February 5, 2012 Comments

Stocks are off to a roaring start in in 2012. The Dow is up 5.3%, the Toronto Stock index is up a similar 5.2% and the S&P 500 is up 6.9%. Our six Strong Buys are up an average of 7.4%. My own portfolio is up 4.7%. ( I have been taking some profits off the table and have some cash, but I am certainly not unhappy with a 4.7% return in five weeks.

Talks to voluntarily restructure Greece’s debt continue. I fully expect these talks to fail or at least to eventually lead to an official default by Greece. This will likely cause a temporary hit to North American markets. (Or it could cause a small rise if it is successful or even appears to be successful this week). I imagine that somewhere a hedge fund is accumulating Greek debt on the cheap and will refuse to accept the 50 cent offer and this will force Greece to officially default. I don’t see much up-side for any investment fund to voluntarily accept 50 cents. And also some of these investors have credit default options which will protect them from losses on the Greek bonds. But they apparently give up that protection if they agree to accept 50 cents. That seems like a ludicrous scenario.

 

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