WHAT HAPPENED?

The great heavyweight champion, Archie Moore in one of his last bouts against Rocky Marciano was asked to describe the proceedings.

"Well, everything was going along just great, just like I wanted, when he it me with a what happened"

"A What Happened?" said the scribe.

"That's what I said when I woke up, 'What happened?'" said the great Mr. Moore.

I suspect that's what I'm going to say tomorrow.  It seems as though the meeting in Brussels ended with the Euros...

1.  Agreeing there was a problem
2.  Agreeing that they must fix the problem
3.  Agreeing to meet later to draw up rules to fix the problem
4.  Not being quite sure what was going to be drawn up within the context of the treaty
5.  Agreeing that it could be fixed between member states outside but inside the treaty because
6.  The Brits vetoed against a treaty change and
7.  That they all hated Great Britain...well, at least France agreed to that.

So, what happened?  May I be so bold to say pretty much what we predicted on these very pages over the past few days which adds up to pretty much zilch.  From my standpoint a surprising event was Frau Merkel's surrender as to the banks.  She agreed that there would be no "haircuts" which has the only effect of making George Soros even richer as it was revealed today that he had purchased $2 billion of MF Global's sovereign debt exposure just prior to the firm's demise.  Somewhere, deep inside me there is the belief that the fix was in but I can't prove it.  I just can't understand how this guy always winds up on the right side of a trade when Euro Politicians are involved.  I guess he's way smarter than anyone else because I didn't speak to a soul who didn't believe that there would be some sort of a negotiated debt reduction in any agreement struck.  Nary a one.  And so the banks, to the extent they wish, come out of this thing intact as long as the agreement holds and the taxpayers get it in the neck again...and there's the rub.

I'm going to go way out on a limb and say we are never going to find out because this Heads of Agreement as the French are fond of calling something like this is not going to happen which is probably better than having it happen and not work.  Oh, today as we have discussed will pave the way for a couple of events such as the ECB to buy up a bunch of bonds starting in January and for the IMF to agree to the release of limited conditionality monies to the EU for the bail-out fund (that is if the members agree to an increase in capital/exposure) and some recapitalization of certain banks (what the heck, Germany owns 25% of Commertzbank already), but in the end one of these heads of state is going to go home and get asked, "What, are you nuts?" and the immediate reaction will be: REFERENDUM!  Thus endeth the ball game.  A David Cameron moment.  As an aside, it's going to be a kick to watch The Suit explain to Congress why we should, as it will be catagorized, "Bail out Europe."

And what of Great Britain?  I"m solicitng comments from my many friend over there which will be ready by Monday.  Of course, the Beeb is in it's "How dare he!" mode and will stay like that throughout the adventure. The Guardian is beside itself and Labor has lost its mind.  The internet sites are wonderful reads...Britain's left wing in full flight is wonderful.  More on that next week.

Of course the problems as have been explained at this site have not been addressed and to be fair, cannot be in the time frame the market will demand.  Despite the promise of sugerplums and Euros falling from the skys, yields on Italian and Spanish obligations actually crept upwards which is another way of saying they are at even more unsustainable levels.  Today, three French banks received an S & P downgrade and one must ask can the country be far behind which, if it occurs everyone seems to believe will kill the plan.  I keep asking how a plan based on S & P's belief that France is triple-A and the United States is AA+ be a real plan and keep getting no answer.  I'm patient.  All in all, not a good day in Euroland but good days will be few and far between.  We had our first snowfall out here in the fly-over zone today.  Pretty.  Paris, by the way is lovely at Christmas time.  Hope the lights don't go out.