Is the EU Crisis just noise to US markets? All this volatility and endless EU headline tape bombs and the US market barely blinks. Now here we are with 30 trading days to year end with the SPX a paltry 110 points from year highs. Is the SPX going to ignore Europe in favor of its typical year end melt up? Markets continue to confound and amaze. Perhaps the bears will have to wait for spring...
What's wrong with Europe? There's a lot of BS floating around. Europe is in recession, they say. From the news I've seen, Europe is in the front end of a recession. That doesn't mean Europe's gonna go into a recession, nor does it mean it's in recession. They keep fixing Greece, which is a fraction of Italy. I hear Italy & Spain are solvent. Italy's debt is paying 8% or so. That's not so bad. Illinois is in the teens, and Illinois isn't broke - yet. The bears were wrong in 2010, and so far, they're wrong in 2011.
Yes. I find myself reading alot of ultra bearish blog posts all day on ZH and BI wish tends to cloud my judgement. I suspect this is a community wide phenomena that traders are really not tuned into yet. The market always knows...
Mainly it is just noise without substance. Not only relating to US but in general. Surely Greece is toast (spent too much, insufficient GDP). But the other countries (Portugal, Ireland, Spain, Italy, France) are quite healthy. In some aspects GB or US show much worse numbers (debt). But some big players obviously found out that the EU has a soft spot: When these players manage to provoke a rate hike for the bonds of one of the smaller countries the bigger countries have to jump in and bring the rates down. In other words these are fail safe trades: - Go long bonds of a "week" country - Spread panic over media - Bonds surge When european governments act to bring rates down (this will never come by surprise): - Exit long positions (partially), go short with a smaller portion. - Start a new cycle, exit short, go long again
I think the pricing mechanism is somewhat broken since the prevailing sentiment is that the worse things get, the more central banks will intervene. Hence, the market is caught in limbo between the reality of low to no growth and the alphabet soup of various subsidies, bailout funds, monetary stimulus, etc, etc... Hence, the entire market is driven by headlines with the good cop, bad cop routine.