There appear to be three critical aspects playing out behind the scenes in markets that are little discussed as potentially catalyzing events. With all eyes focused on FOMC next week (and Kuroda Sunday), the ABCs (Angela Merkel's election, Bankrupt Detroit's fallout, and Corrupt Cohen's potential contagion) make few strategists' notes but could quickly ascend to public enemy number one for the secular bull case.
Via Mark J. Grant, author of Out of the Box,
“The two most important days in your life are the day you are born and the day you find out why.”
-Mark Twain
It is odd you know. Each day has twenty-four hours and yet one can end so quickly while another can drag on for eternity. Most days are a blur and hardly remembered while some singular days will never be forgotten. One day is a blessing while another is a curse and sometimes it takes courage and bravery to cross the line between one day and the next.
I mark September 22, 2013 as one of those singular days. This is the date of the German elections. There is no wizardry afoot here but deduction based upon fact. There is so much in Europe that has been swept under the rug so as not to upset Ms. Merkel’s remaining in power and, once accomplished, so many dirt balls and fuzzy wumpkins that will come crawling out from underneath the carpet that all of the king’s horses and all of the king’s men couldn’t properly clean up the room.
Greece, Cyprus, France, Italy, Spain and Portugal will all crawl out from the dust bin and dance along the tattered rug shouting, “Remember me?” There will be European banks aplenty at the regalia who will arrive unannounced and unwelcomed. It will not be WikiLeaks but EuroLeaks that come to the center of our attention as Germany changes its tune from the light and the airy to the dirges of Wagner.
The aria of “Happily Ever After” will be a lilt remembered after September 22.
In the meantime we will face the scourge of the SAC massacre. Not even Berlin can prevent this fallout I am afraid. It is going to be one mother of a massive liquidation and I do not believe anyone is prepared for it.
SAC will attempt to hold at the borderline but the scavengers of the marketplace lie in wait for the fetid meat to be thrown to the wolves and the air will become rancid with the offal offered. Just how bad it will become is unknown at present but to not think it is coming is a childish dream. Great care is advised.
Detroit is another subject that will change the landscape. It is likely, in my opinion, that the fallout from the inability of a Municipal pension fund to not pay its retirees will raise a cry to create new laws with criminal liability for those elected officials that oversee them. There will be more laws, more regulations and greater accountability demanded with State laws and perhaps Federal laws that attach criminality to mismanagement. This will change the operations of many municipalities and worsen their financial conditions as they fund more of their pension funds at the cost of providing civil services. Higher taxes are likely to result and Detroit will set a new and different kind of template for owners of Municipal Bonds.
Little Red Riding Hood thought it a lovely day to walk to Grandma’s house. Then look what happened.