No long-term solutions, but some improvement
The market has reacted in its most manic-depressive way to the deal announced in Europe last week—and for good reason. In classic European fashion they have bent their own rules enough to fix the short-term funding problem, while at the same time doing next to nothing to fashion a long-term solution.
So here’s what we have:
1) Banks in Europe get practically free money for the next three years, which probably removes a Lehman style blow-up.
2) The Euro took one giant step toward death, because the “non-Euro” European Union members, led by Britain, made it clear they are not interested in bailing out any Mediterranean countries.
This is a short version of what happened, but for a more exhaustive study we’ve attached five articles from GaveKal, the Hong-Kong based research group. Three authors give their views on what took place and how things might play out in the future. It provides clients with, what we think, is the best summary of the European crisis and it also let’s you see what we are reading.
So Europe is headed for a deep recession, but there is now a way for the Euro to be replaced by other currencies without taking out too many innocent bystanders (like us).
The path of least resistance for the US stock market is up for now, but our confidence in this assessment is low. Risks remain high and we will continue to hold our income producing investments, while we put equity allocations into businesses that can grow in just about any economic environment.
Best regards,
Daniel A. Ogden
