Ahhh, it’s those old Greek worries again!  Yesterday they were blamed for undoing a nearly 150-point rally in the Dow, although the question of what had caused the rally to begin with seemed of little concern. We’ll proffer the usual, technical explanation: Yesterday’s ups and downs were driven entirely by mechanical factors – more specifically, by algorithm-driven machines with nothing on their tiny digital brains but a bunch of zeroes and ones.  And if they had a smattering of human help, the humans were wont to apply the same tried-and-true tactic that has carried the day for the hedgies time and again in recent months – i.e., letting the index futures fall on thin volume, exhausting sellers overnight; then, goosing said futures into a short-squeeze panic ahead of the opening bell. 

Would that Greece were driven by algorithms and polymath dervishes!  Granted, this wicked combination could send millions of Greeks into manic-depressive spasms and suicidal lows. But, oh, just think about those highs — just like the ones we thrill to nearly every week on Wall Street, where even the glowering menace of a Second Great Depression evidently cannot kill the insensate ardor of buyers.  So, if 300-point Dow rallies are still possible, why hasn’t the same kind of exuberance seized the proletarian mind in Athens?  The answer, of course, is that Greece’s ups and downs are driven, not by “technical factors,” but by the grim realities of a failing economy.  Greek businesses cannot get bank loans to tide things over while their customers try to scrounge enough cash to redeem their IOUs. This has set the economy on a downward spiral from which no exit is possible. In the meantime, a Europe desperate to save the euro and a political union that has been dreamt about for a hundred years, has imposed on Greece a regimen of austerity that can only hasten the nation’s psychological exhaustion and eventual default. 

Belly Up for Greece 

Has this outcome been factored into “the markets”?  Yes and no.  While it would appear that nearly “everyone” expects Greece to go belly-up, and soon, no one can predict whether this will generate the tsunami that takes Italy and Spain (and France?) with it. For their part, traders seem to have taken the Zen attitude that we shouldn’t worry too much about things we cannot change. And although only a handful of bureaucrats in Belgium and a few ivory-tower eggheads would maintain that Greece is not about to go down, we’ll have to wait and see whether The System survives the shock.  No question that the markets have been extremely volatile, reflecting the nervousness of traders and speculators still in the market. But if these bold players were to reflect for more than a haphazard moment on what is likely, let alone possible, the Dow would be trading 5000 points lower in a trice. 

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-- Posted Wednesday, 21 September 2011 | Digg This Article