Posts Tagged “Europe”
It’s not even New Year’s Eve yet, and I’m already thinking about hangovers.
(Not mine, of course. I don’t drink any more these days. Then again, I don’t drink any less, either.)
Today I’m thinking about how the world is going to look and feel in the coming year, how the markets might react to likely events, and what might be shining over the investing horizon in 2012.
No matter how optimistic my nature is, and how hopeful I am that global issues will be addressed and eventually fixed, the truth is that it’s always darkest before the dawn.
Another way of saying that is, if you’re going to drink to excess, you’re going to suffer with a hangover. And the more you drink – and especially if you mix your drinks – the more likely it is you’re going to suffer the ill effects of too much indulgence. (At least that’s what I’ve heard.)
Is that some kind of metaphor, you ask? Of course it is – have you been drinking?
Why this “hangover” is here to stay…
Far from having my holiday spirits uplifted, I’m increasingly glum (about the markets, but not about life, liberty, and the pursuit of happiness) on account of the lack of any good cheer coming out of…well, anywhere.
Take Europe, for example. You know, Europe, as in the European Union. As in that region of the world that has always gotten along, happily sharing each other’s cultures, cuisines, and shrapnel wounds from their exploding sovereign debts, courtesy of a common currency that affords cheap financing for budget bludgeoning.
There’s no good cheer over there.
Didn’t anybody hear Christine Lagarde (formerly one Europe’s own when she was running finances for France, but now runs around with whips and chains as the high-heeled dominatrix of the IMF)? Last week she said that if we don’t all work together our situation will be similar to the 1930s.
She wasn’t just talking to the Europeans. She was warning world leaders and central bankers.
Good thing Fed Chairman Ben Bernanke got the message. He told lawmakers last week that they have “no further plans to aid European banks.”
So much for holiday spirit.
But, I think the Beard is just too modest; he wants to be a secret Santa.
In fact, there’s really a lot of gift-giving going on over in Europe. If you look closely you’ll see that stockings and sacks are being filled, and the Fed was the first to contribute.
But (frighteningly, if not ominously), if you look closer you’ll see those stockings and sacks aren’t being filled with presents, they’re being filled with sand. They’re sandbags.
Sandbags? Yes, sandbags, as in the last ditch effort to save towns from catastrophic flooding when the big dam breaks.
Click here to find out why European leaders are preparing for catastrophe…
Very soon we will see if the old market adage “Buy the rumor, sell the news” is true.
While rumors of Europe’s impending demise were momentarily shot down by an array of silver bullets, the actual news out of Brussels of a grand bargain wasn’t… exactly… honest.
Let’s call the half-measures agreed to by European leaders “Brussels sprouts,” because they’re more like “green shoots” than a cabbage patch panacea.
The leaders agreed to agree that they needed an agreement on how to more closely integrate their fiscal and monetary interests.
Yeah, that’s what they said. I say good luck with that.
Actually, they made some other moves, too.
Find out what else these European “leaders” did…
“Rudolph with your nose so bright, won’t you guide my sleigh tonight…”
Thank goodness there’s a light out there somewhere, so we can see what’s coming.
And judging by last week’s market action, guess what?
Santa Claus is coming to town!
Ho, ho, ho, what a rally. The Dow Jones Industrials rose 787.64 points, a 7.01% jump, making it the venerable benchmark’s second-best weekly up-move ever! The S&P 500 rocketed up 7.39%. The Nasdaq Composite shot up 7.59%.
But the real winner was the broader market, encompassing the less muscular household names ensconced in the Russell 2000; it rose a whopping 10.34%.
Speaking of the 10% gainers club, guess who else got their tickets punched on this sleigh ride? Not surprisingly (considering a little thing called “short-covering”), Italy was up 10.4%, Spain was up 10.24%. France was up 10.78%, and Germany was up 10.7%.
The week before last, not one single stock market in the world advanced by even a hair. Last week, every single key stock market in the world rose – and very impressively.
Oh, wait a minute. There was one little country that actually fell almost 1%. Good thing they’re not on anybody’s radar and don’t matter much. Who was it, you ask?
Ho ho… uh-oh!
The problem I have with providing “insight” into the market is that the deeper I look, the darker it gets.
Right now I can’t see through to the other side. It’s just that murky everywhere.
Not only did the S&P 500 fall 56.98 points (or 4.7%) last week, but it broke important support at 1160, ending Friday at 1158.67. The benchmark also broke its 50-day moving average back on Monday.
Cumulative breadth (advancing issues minus declining issues) has been tanking.
And speaking of slip-sliding away, third-quarter GDP growth here in the U.S. was revised down to 2% from the previously reported (make that estimated) 2.5%.
Downward pressure was evident across the globe, in terms of GDP growth expectations, sovereign creditworthiness, and stock markets.
In fact, I can’t find any equity benchmark anywhere in the world that rose last week. That’s because there wasn’t one.
What there was a lot of last week – and what there will continue to be a lot more of – is mounting fear that the European Union is about to become unglued. The Eurozone is already being held together with nothing more than Band-Aids and hope, but increasingly those Band-Aids are falling off.
What that means for us…
Have you seen the six-month price chart for the Dow Jones Industrials Average, the S&P 500, the NASDAQ Composite, the U.K. FTSE 100, the German Xetra (DAX), the Hong Kong Hang Seng Index, the French CAC 40, the Milan FTSE MIB, the Australian S&P ASX 200, or the Shanghai Composite Index?
I’ll make it easy for you.
If you haven’t seen any of them lately, check out one of them – any one.
It doesn’t matter which one, because – really frighteningly – they all look remarkably alike.
Talk about dangerous liaisons!
Full story here…
After once again teetering on the precipice of European implosion on Wednesday, events on Thursday, Friday, and Saturday proved once and for all that we’re out of the woods.
Remember that Alka-Seltzer commercial?
Plop, plop, fizz, fizz, oh what a relief it is…
Maybe you don’t remember it, but if you’ve ever had a hangover (be honest, now), and you tried Alka-Seltzer, you know that dull pain tends to linger, no matter what remedy you apply.
So, was I just kidding about being out of the woods?
Have you been drinking? Of course I’m kidding.
The “hangover” of European sovereign debt isn’t going away any time soon.
On Wednesday, global markets swooned. Why? Because investors summarily dumped Italy’s 10-year bonds, causing their yield (interest rate) to soar intraday to just over 7.6%.
The scary thing about that for everybody was that once they started rising above the 7% line-in-the-sand yield, Greece, Ireland, and then Portugal all had to be bailed out.
And it’s getting even scarier…
For the past five weeks, it’s been treat after treat for bullish investors.
The “trick” will be seeing if it can last…
How sweet has it been?
The Dow rose 1,459.63 points in five weeks to end Friday at 12,231.11. The Industrials rose 3.6% last week alone. They’re up 14% in that short run, and we’re now up 5.7% on the year. The S&P 500 is also up 14% over the same timeframe, and the Nasdaq has been following dutifully.
The candy being held out has been the hoped-for resolution to all of Europe’s problems. Every little sign of forward movement burned the short tails of greedy bears hoping for a sovereign default and raging contagion.
On top of progress across the pond, earnings here at home have been another treat. Of the more than 300 companies in the S&P 500 that have reported third-quarter numbers, 71% beat analyst expectations.
The trick now will be seeing if it can last…
Lately it seems everyone wants to know one thing: Are stocks going to rally through year-end?
The answer is an unqualified “maybe.”
To explain this uncertainty, let’s look at where the markets are today.
Last week, the Dow Industrials gained 1.4% to end the week at 11,808.79. The S&P 500 rose 1.1% to 1238.25. But the Nasdaq Composite fell 1% to 2637.46.
While it seems like stocks have come a long way in a short time – and they have – in the big picture, we’re still crawling and clawing our way up…
Here’s the full picture…