Syriza Win

  

“The Greek people have given a clear, indisputable
mandate for Greece to leave behind austerity…..it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish”- Alex Tsipiras – Greek Prime Minister Elect – January 25th, 2015

Asian kicked off the week nervously as they were the first to react to the news of the Syriza win in Greece on Sunday. With all of the votes counted – it reveals that the leftwing ‘anti-austerity’ party has taken nearly half the seats in Parliament and cinched a deal with another smaller right wing party - also opposed to the economic policies imposed by the Euro zone – giving them a clear majority. The Euro plunges to an 11 yr low and although this win was not UNEXPECTED – the extent of the win is what caught the mkts by surprise.

Initial analysis suggests that this subsequent coalition with the smaller right wing party will only complicate matters – and this will only raise the level of uncertainty over the mkts until investors either become conformable with the idea that this too shall pass or not. If not – then look for volatility and a re-pricing of risk across the Euro zone. It will be curious to see the comments out of the ECB, the IMF, World Bank, Germany and other the Euro zone nations as this story unfolds.

So – will this new ‘young buck’ try to buck the system and lock horns with the establishment? Are we about to witness the Greek Spring or another Greek Tragedy?

In Europe this morning – mkts were under pressure but have now reversed course and are all trading higher as they are now getting a chance to react to the news….but again….put it in perspective please…..Yes the mkts today may be taking the news as a reason to hit the SELL button – but given the recent action of late – action that took some of the European mkts to new 7 yr highs – it is difficult not to see today’s action as just another reason for traders to take profits vs. a real shift in the broader longer term mindset.

For a change in ‘mindset’ we would have to see a pickup in volumes, we would have to see sellers being more aggressive or buyers being more picky – You would look for mkts to be lower by whole percentage points and this is not the case – at least not yet. As of early trading – European mkts are now stable. FTSE -0.59%, CAC 40 +0.063%, DAX +0.73%, EUROSTOXX +0.19% , SPAIN +0.35% and ITALY -0.08% – not signs of panic at all.

So Friday saw the mkts give back some of the ground they took on Thursday after the spike rally following the ECB announcement of their massive QE program. Again – in my note on Thursday – I did say that the mkts would test the 50 DMA (which actually was 2045) for resistance and soon after the opening – the mkt was banging its head on this level only to break up and thru to end the day at 2062. So was Friday’s action that unexpected? Not so much considering the rally on Thursday – giving traders the opportunity to take profits as the mkt now needs to fall back and test this same level for support…..and that is what it did on Friday.

After the analysts had a chance to digest the ECB news – the tempered schedule -March kickoff- along with some of the other details this gave the speculators reason to ring the cash register and book profits...

Now regardless of whether this will be successful or not - questions about the effectiveness of the program are already raising some other concerns and it is these concerns that will affect the longer term investor. The level of shared risk – or lack thereof – is something that Germany insisted on and without Germany ‘on the hook’ for this new bailout program, traders/investors ‘may not’ be willing to bet that each Eurozone country will be successful in managing their bailout risk as they implement new structural reforms. So this will continue to dog investors until we get more clarity from the Eurozone as a whole.

Here at home - January has been a volatile month - Stocks have tried to find stability in the face of weaker energy, a strengthening dollar, mixed macro data, softer earnings, a weaker Eurozone and the instability that could now be created by Greece.

Over the past 2 months we have seen the mkt fall 4 times only to try and correct yet the last two correction attempts have been weaker and weaker, suggesting that the mkts may come under some more pressure here in the short term as these issues play out.

For Europe - so much depends on how the ECB QE program gets treated. Will the banks selling bonds use the cash to buy up stocks like they did in this country (creating that disconnect between what the economy is telling us vs. what the stock mkt is telling us) or will the ECB QE buy those country bonds directly from governments, bypassing banks leaving the mkts vulnerable? That is the question…….. and here at home the focus now returns to the macro data and how the European QE program will affect the US economy and US multinationals. Many strategists are calling for more of a correction during the 1st qtr while others think the worst is now behind us.

US futures are under small pressure – currently down 5 pts at 2039…..as US investors/traders take a swipe at the news. Will Greece dominate the conversation or will US investors re-focus on earnings and macro centric data? This morning will initially cause a re-test of the 50 dma at 2045 – whether or not we hold depends on whether or not investors are comfortable with the new leadership and their ability to join the global cast on the world stage. Expect lots of chatter and biographical/professional/educational information about the new leader – born in 1974 - as the Eurozone now makes a stand.

Economic reports due out this week include: Dallas Fed Survey -exp of +3.2%, Later in the week - we get Durable Goods +0.4%, Ex transports at +0.6%, Capital Goods Orders - Non Defense +0.5% Markit US Services PMI of 53.8, New Home Sales +2.7%, Richmond Fed exp of 5. Wednesday afternoon brings us the FOMC rate decision....look for NO CHANGE.

Earnings today include: DR Horton, MeadWestvaco, Roper, Grainger, Norfolk Southern, Texas Instruments to name just a few. The week heats up as we move on with BMY, Corning, Danaher, DuPont, Lockheed Martin, United Technologies and Pfizer....

Pasta Faggioli

On this cold winter day and what is sure to be a very long cold winter night - I need some comfort food - so try the Pasta Faggioli. a vegetarian, healthy comfort dish - full of protein, fiber and low on calories....

In a saucepan - heat up some Olive oil. . Add a couple of cloves of crush garlic, finely chopped onion, celery stalks and carrots and pancetta. - sauté until tender - about 15 min or so. When soft add 1 can of cannelloni beans, one can of crushed plum tomatoes. S&P, and 3 cans of water. Bring to a boil.....then reduce heat to simmer and cook uncovered for 20 mins....you may have to add a bit more water to keep it a bit soupy.

In separate pot - boil a pound of elbow macaroni in salted water.....when almost done - strain - reserving the pasta water - then add pasta to the tomato and bean mixture. Now the pasta will suck up the soup...so if you need to add back some of the pasta water to keep it more soupy.... Add 2 handfuls of grated cheese - Parmegiana or Romano - adorn with chopped Italian parsley - stir and serve.


Buon Appetito.