Contagious Times

"Contagion" is the new key word in markets. And risk aversion is a natural consequence. Hence the flight to the US Dollar, and Gold

The Europeans are struggling to keep their act (and their currency) together, even as Ireland stutters through the economics and politics of trying to get a basic bank rescue fund in place, and the IMF (as well as the rating agencies) even marginally satisfied. Irish, Portugese, Spanish, and Greek bonds are trading at life-time high yields. Markets are quick to focus on Spain (and the other peripheral European dalliance partners) even if they scent an Ireland rescue coming together (if the Irish Government that negotiated this rescue even lasts to be able to see it through!). Meanwhile, in a finalist slot for understatement of the year, the Irish central bank governor Honohan says that “confidence in the banks and government is well below what is justified”.

Germany’s Merkel says the Euro is in an "exceptionally serious situation, there is no alternative to German budget austerity"; she sees at best 'decent' German GDP growth soon. Merkelisms otherwise focus on the post-2013 Euro rescue system (while markets worry about how we will even get there in one piece) as she pontificates that it “must involve investors but politicians need 'primacy' over markets”. German Finance Minister Schaeuble weighs in with “Germany is not swimming in money but drowning in debt; the future of the joint currency is at stake”. Even as I write this, that currency (the Euro) is as close to bid-less today as it can possibly get.

Otherwise, things are okay. To paraphrase various literary pieces today "The Koreans are back in ‘explosive mode” throwing loud things around, the FBI is serving hot warrants around the Street, and everywhere you look you see a sea of joblessness, a housing market that remains very soft, absolute records in deficits, two open-ended wars that have got off the front pages for a bit, an im/exploding mortgage-backed securitization problem of gargantuan intensity, the Federal Reserve continuing to print money as its predominant tool of considered monetary policy, many US States and municipalities in doomsday-level financial peril...."

Not much fun out there folks, even as we head to a Thanksgiving break. If anything the Thanks may just be due for the break !

Jaidev