THE LOOKING GLASS

It got up to 0 today so things are looking up.  Positive temperatures are expected to begin tomorrow and a steady rise is predicted which if one could say that about the state of finances in the world what a happy day it would be.  But things could be worse.  As I have admitted, I thought things would be a lot worse right now than they are, especially in Euroland.  I was wrong and embarrassingly so because I forgot one of the first thing one learns when one gets into the business of finance which is, "don't fight the Fed" which last year was clearly extended to the European Central Bank and Sr. Draghi.  The Pen is mightier than the Sword; a Free Press mightier yet but The Printing Press…ah that is the most mighty instrument of policy in existence.  Free money changes the world.

I was wrong in forgetting another great truth of this business: no one, no thing or no nation for that matter can go broke as long as there is someone stupid enough to lend it money.  An enormously foolish oversight on my part and one that I shall try not to repeat.  And to be sure the flood of money pouring out of the coffers of the world's central banks did substantially improve the short to medium term financial outlook pretty much across the board.  But the structural problems that surly contributed to the great crash have not, to a large extent, been confronted.

In the United States we mentioned the most pressing issue which surely is the future of Obamacare which has the capacity to severely impact the economy--with a greater negative bias in assessment--I'm sorry to say.  Spending and tax policy, energy policy, employment financial regulation and a whole host of issues that should be addressed but probably will not be in this a vitally important election with nothing less at state that the direction the country will be taking for the foreseeable future.

Europe, too, must deal with many of these same issues but with the added burden and overhang of it's currency which I think will once again be in the center of how the continent proceeds.  Make no mistake either, the UK and the future relationship to the EU cannot be played down as so many continental politicians are…understandably…attempting to do.  Whilst the European future is of major international import, it is greatly unfortunate that the United States will probably be only peripherally involved in context of the decision making.  This fact as well points to the structural change that we face over certainly the next year if not longer.

What this leads to is the conclusion that the risks faced in the opening months of this year will probably be more of a political nature in the forefront with the consequences of decision (or non-decisions) affecting the risk points listed above.  This is, admittedly, an apologetic for the promise not to enter into the political arena but duty calls.  Actually, I do not see how it can be avoided.  So off we go.  I think it can work but let me know…early on please.