The Sky is Falling in Europe (AGAIN)
This was the tone of a recent finance newsletter my Dad sent me. It is all CNBC can talk about last week, this week, and assuredly next week. I think the flaw in this type of logic is that there is either a positive cycle in terms of growth or not.
It’s binary.
Europe finds its feet and grows or it is in a depression, segmented or encompassing.
Right now, eurozone is more of a mess than the U.S. because they didn’t throw money at the bastard banks. Believe me, i don’t want to save them, but the systemic risk is real, so we can let ‘em die / kill liquidity / have a depression, or we can deflate currencies, get some stability back into the system, then appropriately regulate / break ‘em up, and hope we can pay it off through growth.
Fundamentally, small business is losing in the current system (in the U.S. and in Europe), innovation is suffering, and while i don’t love government intervention, chaos (like high frequency trading) will reign when a small group of people (6-10 banks worldwide) control so much of the money and influence on the politicians.
This is a moment of government by the people, and if we don’t responsibly act on it we’ll end up with fringe elements and more political radicalism (even totalitarianism, remember WWII) like we are starting to see in French and Greek elections, even seeing some of this in German regional elections now. As for Greece failing, don’t think it is a done deal like some, but if it happens, it’s already priced into the swap market, but not the european stock market. Do think Spain is a problem, and Ireland might be next—> this austerity first BS is ignoring the chilling effect on foreign direct investment and the long-term damage to the citizenry (i.e. the lost generation we are seeing in Spain, UK, and maybe the US).
All that said, I’m bullish long-term domestically, think emerging markets and commodities will pop up (not gold), and midcap / small caps may be amazing in the next 3 years. The US is increasingly less energy dependent abroad, and China is paying roughly 10x what we are for energy (counting coal, gas, oil). Short-term I’m 50% cash and may go to 100% in the next 1-3 weeks. But think we will see a real bull market emerge soon, as long as eurozone does’t dissolve because they are unwilling to fix the situation - i don’t think that will happen, think US and China will push them into the IMF first.
