Crisis? 12-4-11

Europe's debt crisis is hopefully coming to a head this week.  Emma Marcegaglia, the head of Italy's industrial lobby says the coming days "will decide if the euro will survive or not"  If the summit is a failure, France's  Sarkozy warned last week, "the world will not wait for Europe."  "What will remain of Europe if the euro disappears?"  "Nothing."


Here is part of the FOMC press release last week.  
"The Bank of Canada, the Bank of England, The Bank of Japan, The European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system.  The purpose of these actions is to ease the strains in financial markets and thereby mitigate the effect of such strains on the supply of credit to households and businesses and so help foster economic activity."
  
Expectations are high.  How high?  Look at the market last week.  Nothing has really changed except the bank rate, yet the market surged.  Imagine if they actually make some progress! 


Jack Crooks of The Weiss Research Investment Newsletter says "This is only the third instance of this particular type of announced collusion.  He points out the first was in December 2007, the second in September 2008.  You can see the results in his 2 graphs below.

QE2 and QE3 had these results.


You can see from the charts what the market likes and dislikes. From our point of view neither option solves the problem, only kicks the can farther down the road. However, the market certainly likes the easing.

Steven Hansen of EconIntersect says "The timing of the beginning of a new financial crisis might be tomorrow or never (because of change of policy, regulation or direction before the crisis could begin).  There is almost zero chance that the status quo can remain for any extended period of time."  
George Soros "The world financial system is on the brink of collapse, with developed markets running full speed ahead toward disintegration."


Our take is the markets will not be happy very long no matter what happens this week, or next.  There are too many problems to be solved with the flip of a switch, no matter how big the switch.  


On a more positive note, the Green Bay Packers are offering their first stock sale in 14 years.  They are tying to raise $130 million to renovate Lambeau Field.  These stocks do not go up in value, there are no dividends and has virtually no resale value.  You do get voting rights and invitations to annual meetings.  Might be a good Christmas gift.