Wednesday, May 16, 2012

Greece Vs. EU catfights = good entry opportunities

The cat fight between the EU and Greece is likely to continue for a while, and the ensuing market dips should continue to provide good entry opportunities for long term investors.

Greece is already going into another round of elections early next month, and this is causing the markets to become anxious. Irrespective of the results of the election, that anxiety is going to continue. And each new bout of sparring is likely to cause a nice market dip and a good opportunity to make an entry.

Greece has dug itself into a hole from which it is nearly impossible to emerge without a severe battering. With debt at 160% of GDP, an economy in severe recession and a quarter of the population unemployed,it needs serious and painful therapy. Greek politicians, rather than take the blame by executing the EU dictac, would probably prefer to exit EU and blame EU/ECB for the all the pain.  Whether it exits or not, the cat fights and saber-rattling will continue for a long time to come.

As for global economies, barring Eurozone economies, most of the world’s economies are in various stages of bottoming out and recovery.

And what about India – well, India too is in a slow and steady recovery mode. Many folks seem to have been spooked by the negative 3.5% IIP numbers. But those concerns are largely due to their being driven by an incorrect interpretation. IIP numbers are tracking a very normal pattern of recovery, not one of contraction.

This scenario of good fundamentals combined with unjustified fears is an ideal situation for long term investments.