Daily State of the Markets
Wednesday Morning – December 7, 2011

Publishing Note: Dave is otherwise occupied this morning so his friend and colleague Curtis Bergquist is filling in for him.

Good Morning. The latest grand plan to save the Eurozone would have the 17 member states becoming an increasingly close knit family. Here’s my take on how the latest episode of “All in the Family” is likely to play out. And I’ll apologize in advance if you’ve seen this one before as this show has been in reruns for quite some time now.

Mom and Dad “Merkozy” announced that they really are getting along just fine now and have agreed on a wonderful new “Grand Plan” to save the family.

Of course details will be provided later. But for now, their thinking is that over-spending members of the family will be required to ask for prior permission and not for later forgiveness. Somebody, it could be either Grandpa Merkel or Grandpa Sarkozy (“the European Council or the European Court of Justice), will act as the responsible patriarchs and at times, “just say no”.

The problem appears to be that the “kids” must agree to accept any new arrangements put into place on their behalf and given that most of them are at that rebellious teenager stage, this could be an issue. As any parent knows, rambunctious children tend to focus on themselves to the almost total exclusion of all else. So Sister Finland might just not be thrilled with this whole idea. Remember, she didn’t really want to help her brother Greece out. Brother England thinks the plan could be fine as long as his current lifestyle isn’t really affected. The siblings in the south aren’t so sure this will really be a workable solution and have asked annoying questions such as exactly what is a prudent deficit and who gets to determine the answer?

Then we have Aunt Moody’s and Uncle S&P (always such grumps) raining on the parade with their continual cautionary warnings from afar.

Finally, Grandma ECB is getting totally exasperated with this family squabbling. She has always been such a soft touch, especially for birthdays and around the Holidays. But now she talking about giving socks and self-help books as gifts instead of envelopes stuffed with cash.

And then there are those cousins who used to be so willing to help the family with a little loan now and then. It used to be that all you had to do was ask. Now they actual want the family to pay them back. Worst of the lot of course is that darn Vigilante branch of the extended family tree. What an annoying bunch of “know-it-alls” telling everyone that the family isn’t “good for it” and that they should get a little extra something when they get paid back, if they ever do. It’s not really little brother Greece’s fault, he just can’t help himself.

At this rate the family’s Holiday party could be a very dispirited affair.

With the markets having rallied strongly on the hopes of a quick, easy, comprehensive and painless solution to the crisis the chances for disappointment seem to be rising noticeably. I am leaning towards the thought that this current scenario will play out as another example of “Buy the Rumor, Sell the Fact”.

But that’s just me.

Turning to this morning…Pessimistic talk out of Germany appears to be raining on the Bull’s parade as there are a number of reports about the potential for disappointment at this week’s EU summit. Stock futures in the U.S. are basically following Europe and have now turned from green to red.

On the Economic front… There are no important economic releases scheduled for today.

Thought for the day… Remember that it pays to be open minded (in more ways than one)…

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell…

  • Major Foreign Markets:
    • Australia: +0.69%
    • Shanghai: +0.29%
    • Hong Kong: +1.58%
    • Japan: +1.69%
    • France: +0.01%
    • Germany: -0.27%
    • Italy: -1.47%
    • Spain: -0.94%
    • London: -0.19%
  • Crude Oil Futures: -$0.40 to $100.98
  • Gold: -$4.00 to $1727.80
  • Dollar: higher against the Yen and Euro, lower vs. Pound
  • 10-Year Bond Yield: Currently trading at 2.072%
  • Stock Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: -5.04
    • Dow Jones Industrial Average: -54
    • NASDAQ Composite: -6.00

Positions in stocks mentioned: None

For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com

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