This past Monday, the Dow Jones Industrial Average (DJIA) opened UP some 90 points, only to fall back within the first half hour–and closed the day down by just over 50 points. So, what happened?
The good news that started the rally was a 100 Billion Euro bail-out package for the Spanish Banks. But, then, that was much less than had been expected. So, as often happens, the market can drop on good news that was less than expected. Likewise, bad news can buoy the market if it is not as bad as expected.
There is a great article in today’s NY Times, by Jack Ewing and Paul Geitner, which provides good statistical background on the EuroZone Debt Problem, http://www.nytimes.com/2012/06/15/business/global/europe-braces-for-greek-vote-and-maybe-more.html?pagewanted=1&ref=business.
Personally, I believe that a true solution will not be reached. Also, with bail-outs already having been arranged for Greece, Ireland, Portugal, Greece and now Spain, the question is who will be left to do any future bailing. Remember that there are only 17 countries that share the common Euro Currency.
A key point about the bank capital problem, as noted in the interactive graphic in the linked article, is that the Bank Assets of many countries in The Zone is larger than the various countries’ GDPs. (Gross Domestic Product is the total of all Goods and Services produced by a couinttry.)
As always, it is good to consult with your Fiancnail Advisor, from time-to-time, regarding whether you should consider any changes at this time. Update him or her on your current risk tolerance, investment time horizon and any change in your personal situation.