Author: Gregg Gib
oney, CFA, Timberline Investment Management
Covestor model: Dividend and Growth
The issue of a Greek exit from the Euro has gained further altitude with hints that plans and expectations are being made for such an outcome.
Rumors that Greek officials have discussed an exit plan have been denied, but the German Bundesbank has outwardly stated that a Greek exit is manageable.
Greece has scheduled an election for a new government on June 17. This will probably be a pivotal event to determine if Greece will go along with or defy austerity commitments that were part of a comprehensive agreement to receive substantial European aid.
If current indications hold, it is looking likely that the Greeks will turn away from the austerity commitment.
As much as austerity is making life difficult, Greeks are being further harmed by declining business and tourist activity associated with currency risk concerns.
Given the lack of commitment to austerity plans, it appears more unlikely that the European Union can go along with any new plans or proposals. The momentum of thinking in the markets appear to be heading this way too. With this, we have weak equities, with markets anticipating the disruptive potential of a Greek exit.
Also adding to today’s difficult market were weak results from Dell (DELL). Dell is a major tech company but it is not the player it used to be so I don’t think Dell earnings should be treated as an important indicator of business conditions in technology.
The last point I wish to mention is that this year appears to be playing out much like last year with the Greek issue and some signs of seasonal economic slowing. The overall economy appears to be maintaining a slow growth trend with housing showing modest signs of improvement with some developing declines in commodity prices that could be helpful over time.
It is always tough to say if the market has fully anticipated the mentioned negative elements. But it is worth noting that the news flow is clearly negative and that positive perspectives are tough to come by.
This is the type of scenario that can be a favorable setup for the market. But it may take some time.
As always, thank you for your business and interest in Timberline Investment Management.
Gregg Giboney, CFA
