Words are important. Not only do they have a specific definition (denotation), but they carry with them connotation, an implied or suggested meaning, if you will. The word “if” has a specific meaning, (in the event that), but with that meaning comes a sense of ambiguity on the negative side and on the positive side, a sense of possibility …
If confidence returns to the [European] markets and banks become less fearful, a huge bounce in asset prices is possible. Some believe that the slow build-up of cash at the ECB creates the potential for a massive asset binge should nervousness ease and bank funding stabilize.
I know, I know, Europe this and Europe that. I am stuck. I can’t help it. In my little world, Europe and its problems appear every single day. Oh my! I need to get out more – apparently, it is not just my little world into which the problems of Europe pop every day. It seems the whole big world is getting a big dose as well. So much for my egocentric view, I guess.
In any case, Europe’s plight is keeping us sitting on a thin razor’s edge with little to do but keep our balance or to look for a safe place to fall. Although I have peeked down to see what is below (a safe place to fall), I am literally stuck on the “possibilities” connotation of the word “if.” If this European “thing” can get on a solid path toward resolution this March, the possibilities for “the big one” are much more real. And when I say “the big one,” I am not referring to the Californian’s connotation (the doomsday earthquake); I am suggesting a huge bull rally, perhaps, even a huge bull run lasting for some time and taking us past the former highs of 2007. How do you spell relief, as the old commercial asked?
Mind you, this is not a prediction. I am simply saying that “if” Europe can put this debt scare to rest, it will lead to restored confidence in the largest economy on the planet, and that will lead to a pickup in European consumer and business spending, which will dovetail nicely into the building momentum of the U.S. economy and the easing economic policies of China, the two largest European trading partners. I know it is a big “if,” but, as I said, I believe the possibilities outweigh the ambiguities. I suspect I am not alone in thinking this. If I were, where do you think the market would be today if investors actually believed Europe would fail to get through this, its biggest crisis since WWII?
- Italy’s goal of refinancing some 90 billion euros of long-term debt by the end of April is beginning to look within reach after months when the weight of its debt burden looked likely to tip the euro zone even deeper into crisis.
- The Eurozone cleared a major funding test on Thursday when Spain romped through a key bond sale, while signs pointed to only a mild recession for the 17-nation bloc.
I understand the looming dangers in this process, and that Europe’s fiscal issues are large and complex, and that it will take years to actually fix them, but the market cares little about the long-term. It moves on both perception and reality, and the market’s connotation of the latter word revolves around getting in (or out) before it is too late. Reality for the market is not what is, but what will be in the near term. Now that I think about that, I realize that perception and reality actually carry the same connotation for market players. You see, words do matter, especially if the connotations are more important that the denoted definition.
Trade in the day – Invest in your life …
