Looking for a Wild Monday. This too Shall Pass.

July 5, 2015    9 pm

A couple weeks ago the option of the Greek people directly deciding the direction of the financial negotiations with their creditors wasn’t even an option. In hindsight they elected a government who committed to end the citizens pain and suffering (somehow–someway) so it shouldn’t be a surprise that they have voted to reject the most recent bailout terms from the ECB. Honestly we think this may turn out to be a positive–maybe it will bring this all to a head sooner and get a realistic deal done (or lacking a deal outright bankruptcy). Let’s face it the ECB, IMF and any other creditors are going to have to write down some debt, stretch out the terms and lower interest rates to very low levels–anything lesss will simply be a further kicking of the can down the road. On the other hand there simply has to be more pain in Greece–the welfare state can’t be maintained even if a deal is done. Whether a deal gets done or Greece falls into outright bankruptcy there will be plenty of pain for the Greek people.

So we already see that tonight U.S. stock and bond markets are moving sharply–stocks to the downside (around 200 points) and bonds to the upside (yields are down 10 basis points).  Pretty much what we would expect to see.  Currently EU finance ministers are scheduled to meet on Tuesday and again the uncertainty of the future is with us–will it be for a week or will it be for a month? The uncertainy will likely move share prices down with little chance of a rebound until there is a resolution (or at least the perception of a resolution) and then we will see a sharp, short term move higher.

As we have mentioned time and again there is nothing we can do short of being in 100% cash during this uncertainty and there is no chance this will happen.  We have a hedge in place that will offset some portion of losses that may come with the current situation and that is all we can or will do.

We will focus on the positive of any setbacks that we incur now–those positives are that more potential bargains may be created and with reasonably good cash positions we can take advantage of them.