Academy Awards, Greek Bailout & A Growing Economy

Our Two Cents – Week of 2/27/12

As Hollywood celebrated the Academy Awards Feb. 26, the world watched “The Artist” snag five trophies and Meryl Streep receive her third Oscar win. On the financial stage, eyes cast on the German parliament, Greek finances and U.S. economy confidence.

After agreeing on a new rescue package for Greece Feb. 20, the eurozone stepped back into the spotlight as German Chancellor Angela Merkel won a parliamentary about Greek aid from the Bundestag—the lower house of the German parliament. The vote favored the 130 billion-euro package to help Greece. She cautioned her fellow lawmakers that pushing Greece out of the euro would result in failures for the European Union and global economy.

Merkel also spoke about the European Stability Mechanism, saying Germany was willing to expedite payments to the ESM—the eurozone’s primary bailout fund—if other European members followed. She said Germany was willing to pay 11 billion euro to the ESM to accelerate funding. Regardless of adding new money to the fund, some German lawmakers believed that a third Greek rescue package could arise because they felt that even new funds would not right Greece’s finances. Aside from discussions about Greece, Germany saw positive news in its IFO (the country’s No. 1 think tank), predicting an increased business climate. The nation’s rating jumped to 109.6 points, better than the expected 108.7. A higher IFO showed dwindling signs of a German recession.

In the U.S., economists continue to see financial optimism. As many Americans ushered in the weekend, the Standard & Poor’s 500-share index finished Feb. 24 at its highest point since 2008. The S&P closed at about 1,365 points—the highest mark since June 2008 before the worst of the financial crisis. The good news continued with signs of a growing economy. The National Association for Business Economics said the U.S. economy will rise 2.4 percent in 2012. The NABE February survey also showed expectations of an average unemployment rate of 8.3 percent, with the economy adding about 170,000 jobs a month in 2012.

For hedge funds in 2012, investors forecast $250 billion in new assets, with net inflows of as much as $140 million and the rest coming from investment returns. According to the Morningstar MSCI Composite Hedge Fund Index, hedge fund performance in January jumped 1.9 percent—the largest monthly gain since December 2010.



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