Good morning,

Despite the Greek talks stalling and the dire warnings from the IMF which are headlines in today’s papers,the overseas markets were remarkable quiet and not too bad all things considered…strange!

One thing that is happening around the World is volume in markets is drying up even the good ol’ US of A is suffering..looks like the mutual funds withdrawls from last year are biting..So where to from here? That is the question!

I must admit I am getting slightly worried about the state of the markets and the apparent sanguine attitude that investors are taking to the barrage of bad news (VIX still 19% yet we are on the cusp of a Great Depression?)..there are two schools of thought..one is the river in Egypt whilst the other is the weight of money argument that has nowhere else to go and that Europe will muddle through..for the last few years there has been a live economic experiment..On the one hand the US has just printed money and inflated, hoping that Growth is the answer and that employment will improve and thus the economy..whereas in Europe under the austerity measures ,Governments have been cutting spending faster that you can say nine! The results so far have been impressive. The US seems to be gradually pulling out of its death spiral whilst “Austerityland” under a East German Angela Merkel’s direction have been heading into oblivion. Now the East Germans knew how to handle austerity but I am not sure the Greeks and Italians are quite so keen..time will tell where this ends up but I am reminded of a great quote from Peter Finch in Network, ”I’m mad as hell and not going to take it anymore!” It’s only a matter of time (and weather I suspect) until the riots of London come back to haunt Zombieland…

So how does Australia survive and prosper..well we are certainly better placed than other OECD nations but we are not immune..the one thing the bulls of the housing market always point to is the employment levels in this country..well in “Sunny Sydney” that is about to change and not for the better….the planned layoffs in the financial services industry in the coming months will bite the Sydney property market hard..it is already struggling under the weight of the AUD/US exchange rate and will be further undermined. The banks will be rewarded to some extent by their cost cutting measures but will suffer when mortgage delinquencies rise and bad debts also follow..

I remain a fan of yield stocks for safety and believe the RBA will be cutting aggressively in the next few months. Income stocks are a good place for the next few months. I remain a fan of banks and any pullback will be a buying opportunity..they are still the best in an ugly world and moves from WBC to raise money in the five year bond auction is welcome. Feel the market is due for another dose of volatility in Feb/March..no time for complacency…a Greek default is not a option..but why are the Greeks so special, what about Portugal, Spain, Ireland etc!!They may well ask the same question!

My favourite gold stock SLR has made a small acquisition this morning and will drift a little….I also like the oil sector with Iran a flash point for $120 oil in the next few months..OSH,STO,WPL(?)

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