I backed my car into a cop car, the other day.
Well he just drove off, sometimes life's ok.
I ran my mouth off a bit too much, oh what did I say.
Well you just laughed it off, it was all ok.
And we'll all float on, ok.
And we'll all float on, ok.
And we'll all float on, ok.
And we'll all float on any way, well.
A fake Jamaican took every last dime with a scam.
It was worth it just to learn some sleight-of-hand.
Bad news comes don't you worry even when it lands.
Good news will work its way to all them plans.
We both got fired on exactly the same day.
Well we'll float on good news is on the way.
Commentary & Analysis
"Summon the political will."
It is the nature of market analysis and advisory newsletters to make predictions. I am going to make a prediction now ...
Some not-so-modest Congressman will utter the words - "Alright, don't worry, we'll all float on." - as this debt ceiling debate finds a resolution.
Will it find a resolution?
Yes. But chances are it won't find the best one. That is the nature of government. Republicans pretend to be fighting the good fight; Democrats pretend what hasn't worked for so long will finally work this time; and the President pretends to seek the best interest of the country ahead of next year's election.
They will find a resolution because they want to look like they're doing something helpful. They will effectively summon the proverbial political will.
Across the pond things are just as much a game of Where's Waldo?
Who can find the right solution for Greek and peripheral debt problems that are destined to rock the eurozone financial system even further? We've talked about how this matter has been going on for more than 2 years now. And we've heard about all the potential solutions that have not panned out, amounting to a kick-the-can-down-the-road strategy.
Each time has been a relief of worry, expecting the next proposal to sufficiently address the concerns the proposal before it could not. And that's where we are today ...
The leaders of France and Germany met yesterday ruled out a bank tax but agreed to some form of a second bailout for Greece. The details are still few at this point, but optimism is alive. This from Reuters today:
The risk premium investors demand to hold peripheral euro zone government bonds rather than benchmark German Bunds fell on Thursday on news of the Franco-German agreement.
"There are huge expectations something will be done... the big disappointment could come from how quickly they can implement things. They can agree principles but implementation will take a long while," said Peter Schaffrik, a strategist at RBC Capital Markets.
The head of the European Commission, Jose Manuel Barroso, warned on Wednesday that the global economy would suffer if Europe could not summon the political will to act decisively on Greece.
"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," Barroso told a news conference.
Britain's finance minister George Osborne, in an interview with the Financial Times published on Thursday, said failure could produce an economic crisis as serious as the recession which followed the global credit crash of 2008.
The global economy would suffer? Negative consequences will be felt in all corners of Europe and beyond? An economic crisis as serious as the recession which followed the global credit crash of 2008?
- "These guys are right about the severity and can credibly address the problems so as to avoid financial Armageddon.
- These guys are right about the severity but really are clueless about which of their solutions are going to stick when thrown at the wall.
- These guys are full of crap and their fear-mongering is simply a means to gaining support in their latest bailout endeavors despite their ineptitude up until this point.
Ok, now let's poll the audience - which do you believe to be the case? Press A, B, or C on your keypad devices to respond to this poll question:
The results (of this entirely unscientific, completely fabricated poll) are in ...
Overwhelmingly it seems everyone thinks these guys are "thoroughly full of crap." And honestly, that's exactly how I would have polled. Oddly enough, after asking these same respondents where they invest their money, 95.1% of them said simply: gold.
Naturally, because it seems those who invest in stock markets, currencies, and commodities have faith in politicians; i.e. they don't seem too worried by the fact that THE FINANCIAL WORLD IS ABOUT TO END IF BEN AFFLECK AND BRUCE WILLIS DON'T DRILL THROUGH THAT ASTEROID THE SIZE OF TEXAS!
Hey, I didn't say it - Mr. Barroso and Mr. Osborne did.
On a serious note, a reader sent us this, which somewhat reflects the general sentiment of the fake poll above:
It is unbelievable that your nitwit Federal Reserve Chairman even holds out the possibility of a QE3, given that QE2 had such miserable results.
So here we sit this morning with US stock futures indicating a higher open while the euro is making a respectable move higher up through $1.43. Commodities, I'm sure, would be playing along if it weren't for the fact that Chinese manufacturing numbers disappointed investors earlier today.
S&P 500 Futures Daily: busting out the pitchfork ...
Today European leaders have met at a summit to address all the current proposals aimed at fixing Greece's finances. My guess is that they're NOT going to come away from the table and say, "You know what - we realize there is no viable solution here. Greece is screwed, and its collapse is likely going to ripple throughout the global financial system until the system has cleansed itself of debt and malinvestment."
Until then, I go back to the advice of the Modest Mouse: for now markets will be "alright, don't worry, we'll all float on."
And as Jack said to me today: "I am thinking ... if unemployment can just get to 30% in the US, then maybe the Dow could make it to 30,000 on QE6 or QE7 by then."
Just summon the intestinal fortitude and go long this market.
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