"And now we’re back where we started,
Here we go round again.
Day after day I get up and I say
I better do it again.
Where are all the people going?
Round and round till we reach the end.
One day leading to another,
Get up, go out, do it again." – The Kinks
What a silly week!
The Dow was up 100 early Monday then dropped 175 then gained 200 into the close then dropped 100 Tuesday morning, then regained 175 and made the week's high at Tuesday's close and then we opened down 300 Wednesday morning, bounced 100 and dropped another 200 to finish the day at the week's low, just 6.5 trading hours after making the week's high.
Then we gapped up 100 yesterday morning and topped out up 150 but gave 50 back into the close. Add it all together and we're down 50 points from last Friday's close. Did I pick a good week to take a vacation or what?
I gave a mini-dissertation to Members earlier this morning on why I think the World is not ending and why that means I'm still pretty bullish on US equities – all should read when you have a chance.
Doug Kass agrees with me, calling US equities "the best worst option." When compared to the rest of the world, the U.S. has a more stable economy, healthier banking system, better corporate culture and more balanced political system than anywhere else globally. We're the best house in a bad neighborhood, notes Kass. So, as the situation in Europe worsens over the near-term, he's expecting some heavy global rotation into U.S. equities.
Economists polled by WSJ see a smaller chance of a U.S. recession in the next 12 months, placing one-in-four odds vs. one-in-three they were seeing just two months ago. But the economists put two-in-three odds that Europe will fall into recession, and a 50/50 chance that at least one country will leave the euro zone in the next two years.
"The euro is held together only by the fear of what might happen if it all falls apart," writes Jeremy Warner, who would prefer energy be spent on how to "get out of the mess" rather than "to prop up a manifestly failed endeavour." Status quo might condemn Europe to something even worse than Japan's lost decade.
Although Spain's Q3 GDP was flat this morning and ING sees Spain's economy slipping into recession in Q4, EU markets are up 1.5% this morning (8:30) on news that the Italian bond auction was not as terrible as feared at 6.6% for the 10-year. The issue in Spain (France and Italy too) is not so much horrid government finances, but flatlining to declining economies combined with rising interest rates that threaten to turn government finance horrid.
President Clinton's new book hit the stands this week and he has a lot of great suggestions for fixing our economy. Mr. Clinton writes that he started and stopped writing the book several times because he didn’t “want just to add another stone to the Democratic side of the partisan scale,” but “decided to go forward because I think it’s important that all Americans have a clear understanding of the basic economic facts and of the ideas driving the policy proposals under discussion.” Clinton also has an optimistic view of our future but, sadly, it's based on the assumption that our "leaders" are eventually able to get something done – that seems less likely with the current crowd:
I can't tell you how happy that last video makes me. Can we look forward to the 99% simply standing up and making themselves heard at public events? That's the problem when you try to oppress the masses – there's just so damned many of them! And that's all it takes folks – a simple "We are the 99%" chant before a play begins, at news events, for audiences at concerts and TV shows – just to let the people know we're out there and we WILL be counted.
I've had a lot of time to speak to all classes of people on my boat trip and I have a lot of thoughts for my 99.9% Manifesto, which I hope to be able to work on next week. There are, for example, 1,000 people working on the ship I am on serving 2,000 mostly top 10% passengers and ALL of the profits flow up to the top 1% and mostly the top 0.1% who own and control DIS. It's a great microcosm for what Capitalism is all about – 1,000 people, trapped in a ship, making just over minimum wage all so a dozen people can reap the benefits. It's not slavery if you get a check instead of free room and board, right?
The market microcosm today is whether or not they can get the Dollar below 77.50 – at the open, it's looking pretty good and that's the formula for us to break Dow 12,000. Whether or not we hold it is another matter entirely. I'll be back on Monday and I'd sure be cautious into the weekend but then we'll see if we can finally afford to get a bit more bullish – depending on what new nonsense we get out of Europe this weekend.
Have a great weekend,
– Phil
