Tuesday, October 23, 2012


For a few weeks now I've been saying I don't like what I see and feel about this market.  I'm afraid yesterday's and today's performances have confirmed my fears.  Today was a truly lousy day with neither Euroland, Over Here or any place else in the world providing even a sliver of good economic news as an off-set.

Corporate earnings were stinko which seemed to take a lot of people by surprise which for the life of me I can't understand as the evidence of declining economic conditions were evident for some time and are now coupled with the impending presidential election which at this point is, at least in the minds of the professionals who monitor these things, too close to call.  Sovereign wise, the Greek talks have gone badly with no agreement on the conditions under which new bail-out funds would be provided and just when it looked like things in Spain were looking up, here comes Moody's this morning with a down-grade of 5 Spanish states which was rattling to Euroland to say the least.

Which brings me to another of those little conundrums that trouble me so much.  Why downgrade the states?  They don't have any money.  Anyone except those resident in a nut house knows that the credit of these entities is entirely dependent on the central government.  Too scary-'fraid to downgrade Spain?  Then do us all a favor and get the hell out of the business!  We would all be so much better off without you mucking about.  Throw the States' obligations into the same pot containing those of the central government and you have a pile of liabilities That may just be too much  to finance given the fact that the only source of financing are the Spanish banks operating under the Draghi put, and so without so much as breaking a sweat, here we are back to where we started before everyone began having visions of sugar plums which is not at all a good place to be.  Problem is, having more or less convinced themselves that they had some breathing space, the leaders  began speaking of things like universal bank supervision, transaction taxes and the like and stopped focusing on the immediate problems at hand.  Then of course has been the Frankie and Angie little back and forth's of which there has been a good deal written but also as a result of this somewhat fanciful dialog has been developing one of the most significant issues to face the EU since it's founding---the status of the United Kingdom.  Is the UK in or out and if still in, for how long?  I've been thinking about this for some time and will continue to do so before writing on it, but may I suggest you think about it as well?  This mess is moving rapidly to a very bad place and I'm not sure  that even if there is the understanding whether there is the political will to remedy the situation.  I think that in the next few days the market will reveal to us just how tragic this drama could be.  Watch and wait is the order of the day.

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