points to a major breakout this spring. One point that I didn’t realize that Eric Coffin was kind enough to bring up at the World Outlook Conference… this is a sell in May year and not one that will be affected by the typical PDAC March curse. One factor that changes the habitual selling in March is the fact that there were not many private placement financings last fall meaning there will not be many free trading shares that financiers are looking to dump on the market.
December saw a definitive break in downtrend in North American markets. It saw a cup and handle formation and the US markets and an inverted head and shoulders on the TSX. These two patterns developing in early December gave me confidence to expect a break in trend which happened before Christmas. We got our continuation pattern and now markets are set to really rock and roll.
This is a typical bull market - An End of the World Bull
These markets will continue to grind higher and climb that wall of worry. This is a bull market to end all bull markets in 2012 and this is one run you don’t want to miss out on. 1,500 on the S&P is a reality and I would be surprised if the SPX doesn’t break that number by Q4. It’s the type of market where you put any and all extra cash at work. Put a second mortgage on the house, sell your kids, rent out your wife… do anything and everything to get as much cash in this market. Did I just say rent out your wife? Yes. Conditions and setups like these don’t happen too often, so do anything you can to get invested wtih as many dollards as you can and stay invested in this market this year… Once the SPX 500 breaks out of current 1350 resistance, 1,500 is a real possibility. It’s what I am calling an End of the World Bull (I got in trouble for calling it a ‘pimp your wife bull’.) It wouldn’t be the end of the world without the end of the world bull.
When Armageddon comes in an end of the world bull… you want guns (technology metals), gold (copper, silver, platinum, palladium) and groceries (potash and phosphates.)
It’s an end of the world bull and in this type of market you can buy any ‘ol’ $0.03 or $0.05 stock and you are bound to make money. |
