It seems like the whole world is expecting Ben and Mario to ride in and save the day with yet more stimulus. But to what effect, I wonder. Is a short-term rise in the market a cure for the basic disease of too much debt? And, as today’s Outside the Box hilariously points out, it can even make things worse.
Joan McCullough is perhaps my favorite curmudgeon. She writes so freely and with such style and feeling, but she also gives us such exquisite bits of information that no one else seems to find. Today, as I sat in a Denver hotel, I read her and just had to laugh a few times (mostly to keep from crying). She can be a tad hard on sensitive nerves, but we are all adults here, right? Be forewarned, though, that while she may pokes at someone you don’t like today, tomorrow she may be pointing out the issues with your guy. She is an equal-opportunity skewer.
Today she has Ben and Mario in her sights, and toward the end the poor Department of Labor incurs her wrath, too. On this both Joan and I agree: Europe is going to end in tears. The longer they keep piling up debt, the worse it will be. Their choices are Disaster A and Disaster B. Try to avoid both and you get Super Disaster C.
Joan has been trading and pontificating for longer than most of us have toiled and has forgotten more than I have ever known, assuming she ever forgot anything. She works with East Shore Partners, and God Bless them for giving her free rein to write as she sees fit. The wire-house boys would just die.
But before we hand it over to Joan, here is a quick paragraph from Yanis Varoufakis, writing about Greece at http://yanisvaroufakis.eu/2012/07/28/23-crucial-days-for-greece/. This shows just how absurd things are, and also how pernicious. The Greeks are paying back the ECB on the backs of Greek and other European taxpayers. Just to keep the game going. This is wrong on so many levels.
On 20th August, the Greek government will have to borrow 3.2 billion from one arm of the Eurozone (from the EFSF) in order to repay another (the ECB). Yet Greece is insolvent. The very idea of an insolvent entity borrowing more from a community, like the Eurozone, in order to repay that same community is obscene. All it does is to shift the burden from the Central Bank to the taxpayers of Germany, Holland, Austria and Finland. This is not an act of solidarity with Greece. It is an act of irresponsible kicking-the-can-up-a-steep-hill. The simple point I have been trying to drive home for a long while now is that the Eurozone must make a simple decision: Either to give Greece a proper chance of exiting its current death spiral. Or to dump Greece now, before the Greek state loses all its remaining assets and before it gets deeper into debt. And if our Eurozone partners are not prepared to make up their minds (caught up in their own short term concerns and shenanigans), then Athens must force their hand to decide within the next 23 days. How? By announcing that Greece will NOT be borrowing on 20th August monies it cannot repay under the present scheme of things.
I am speaking tomorrow at the Financial Advisor magazine conference for my partners Altegris Investments. But first I get to be a groupie and meet George Will, who is one of the truest wordsmiths of my generation. Tonight there will be a dinner and then some fun with Altegris partner and old friend Dick Pfister and his team.
I fly home and then on to Maine to be with many more friends for the annual Shadow Fed fishing-camp meeting. I think I will be on Bloomberg at 6:30 AM with Tom Keene (he may be the only one awake!) and then on with Mike McKee at some point. They will be cutting away to Maine throughout the morning, so you might want to tune in. Some good commentary on the employment number should make for some fun TV and radio. They do tend to change the schedule at the last minute, but it will be good whatever it is.
Time to hit the send button. Good friends (including Vitaly Katsenelson) are waiting. Have a great week, and the letter will be heading your way Friday from Maine.
Your shaking my head at Europe analyst,
John Mauldin, Editor
Outside the Box
Tuesday, July 24, 2012 All red is mine. All times ET.
Joan McCullough, East Shore Partners, 1-212-226-1223
Trading: 1-800-222-8723 firstname.lastname@example.org
… “Such supplementary interventions [by the State], which are justified by urgent reasons touching the common good, must be as brief as possible, so as to avoid removing permanently from society and business systems the functions which are properly theirs, and so as to avoid enlarging excessively the sphere of State…