I think I got this down. By “this” I mean the strategy used by policy makers to feed news to the beast, a.k.a Mr. Market.
First you let the beast hungry. You actually taunt it a bit. You can do this either by just ignoring it or giving it the impression that all food is gone and this is the end or just showing it the food. In the relationship between EU policy makers and Mr. Market all three options were used. We heard from them that Mr. Market should be ignored as it is known for his irrational fits. Or policy makers played into his game and actually mentioned Plan B and beyond after Greece’s departure. And finally they always kept the main idea somewhere in the background that Greece cannot leave euro zone.
Very twisted game they are playing. But now I got it solved and I sure so have you. That is why I do not think it was a surprise yesterday that J. E. Barroso started to talk eurobonds and that Merkel-Sarkozy duo are “convinced” that Greece will stay in the euro zone. Of course their “conviction” does not come free, as otherwise would not be credible. It had to come together with this:
“But Mrs. Merkel and Mr. Sarkozy also stressed during the call the need for Greece to put into practice in a strict and effective way the already-agreed measures of its austerity program under a current bailout package, the spokesman, Steffen Seibert, said.
“That is a prerequisite for the payment of future tranches of the program,” Mr. Seibert said. “The Greek prime minister has reaffirmed the absolute determination of his government to take all necessary measures to put into practice given commitments in its entirety.” ”
Do you feel better now? Do you trust that all will be well?
I do not. This relationship between Greece and EU resembles more and more a marriage that has no divorce clause. It is just a matter of time until Greece will get fed up of being “bitten up” every day. It might not be able to officially “divorce” the euro zone but it can stop “working” for the relationship or just simply give up and leave.
And of course I do not expect the current rally in the markets to last more than few days. So, either take your profit or use the new level to enter the positions you might have missed the few times this year when you had the chance.