I didn't like the last few minutes where the Dow gave up more than 100 points, but I can't complain too much as stocks have finished higher for three straight days, and it feels like three straight weeks. Europe's drama has taken center stage as we wait for the next round of fireworks from the Fed, the Super Committee, White House (big refinance deal on drawing board) and the update on jobs data (shouldn't be hard to be zero). I find it amazing that markets settled down as rumors of a China bailout persisted. One Chinese official called it absurd since it would mean a country with per capita income of $4,000 is bailing out nations with per capita incomes of $40,000.
It goes to show just what can be done when people buckled down for decades and do with less, save half the money they make even when it's pennies, and wait until they have trillions in the bank to make their move. It also goes to show just what can be done when people feel entitled and spend like crazy for decades because they would never do with less or save any money they make or receive even when it's billions, so they gorge until there's nothing and then make their move. These moves seem to be colliding. As those decadent European nations that squandered greatness and fortunes are now sniffing around up and coming nations are being looked to for bailouts.
Of course, to get this money these nations known as PIIGS will have to give up a lot beyond financial sacrifices. Yesterday, Wen Jiabao said "indebted nations must not rely on bailouts" but added "countries must first put their houses in order" before getting any outside help. Late in yesterday's session gold sold off big-time in part to rumors some of the nations in trouble might have to sell parts of their holdings. I'm sure that's not what the Chinese leader was talking about, but it underscores the fact that a lot is going to have to be given up to get help. There is an amazing irony to all of these as these old would-be saviors are still relatively young as independent nations.
As it turns out, finance ministers from BRICS nations will have a side meeting when the World Bank and International Monetary Fund gather in Washington, DC on September 22. In so many ways, this is bizarre and so improbable, and yet the news helped stocks post one of their best days in weeks. This is a wakeup call for America, and one where we can't look the other way or look backward at past glory. But, pieces are in place right now, and there is only one way to change what is becoming an unavoidable future.
But, there is also a lesson about hunger. Greece, Italy, Spain, and Portugal have glorious histories of global domination, but as their dominance faded they lived a lie through political systems designed to make everyone feel a sense of power when in fact all the real power of free markets, entrepreneurship, and ambition was being snuffed out. Who's going to make up the collision that bails America out twenty years from now? Mexico, Turkey, Singapore, and Indonesia are on the right track to be our BRICS rescue team by then. The headlines will read: "MITS Bailout USA!"
The closest America ever came to colonizing was the Philippines when it toyed with the idea after winning the Spanish-American War. But, those European countries currently sinking once enjoyed colonial outposts, which add an interesting twist.
For now, it looks like Greece will stay in the euro and not default based on comments from Sarkozy and Merkel, who said they're "convinced" Greece will stay. But, a Slovak lawmaker suggests Greece should bailout of the euro and default on its debt because their problems will not go away.
Home Sweep Home
It looks like banks have gotten over their self-imposed ban on issuing default notices as there was a spike in August to 78,880 from 59,516 in July. Repossessions actually continued lower, dipping to 64,813 from 67,829. The news isn't impacting the market as default notices are still down from a year ago, and it's unclear if this spurt higher will gain momentum or level out. Plus, nobody is hopeful on housing improving too dramatically anytime soon.
The market has reacted to disappointing economic data from initially jobless claims to Empire State Manufacturing to Consumer Price Index. We will have in-depth analysis of all these numbers in the afternoon update. For now, the CPI was too hot, jobless claims too high, and Empire State too flaccid. We get the Philly Fed report later and that probably makes or breaks today's session.
This is what a Market is all about
By: Brian Sozzi, Equity Research Analyst
The very fabric of what makes a stock market is differing opinions between parties that have their own financial agendas at heart. Now is a great example of the classic push and pull inherent to markets at work. As I see it there are a couple of crowds:
The liars: It amazes me how many people have been "in cash" since late July. I would love to see their books because to be frank, I don't believe a lick of it. The liars will magically maintain their overweight on cash until they don't...and that is when the market sustainably turns higher.
The non-believers: These are also called "perma bears", who have continued to be negative on the market since March 2009. No matter what the outcomes are for the EU sovereign crisis, this crowd will continue to pump their doom and gloom global macro scenarios. At points of market stress, they will come out and thump their chests that they were right, even though we all know they have been generally wrong.
The realists: I fall into the realist category, acknowledging that while significant problems with the EU remain unresolved (jawboning by officials from France and Germany is not actual action; market forces may overcome the positive commentary yesterday afternoon on Greece) there will be opportunities to trade the market. In order to do so with success, a heightened awareness has to be paid to the mood of the market and the daily news flow. This is especially the case in non-earnings periods, where macro developments become significantly amplified. Note that we have rallied a bit off the August 9 intraday lows in the market; for all the talk of global demise, no EU countries have seceded and there were a few positive domestic macro data points earlier in the month to support the view that Augusts' malaise was a hiccup, not the start of a depression (David Rosenberg of Gluskin-Sheff yesterday noted we are in a "depression." Going to have to disagree with that assessment...I don't see people lined up for food or mid-teens unemployment).