G20 meets tomorrow. That alone may decide the direction of markets barring some craziness out of the PIIGS. Yes, the PIIGS are back in the news. They are the bad penny that won’t go away. The austerity programs that have been proposed are not enough to head off the inevitable. Bankruptcy.
Recently it was the Irish. Rates increased dramatically as the risk of holding Irish bonds increased. The ECB tried to calm the waters. However, these are waters that will not be calm for some time. They have only begun to swirl.
The European Union reminds me of a leaky boat. Once you plug one hole, the one you just plugged begins leaking again. It is only a question of time before Spain, Portugal or Italy blows up. Not to mention the French which have some pending problems of their own.
The far right wing press is giving President Obama a hard time for being in Korea on Veterans Day. I give him a pass. He needs to be out front negotiating a trade agreement with the South Koreans. Plus, he needs to be at the G20 meeting and hopefully something nice will come out of it. The best service Obama can do is get a trade pact signed so veterans back home have a better shot at the jobs that may come out of it. If Obama doesn’t get something, it is another failure.
A failure will add to the pressure to pass CAFTA. The pact in Korea is centering on autos, trucks and agriculture.
The bond market took a major dump on the holiday. The risk of holding US bonds is increasing. The stock market moved in sympathy with it. The dollar strengthened with the trouble in Europe. I think the trade follows through tomorrow. Risk off in the stock market and put it on after the meeting.
Amidst all the waves and cross currents, I still am bullish the stock market heading into the end of the year. It goes up as long as the government is buying it. Post QE2, they are buying it with both hands.
I say, outsource the job of handling the G20 protestors to the North Koreans. A few years in the gulag will do them well. The real question is what sort of stupid outfit does South Korea have cooked up for everyone to wear?
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