Marc Cuniberti: Assessing aftermath of Greek bailout
The Dow Jones Industrial Average responded to the latest Greek bailout news by assaulting, then passing, the 18,000 level once more, the ninth time it has done so within the last year.
The market’s recent illness had been brought about in part by the fear of a Greek exit from the Euro currency block.
Up until last month’s capitulation, Greece had refused demands to continue down the path of austerity and higher taxes.
Greece has been mired in recession, in part brought on by the austerity measures required by the European Central Bank (ECB) for its last two bailouts.
Now, despite the referendum voted on by Greek citizens against further austerity, Greek authorities elected to submit to continued cutbacks to obtain a third bailout.
With its banks shuttered and its stock market in freefall, Greek Prime Minister Alexis Tsipras bowed to the demands of the ECB in lieu of finding out the alternative: how bad would it get without more funds and what the future would hold for the Greek economy by withdrawing from the Euro currency block altogether?
Markets worldwide had staggered in the face of a possible Greek withdrawal from the Euro, fearing contagion would spread to other indebted nations who might also threaten to withdraw should Greece leave, possibly defaulting on what it owed on its sovereign debt.
Much like the banking blow-up of 2008-09, many financial institutions had gorged on Greek debt because of its high yield, and if some or all of that debt went unpaid, the ramifications could mirror the same problems we saw when billions in real estate debt went up in smoke, almost bringing about a worldwide financial implosion.
Although relatively small in the grand scheme of things, the dominoes of a Greek default could echo through banking institutions everywhere, where if one institution fell, it could cause many more to do the same. With Greece’s capitulation and its subsequent bailout funds forthcoming, the problem seems solved for now.
However, many are claiming a real resolution has not been reached.
Greece may be back at the table again for another bailout, should current austerity measures not help them crawl out of the huge economic hole they have found themselves in.
Markets rejoiced at least temporarily, with the majority of indexes and markets soaring on the news.
Since then, the Dow has once again fallen back making its 10th penetration below the 18,000 level once again.
Only time will tell if we will witness a sequel of last month’s events somewhere down the road and how severe a consideration of another Greek bailout will once again affect markets and the Euro block in general.
This article expresses the opinions of Marc Cuniberti. He is an investment advisor representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. He can be contacted at MKB Financial Services 164 Maple St. #1, Auburn, CA 95603 530- 823-2792. Their website is MKBFINANCIAL.COM. MKB Financial Services and Cambridge are not affiliated.
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User Legend: Moderator Trusted User
The MEME stocks are on fire again. You remember these. My last article on the MEMEs was the called “The Game that is Gamestop.”