Seeking Alpha

Deep into the middle of the night in Brussels, EU leaders are still at work, but what has...

Deep into the middle of the night in Brussels, EU leaders are still at work, but what has emerged doesn't sound good. Reuters reports diplomats saying treaty change for all 27 states isn't happening, but is still alive for the 17 nations that use the euro. A sizable rally in stock futures has reversed, with the S&P down a hair after being up about 0.8%. The euro gives up about a 40 pip gain since the NY close.
Comments (23)
  • J 457
    , contributor
    Comments (947) | Send Message
     
    S&P downgrade over the weekend?
    8 Dec 2011, 10:59 PM Reply Like
  • Tack
    , contributor
    Comments (12765) | Send Message
     
    Omigod, an S&P downgrade. The world might end, just like it did for U.S. Treasuries.

     

    Oh.... that didn't happen, did it? Rates are lower now than before the U.S. downgrade.
    8 Dec 2011, 11:07 PM Reply Like
  • sean.parmelee
    , contributor
    Comments (790) | Send Message
     
    Tack, whether you or the bond markets consider it rational or not is irrelevant. S&P's downgrade clearly precipitated a huge decline in equities, and fear of European downgrades has catalyzed similar declines since then. Markets are irrational. Those of us here who trade on a very short time frame take this kind of thing seriously.
    8 Dec 2011, 11:30 PM Reply Like
  • Tack
    , contributor
    Comments (12765) | Send Message
     
    SP:

     

    The downgrades are as certain as the sun rising, so plan accordingly. These agencies are helpless to avoid assigning downgrades almost everywhere, just because it will make them feel better.
    8 Dec 2011, 11:33 PM Reply Like
  • sean.parmelee
    , contributor
    Comments (790) | Send Message
     
    Agreed, and the dumbest part about it is that they issue the downgrades months or even years after it becomes clear that the subject's creditworthiness has lapsed.
    8 Dec 2011, 11:44 PM Reply Like
  • Tack
    , contributor
    Comments (12765) | Send Message
     
    SP:

     

    They're precisley like their equity counterparts, who tell you to buy when something has risen 100% and sell when it's fallen 75%.
    8 Dec 2011, 11:48 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    and if you listen to people who claim that no company can have higher credit rating than its home country, U.S. getting downgraded to AA+ was like having *all* U.S.-based companies getting downgraded to AA+ (never mind that many private companies held onto the nominal AAA rating). That can't benefit risk assets, and we all know what that ends up benefiting (ironically).
    8 Dec 2011, 11:52 PM Reply Like
  • stalker001
    , contributor
    Comments (6) | Send Message
     
    Why would we trust our retirements to something irrational?
    9 Dec 2011, 01:36 AM Reply Like
  • sean.parmelee
    , contributor
    Comments (790) | Send Message
     
    Markets are only irrational in the very short term. In the long run, they're about as rational and efficient as you could hope.
    9 Dec 2011, 09:33 AM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    I cannot even begin to describe how sick I am of this thing. For almost two years now everything hinges on a bunch of politicians and what they may plan to do next. They go to the greatest lengths to not use the one remedy that would help, namely the ECB. I guess it will take a lot more pain before that happens. Look for the next crucial EU summit in about 2 weeks.
    8 Dec 2011, 10:59 PM Reply Like
  • Eric Stalee
    , contributor
    Comments (91) | Send Message
     
    March actually. But Italy/Greece will probably default before then.
    8 Dec 2011, 11:33 PM Reply Like
  • bdarken
    , contributor
    Comments (417) | Send Message
     
    Everyone's sick of it.  Aren't the Europeans too?

     

    Even though the EU is an expensive and obvious failure, the big countries have made this big bet...and they're so invested in the EU dream that none of the big countries are willing to fold their hand----even though they're  hemorrhaging ... to neighboring people.

     

    So I keep wondering if we're on the cusp of some smaller nation, throwing up its hands and pulling out of the whole EU experiment. We'd get one small one. Then another small one. Then FR/GDR have the excuse they need to walk away: "....THEY don't want it so why should our people continue with this?"

     

    All it takes on one tiny country to fold and walk away, and it will give the rest the license to fold as well.
    8 Dec 2011, 11:33 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (5788) | Send Message
     
    Well nobody really expected all 27 countries to go along. All that matters is the 17 in the EU. That will happen with Germany and France already on board.
    9 Dec 2011, 12:34 AM Reply Like
  • bdarken
    , contributor
    Comments (417) | Send Message
     
    Okay...maybe Britain isn't "tiny" but they certainly pulled thier card out of the EU house of cards:

     

    http://bit.ly/vLU0dc

     

    Who's next, and how long will it stand?

     

    I read somewhere Germany is back printing deutschmarks....
    10 Dec 2011, 06:40 AM Reply Like
  • mP1
    , contributor
    Comments (386) | Send Message
     
    What possible advantage to their business do these agencies gain by offering these analysis....Simple answer none, therefore the obvious advantage is gained by manipulating listening fools while playing.
    8 Dec 2011, 11:13 PM Reply Like
  • IncomeYield
    , contributor
    Comments (1462) | Send Message
     
    If the Europeans are sick of it they need to step up and take the pain. Increase retirement age, decrease benies, ...
    8 Dec 2011, 11:37 PM Reply Like
  • Eric Stalee
    , contributor
    Comments (91) | Send Message
     
    Let the banks fail like they need to in true capitalism...
    8 Dec 2011, 11:38 PM Reply Like
  • torahislife
    , contributor
    Comments (400) | Send Message
     
    But they're not true capitalists. Regardless, the market will have it's way and make them pay.
    8 Dec 2011, 11:42 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Regardless of EU17 agreements or not, it still does solve any funding issues. Where are the multi-trillions going to come from to rollover sovereign debt, rollover EU bank debt, recapitalize EU banks, etc? Sovereign debt rates still high and unsustainable and less and less willing lenders. The funds just are not there, regardless of agreements.
    9 Dec 2011, 12:53 AM Reply Like
  • Tack
    , contributor
    Comments (12765) | Send Message
     
    UI:

     

    They (the Germans) can deny all they wish, but their two options are:

     

    1) print euros to prevent defaults

     

    2) allow defaults, and print euros to recapitalize banks
    9 Dec 2011, 01:04 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Tack,
    Basically that is probably right, but the far better alternative is to force defaults and then print as needed to recapitalize banks. Nevertheless it does not address the many structural issues in the EU. Just as all the actions by the Fed did not substantively address the major structural issues in the US either.
    9 Dec 2011, 03:03 AM Reply Like
  • hcpmark
    , contributor
    Comments (4) | Send Message
     
    Hang on, it's not over yet. I believe there is a monumental game of chicken going on in Brussels. They all know that it is in everyone's interest to at least APPEAR to be proposing a real solution, so look for something by morning that proposes a short term formula that contains greater ESF funding with some concrete penalties for profligate spending and a longer term amendment to the Eurozone agreement that will placate the Germans. This should be followed in a few days by a comment from the ECB hinting at more flexibility. Rationale: These people may be incredibly stubborn and even shortisighted and nationalistic, bur everyone realizes that this time they are staring catastrophe in the face.
    9 Dec 2011, 01:39 AM Reply Like
  • mP1
    , contributor
    Comments (386) | Send Message
     
    I believe the real answer is the ez govs cannot do anything, they are just waiting for the eventual in their own special ways. For a variety of reasons theres just too much complications, deadlocks, hurdles that mean they cannot effectively create solution in time that actually works.
    14 Dec 2011, 05:53 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|