Update on Greece ...

Greece's election may have created more questions rather than providing answers to the ones that came up in the May elections.  The more conservative New Democracy (ND) edged a win over the radical left, SYRIZA.  Basically, the pro-bailout barely beat the anti-bailout, which means Greece has some more time to remain within the EZ.  However, ND does not yet have enough seats in the parliament (needs at least 151).  It will likely form a coalition with PASOK and maybe even with the Democratic Left to get the 151 seats.  Many believe such coalition is likely.  It has to be done within the next three days.

We listened to a conf. call which took place in Europe this morning, and it was stated that although such coalition will take place, the new government may not be able to do much to address the growing economic and political issues, as the parties and their leaders within this group have been rivals for around 40 years.  Greece will likely just be given more time, but the final result, whether it takes place tomorrow or next year, will be an exit from the Euro. 

At this time, based on lower U.S. equity futures, it appears that although Greece's election results were not the worst, the markets do not welcome those results.  This could go along with what we mentioned last week, which is that the market may have priced in risk-on actions that the ECB and/or the Fed would take if Greece's election results turned out to be very frightening.  So, now the market is looking for more bad news to convince the central banks (CB) to reach out and help again ... and again.  The CBs are looking for a big crash to justify more intervention, but given that the market expects intervention in case of a bad crash, the crash that may come along may not be that bad!  Confusing, eh?  This is the psychological hold that the CBs and governments have over the market.

Lastly, we must note that the meeting in Moscow between Iran and the other five nations was discussed on that conf. call.  It appears that many believe those talks will fail, which will result in a higher likelihood of an attack on Iran before the U.S. elections.  We do not want to get into all the dirty politics that surrounds this issue, but must say that we are amazed that given the current uncertainty about the U.S. economy, the U.S. government would actually take steps that would push up oil prices and create more pressure on its consumer-driven economy.