...il fait mal, fait mal, fait mal. Nikki met with his hot blond buddy Angela today and came up with rien, zip, nada, niente. It would have been better IMHO had they not met at all and unquestionably better had they just kept their mouths shut. With the numbers showing growth has stopped in Euroland, yields on Italian and Spanish paper heading north again and the Greeks looking at a beaucoup Euro repayment in a week all these two chuckleheads could come up with was an assurance that the bail-ou facility was big enough (it isn't), a call for a United states of Europe to be led by a Belgian for the next 2 1/2 years, higher taxes on shares transactions and higher taxes rates--the word they used was "conforming" among all states. For those who have been dead for a while that means Ireland.
The reaction was an audible gasp on both sides of the pond as if the collective thought raced through the synapses of every observer at the same time: "Are these two as dumb as The Leader and if so, wadda we do now?!" Well, it beats the hell out of me but I think what happened...or didn't happen...pretty much insures a Greek default sooner rather than later and serious trouble down the road with possibly Italy and almost certainly, Spain. The U.S. of Euroland will go nowhere and the Irish will require armed force before they relent on their tax code and of course it is never a real good idea to get into a fight with the Irish. Over here, the markets tanked before coming back a good deal from their lows but I'm not sure that the result of this failure on the part of Europe's two most important leaders has been fully understood. My bet would be continued weakness, especially in the financial sector, even in the face of surprisingly good numbers today regarding plant utilization and corporate profits.
Obviously, Frau Merkel knows she doesn't have the votes to get Germany fully behind a European bail-out and without Germany, nothing happens. If there is such a thing as an orderly collapse over the next few months that's about the best I think one can hope for and I would expect that we will see is the rationalization of the financial sector in Euroland. The problem is, of course, I'm not at all sure that anyone really knows the true state of European banking much less the state of any individual bank which is going to cause some sleepless nights for all concerned. Then again, if the weeding-out process begins--probably through mergers with vast government support--the politics of the individual countries will play the dominant role and I for one wouldn't even pretend to understand or begin to spectulate as the direction that will take. It will probably be ugly.
Tomorrow's open in Europe will be interesting. The ban on short-selling in some markets will have absolutely no effect if this thing is programmed to go south. There simply will not be a bid out there for either equities or fixed income soverign debt. Then again, I may be far too pessimistic and negative in my view of what occured today and if so, I wouldn't mind a "Ho Hum" day at all but I don't think we are set up for that. No one was particularly optomistic as to the results of today's chit-chat but the results I think it's fair to say were particularly disappointing. Hold on tight; it might be a wild ride.
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