I you are an investor in world stock markets that is. The Leader was reelected rather easily which was a surprise and as a result the DOW closed down 312 points. There was an attempt to make it appear that the real movement from a flat opening was the bad economic numbers out of Euroland, an argument that certainly lost its creds as the day progressed, but actually in the medium term it is Euroland that may be the more important of the two events as rather than the usual suspects it was Germany's economic performance which fell sharply among all the other bad news that caused the greatest shock.
I think this should be viewed carefully in two respects. Germany was of course the key factor affecting all the other economies in the zone but perhaps even more important is that Angie is now in a box: whatever flexibility in dealing with the debt crisis is I believe is gone. The mood will certainly shift to one of Deutschland uber alles as opposed one of Euro cooperation by way of leadership and sharing of the wealth. German capital in bail-out mechanisms just got a lot harder to obtain. Which brings us to Greece which was supposed to vote on the new austerity package today at 2:00 pm local time. Then the riots broke out involving some reports had it at least 75,000 people in the center of Athens. As I write, it is now 1:00 am in Athens and I have still not heard as to whether a vote has been taken. I assume it has not. Unfamiliar as I am with Greek parliamentary procedures I'm not sure what this means other than in most places it would signal that the leadership doesn't have the votes. If this does not pass I cannot see how this can be put back together in time for the latest tranche of the bail out package to pass which could result in a Greek default in less than two weeks. If that happens...
In the mean time Angie stopped into No. 10 to have a bit of a chin wag with her pal, David. Given the fact that in my book the odds of holding things together suddenly just went from about 90% to about 50/50 the conversation may be about nothing at all as there may be no Euro Union in which the Brits can remain attached. That may indeed be an overstatement but there has been such a sudden shift in sentiment for the future that it may not. Focused as we have all been over here on the election a lot of folks haven't been paying too much attention to the event in Euroland and today's goings on have come as a bit of a shock. No doubt there will be an overreaction but our friend across the pond had better lay this one to rest quickly before the global sell-off broadens.
And as to the election, from a banker's standpoint the victory in the Senate Race in Mass. of Elizabeth Warren is the scariest thing imaginable. The general view is that she's a one trick pony, determined to squash the financial industry in general and banks in particular with thousands of pages of regulation even stupider than Dodd/Frank. Could be but then again she has earned millions in representing financial institutions in regulatory matters. From my stand point I hope her ambitions run up against the Wall Street money raising sensation, Chuck Schumer. Settle it fair square, Lizzie and Chuckie. How 'bout a mud wrestling contest in Battery Square Park? Hell, you could probably sell enough tickets for that to pay off the national debt which incidentally is now in the area of $16,000,300,000,000. Greece? What, us worry?
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