Yaaaay…it’s all better!
Yesterday morning we had snow here in Memphis, TN. Normally just the forecast of snow would mean car crashes and snarled traffic in this town...but yesterday it was magical…there were no traffic problems at all and I arrived at work remarkably un-stressed from the commute.
After I parked my eco-friendly 5,500 lb, 4x4, V8 powered pickup truck I walked through the parking garage where I could see the snow falling outside and the intercom system was playing Bruce Springsteen’s “Santa Claus is Coming to Town” and the air was just crisp enough to remind you that it’s early winter. I sipped my coffee as I walked and took in the sights and sounds and I felt very much in the holiday spirit for the first time this year. I even passed a sign near the front door that read “Santa Parking Only”. Geez…this is perfect.
For a moment I thought I had landed in Mayberry. Then I came inside, sat down at my desk, and saw the headlines. Troubles continue to rage in the Eurozone…a breakup is being rumored…businesses and governments are making plans on how to deal with the potential disaster. A co-worker then pointed out what had to be the quote of the day. It came from Poland’s foreign minister Radek Sikorsky. He was giving a speech about the euro and he expressed that Poland’s largest threat wasn’t an attack by a neighboring country or rogue state…their biggest threat was the collapse of the Euro; and he viewed Germany as the one player that could avert that disaster. He said:
“And I demand of Germany that, for your own sake and for ours, you help it (the Euro) survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.”
I frequently joke that if I were Greece I would be very uncomfortable having my fate in the hands of the Germans due to historical precedent. But that’s just little-ol-me…a fixed-income salesman and former Marine from Memphis TN with a dark sense of humor…nobody cares what I think. Here, however, we have no-less-than the foreign minister of POLAND…the country that hosted Germany on their first away-game of WWII…saying something not too far removed from my quip on Greece. Poland now sees Germany as its best chance of survival. I’m starting to hear tones of Princess Leia ringing in his statement: “Help us Obi-Wan, you’re our only hope”.
So, yesterday went from “winter wonderland and Christmas music” to seeing the victims of the Blitzkrieg begging for help from the Germans of all people. Just when I’m confident that this crisis can’t get any weirder this happens.
What a difference a day makes
Today we have a much different set of stories in the market. On September 9th I wrote a piece titled “Smells like Coordination”. That piece basically said that based on what I was seeing at that time it seemed like another round of coordination between Central Banks might be in the offing. As it turns out it appears that they were in fact scheming along those lines…this morning we see the results…six Central Banks have announced coordinated efforts to help ease pressure created by the crisis in Europe.
The Fed, ECB (European Central Bank), Bank of Canada, Bank of England, Bank of Japan, and the Swiss National Bank have all coordinated their efforts. The short story is that they are essentially providing guarantees of cheap liquidity in a number of currencies through February.
European banks had seen their cost on dollar denominated loans increasing recently as potential lenders watched with alarm as problems in Europe escalated. Fear not…the Central Banks are riding to the rescue with more cheap money. This is a continuation of the recurring strategy of “buying time” that has come to define much of this business cycle.
It’s like Broadway
I don’t often go to see a “play”…you know…like on a stage in a theater. I have however been to one or two in the distant past so any of you who like to call me completely uncultured will have to dial it back just a notch.
Today’s market activity reminds me of the theater. On stage right now I have a group of actors who are singing about a recovery. The songs are all about the ADP Employment figures being higher, and Pending Home Sales rising, and Black Friday Sales going through the roof...and the Dow is up 400 and the 10-year is up to a 2.09%, and all of the actors are happy and singing and everything is great. But backstage behind the curtain the stagehands (represented by the Central Banks) are fighting like mad to put out a fire that is threatening to burn up all of the props needed for the next scene…and maybe even the theater itself.
Seen from this point of view it’s difficult for me to get excited that the play is going to be a great one. Normally what would happen is that during the intermission I could try to talk the wife into going to a sports bar instead of seeing the second half of the play…but I’m afraid this one will end like the others…I have no hope of getting out of watching the whole thing unfold. Good or bad we’ll all have to stay here and watch the rest of the play.
If you have any questions or if there is anything I can be doing for you just let me know.
Steve Scaramastro, SVP
800-311-0707
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