A deal has been struck in Euroland. It is, of course, merely another charade. More pretend and extend. This morning’s euphoria in stock markets will not last long. Once details are available, markets will see through the sham. My guess is that markets cannot remain euphoric for longer than the end of this week.
Mish’s assessment is similar:
Although many details are yet to be resolved, the bulls got everything they wanted except endless printing by the ECB. However, the sad fundamental situation remains unchanged
- No structural problems have been solved
- Banks most assuredly need more than 106 billion in recapitalization efforts. The idea that French banks only need to raise 8.8 billion is preposterous.
- No investors in their right mind will fund Greek and Spanish banks to the tune of 56.2 billion euros
- The haircuts were not voluntary
Instead of the rumor mill of potential actions working to lift the market 24 hours a day for three straight weeks, it will be up to the EU to make the plan work. However, the plan won’t work because of point number one above: not a single structural problem has been solved.
I put some short positions on shortly after the open this morning. Whether these win or lose remains to be seen. My thoughts are that the recent Euroland action is irrelevant, at least in terms of altering reality. It may be necessary “public relations,” but it does nothing to solve the mounting problems. Europe continues to ratchet to ruin.
Monty
Fully agree. Can you give me the details of your short ? I would like to do something similar but have only done long positions. Buy and hold. I would like to try a short. What are you shorting?
Hi Monty, as I drove around today during my work day the news of the European debt deal and our stock market response to it was the buzz of the day on the radio. My response was laughter. I realized it was just a another, if not the final, kick of the can down the road, more good money following bad. I was already aware that Greece hadn’t been making their payments on previous handouts, that deficit spending was still rampant and that nothing had substantively changed. This whole thing seems so surreal. Its sad that the only point of optimism for us, is simply that we are better off (seemingly) than Europe. How long this whole house of cards will stay together is the question, I’m still holding out for next summer at the latest, more time to be prepared.