"When you are thwarted, it is your own attitude that is out of order." -- Meister Eckhart
While the U.S. equity market was having something of a party over the course of the holiday-shortened week, the European Union (EU) was entrenched in yet another series of issues that would seem to indicate just how tenuous the region's alliance might be.
Over the course of the last four days, the Bulls made up a lot of the ground they conceded for November, and as of Friday, the major indices remained only slightly mired in the red for the month to date.
Leading the charge to reverse the month's downtrend was the Nasdaq Composite Index (COMP), which ended up a stunning 4% on the week. The benchmark S&P 500 Index (SPX) also impressed, gaining 3.6% over the last four sessions. Finally, the Dow Jones Industrial Average (DJIA) shot up 3.4% over the same time frame.
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Technically speaking, Friday saw the Dow break above the psychologically important 13,000 mark for the first time since the November elections. Likewise, the SPX moved past the 1,400 line for the first time since Wall Street got bearish immediately following Obama's reelection.
One reason for the uptrend, beyond the current sense that the fiscal cliff issue might actually get addressed, is that investors appear to be buying into the idea that Greece will remain in the eurozone, at least for the foreseeable future.
This sentiment is no doubt influenced by the fact that over the course of the last few months, the Eurogroup, consisting of the Eurozone's finance ministers, seems to be pounding out an agreement that will allow Greece to actually receive the next tranche of bailout funds, $45 billion, that was conditionally promised earlier this year.
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Though there has certainly been the usual amount of high stakes bickering among the summit participants, particularly between the Eurogroup and the International Monetary Fund (IMF), the fact that the arguments seem limited in scope to specific conditions and dates, as opposed to broad-based rhetoric and accusations, may be seen as a positive sign by investors that Greece will get what they need to continue to function, at least for the time being.
But the rhetoric and accusations seems to have found a new home. At last week's EU budget summit meeting, deep fissures between EU member-states emerged, as a slightly different version of the global question of "austerity verses stimulus" moved to the fore.
Britain, an EU member that retains its own currency, and has indicated it has no intention of adopting the euro at any point in the near future, insists that the next EU budget is simply too big. The budget is slated to go into effect in 2014, and the number being bandied about to cover the cost of EU programs and operations is about 1 trillion euros. While the number is staggering, it represents just 1% of the EU's combined projected GDP. Still, it is a huge number, and one that is serving as a political hot potato for a number of the EU's political leaders.
Britain's Prime Minister David Cameron, for example, is insistent that British tax payers will not foot the bill for the EU's "increased extra spending."
A rising sentiment among the British electorate is one that questions the benefits of remaining in the EU. Though this debate has been ongoin to a certain degree in Britain for decades, it is now gaining traction, and as the country has retained its own treasury, its withdrawal from the EU would be far easier for it to accomplish than any country tied directly to the euro.
Keeping Greece in the eurozone remains an important effort for the EU, because once one country departs others could be expected to follow. The crack in the damn would be hard to patch.
On the other hand, a departing Britain, with the second largest economy in the EU, could create a deluge that might make containment most unlikely, perhaps even impossible.
Full disclosure: The author does not personally hold any of the ETFs mentioned in this week's "What the Periscope Sees."
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