May 14th, 2012
in Gary's blogging
I guess one could have expected the markets to start off this week being down with all the distressing news going around. Let's face it, hearing of a tiny 2 billion dollar corporate mistake last week from JPM is one thing, but the financial problems of a poor nation like Greece that has an economy smaller than some US States is a real tear-jerker for some. Putting the World's financial issues into perspective for many is difficult I think.
However, like it or not, the Greek Drama is front and center stage with the French Banks playing loudly, and out of key, in the orchestra pits. Spain and Italy are waiting in the wings, in their clown costumes, to enter for the second act. All the while, the audience (German voters) are complaining that the damn popcorn is stale and cost too much. I can hardly wait until they get to the Wiener Schnitzel being made by the 'Merde' duo (Merkel and Hollande) which will taste like the French translation. But that is next weeks article. Follow up:
Follow up:Not that I am making merriment of Greece being really small and insignificant financially, but actually this politically unstable country is quickly becoming the straw that will eventually break the camels (Eurozone) back. Oh, oh yes, don't forget the poor overextended French banks and their new Socialistic President both hell-bent on running the country into the ground. Truffles and the new French government have a lot in common, they both stink, are in the ground and cost too damn much. But then, I forget that we are talking about France.
The issues before the Germans, IMF, ECB and other interested parties is how to solve the looming financial consequences for the Euro and the Eurozone if they are not resolved.
John Mauldin “I have been making the case that for the eurozone to survive, the European Central Bank would have to print more money than any of us can now imagine. That the sentiment among European leaders was that they were prepared for such a move was clear - except for Germany, which is haunted by fears of a return to the days of the Weimar Republic and hyperinflation.”
My personal thinking is to have Greece breakaway to Africa like some have suggested that California secede to Mexico. Out of sight and out of mind with their Keynesian and out of touch governments. Come to think of it, France can go down the loo too. Once flushed, the 'merde' goes with it and a nice white, clean and odor-free porcelain economy can once again serve the public. Again, another article.
So now, all kidding aside, I wonder when The German's are going to say, “Fuggedaboutit”, close their borders and reinstate the Deutschmark printing presses. The German economy is the strongest in the Eurozone and is 5th. largest in the World. Next to the rest of the Eurozone's debt-ridden, high unemployment, 'hopium' run socialistic economies it is the “König der Murmelspieler “ (King of the Hill), in comparison.
Its export and manufacturing industries are turning out goods and services that dwarf the rest of the EZ members. Its tech and other industrial industries are solid with the country boasting a surplus in the unemployment and health benefits. I really don't foresee isolationism on the part of Germany, but putting their foot down resistance the continual depreciation of their own assets, reinstating the DM along with exiting the Euro is a real possibility
The problem as I see, is that the Greek debt, as insignificant as it may be to the World, is weighing heavily on the German tax payers and the squeal test is nearing its 120 decibel threshold of pain. What has been known, and suspected for a long time, there is way too much financial exposure for the German fiscal stability to survive, at least gracefully. The Spanish, Portugal and Italian support issues are becoming intolerable in the minds of the German people and it is rumored they are going to do something about it.
Philippa "Pippa" Malmgren, a US politics and policy expert and Deutsche Bank board member, has stated that the German's have ordered the DM printing press to start printing the DM again. Zerohedge: Germany is Already Printing Money… Deutsche Marks!!! Chancellor Angela Merkel stated in October, 2011 that “. . . she will defend the euro despite spiraling debt problems in countries such as Greece which have tipped the 17-member currency bloc into a crisis. Most Germans are against granting further aid to Greece”. Fast forward to today and NOTHING has changed as Germans overwhelmingly oppose further aid for Greece, according to an opinion poll. Just last week Bundesbank chief warns Greece on rescue deal. It appears that Merkel is going to rethink her position, or at least do so publicly.
A bit hard to believe conspiratorial story, financial guru Max Keiser said, “The whole Euro project was a ‘trick-bag’ to reunify German under the umbrella of the Euro, and things went bad, as they inevitably would do, they could eject themselves from the Euro, and there it is- The Deutsche Mark ” I think it is more like they saw this unmitigated disaster coming and decided to be proactive, but anything is possible.
As this drama unfolds over the next year I would be reluctant to take any long position until September 2012. One because that is traditionally the lowest point in the trading season, two, the uncertainties of political upheaval and financial devastation in the making, three, the US corporations starting to signal lower earnings in the future and lastly the possibility of the US slipping again into a recession. Even a mild recession could do irreparable damage to an already frail US recovery and drive the markets to depths I would rather not think about.
Last year was an unusual year for trading and this one has started out to be no different as I am sure Mr. market has some surprises in store for us.
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Written by Gary