Tuesday, July 28, 2015 01:50am
North Adams, MA now: 66 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
@theMarket: One Down, One to Go
By: Bill Schmick On: 01:26PM / Saturday July 23, 2011

On Friday, the European Union announced a new $157 billion bailout plan for Greece. The scope of the plan went much further than most investors expected. It promised to finance all countries that need bailouts for as long as it takes for them to recover. There's more.

I refer to the new plan as the "Full Monty" (see my column "Europe Goes the Full Monty") because it is the first time in the 18-month long crisis that European leaders were willing to draft a comprehensive approach to the financial crisis among the PIGS (Portugal, Ireland, Greece and Spain).  The plan will be proactive in heading off any further financial contagion among its members while fencing in those that already are in trouble (Portugal, Ireland and Greece).

The deal does allow for a "selective default" in Greece, where some but not all of its debt will be written off or renegotiated at lower terms and lengthened maturities. The plan does not go as far as I might have wished but in the real world of European politics it appears the best that they could do. In my opinion, the crisis appears, if not over, to be at least contained for now.

That crisis is one of two large clouds that have been hanging over the markets for months. The other bailout issue is in our own backyard. And, as I suspected, our elected representatives are stretching out the tension as long as they can. Both sides are glorying in their extra media attention, using their 10-15 seconds of sound-bite glory to appear concerned, tough and "on your side" (while raising as much additional campaign funds as possible for next year's elections).

Here are a summary of client questions and my answers this week on this on-going travesty:

"Will the debt ceiling be raised by the August 2 deadline?”

I'm betting yes, but that still leaves 11 days of volatility in the bond and stock markets.

"What will happen after the deadline, if the ceiling isn't raised?"

As I wrote last week, the markets will decline in the short term, presenting a buying opportunity for anyone brave enough to venture into equities.

"Will the Gang of Six deficit-reduction plan be passed?"

I suspect some version of that plan will be passed but the question is when. The Republicans want to prevent any legislation that might improve the economy or reduce unemployment until after next year's elections. They hope voter frustration over the economy will propel their party's candidates into office and defeat a re-election bid by President Obama.

Unfortunately, the nation's financial credit agencies are not cooperating with the GOP timetable. They have made it clear that without a serious, comprehensive deficit–cutting plan in the ballpark of $4 trillion or more, they will cut the U.S. debt rating. I suspect we will be on "credit watch" until a deficit reduction deal is passed, which means that we will be assaulted by this back-and-forth bickering for some time to come.

"If and when the deficit plan is passed, can we go back to whatever normal is?”

That depends. I believe that cutting spending and raising taxes in an economy that is struggling to gain momentum exposes this recovery to extreme danger. Cutting spending too deeply while raising taxes too much (and shrinking the money supply) is exactly what nipped a fledgling recovery in the bud and sent the U.S. economy into a depression in the '30s. Ask yourself this question: do you feel confident that a bunch of madmen in Washington have the ability to strike just the right balance in order to grow the economy while reducing the deficit?

But let me worry about that. It will take weeks, if not months, for such a compromise to be worked out. In the meantime, this last storm cloud appears to be moving to the edge of the horizon for now. I expect some real progress on a compromise next week.

The economy may be inching along, but corporate profits are booming. This earnings season so far is seeing the vast majority of companies beat earnings and increase guidance. This debt crisis is repressing what should be a buoyant stock market. Like a coiled spring, stocks are just waiting to bounce higher. If and when the debt ceiling is passed, that will happen.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.



0 Comments
Tags: Greece, PIGS, bailout, Europe, deb ceiling      
News Headlines
Gilbane Awarded Contract For New Taconic High School
Adams Lions Spreading Word on Activities, Vision Care
Bopp, Alibozek Lead Team to Narrow Win
Local Author Publishes Book On Northern Berkshire Trains
Clarksburg Cemetery Stones Being Repaired
Brewing Boomed In Pre-Prohibition Pittsfield
Local Lawmakers Push To Override Baker's Budget Vetoes
LaFesta Baseball Exchange Marks 25 Years
Potential Disruption of Mount Greylock Renovation Raises Concerns
Renovated Pittsfield Common In High Demand

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (175)
Independent Investor (237)
Archives:
July 2015 (5)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
Tags:
Federal Reserve Recession Stimulus Retirement Pullback Election Selloff Fed Interest Rates Housing Economy Markets Taxes Banks Debt Energy Crisis Europe Congress Stocks Oil Bailout Deficit Metals Europe Commodities Currency Euro Rally Japan Fiscal Cliff Debt Ceiling Greece Stock Market Jobs
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
The Independent Investor: Are You Ready for El Niņo
@theMarket: O Ye of Little Faith
The Independent Investor: When 'No' Means 'Yes'
@theMarket: Global Markets Weather a Wild Week
The Independent Investor: Same-Sex Marriage Good for Business
@the Market: Second Quarter Earnings on Deck
The Independent Investor: Tiny Houses Gain Appeal
@theMarket: From Russia With love
The Independent Investor: Robo-Advisers Have Landed
@theMarket: Don't Try to Trade This Market


Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
Gather-In Festival 2015
The annual Gather-In, a celebration of Pittsfield's...
'Romeo & Juliet' @ Pittsfield...
Free performances of 'Romeo & Juliet' run through Aug. 2 at...
LaFesta Baseball 2015
The LaFesta Baseball Exchange marked its 25th anniversary...
Bulldogs Win Cal Ripken State...
The Lanesborough Bulldogs used a big base-running play to...
Spark @ Naumkeag
Berkshire Creative held its July Spark mixer at the...
LL: Pittsfield vs Longmeadow
The 10- and 11-year-old Pittsfield National Little League...
Pittsfield Polish Picnic
St. Joseph's Church in Pittsfield hosted the annual Polish...
Pittsfield Babe Ruth WMass...
The Pittsfield Babe Ruth 15-year-old All-Stars beat Holden...
Shire City Sessions July 2015
The inaugural Shire City Sessions drew a crowd to hear US...
3rd Thursday June 2015
Pittsfield's 3rd Thursday monthly street fair featured...
Cheshire Block Party
Cheshire's first Block Party featured live music, food,...
Berkshire Museum Science...
The Berkshire Museum in Pittsfield hosted a free evening of...
Pittsfield Rally Against...
Residents gathered at Linden Street to call for community...
Eagle Street Beach Party 2015
A few shots from the annual beach party Friday night in...
Live On The Lake Concert
Burbank Park on Onota Lake in Pittsfield. The band Who Are...
Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
Gather-In Festival 2015
The annual Gather-In, a celebration of Pittsfield's...
'Romeo & Juliet' @ Pittsfield...
Free performances of 'Romeo & Juliet' run through Aug. 2 at...
LaFesta Baseball 2015
The LaFesta Baseball Exchange marked its 25th anniversary...
Bulldogs Win Cal Ripken State...
The Lanesborough Bulldogs used a big base-running play to...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement