Gluskin Sheff’s David Rosenberg: The Four Horsemen
We have identified four major downside risks for US growth over the next four quarters:
1. More adverse news out of Europe
Sorry but the situation in the euro area remains highly unstable and the fact that financial markets gyrate so violently with every passing comment from Mario Draghi says something about the manic mindset of today’s algorithm-dominated fast-money backdrop. Never mind that the ESM isn’t even up and running yet, didn’t you know that the scuttlebutt is that it will be granted a banking license, suck off the ECB’s teat, and save the (failed) eurozone experiment. This is actually beyond the ECB’s purview and in the final analysis this will be a political decision. Every German knows what happened in the 1930s and anyone with a keen sense of history knows that Germany is never going to vote for outright debt monetization. What one can reasonably expect at some point is a partial fragmentation of the nonsensical monetary union.
As the FT so aptly put it yesterday:
The reason; however, that the eurozone issue is such a challenge to the markets is because it is ultimately a political issue, whose outcome carries both serious short term risks and profound long-term consequences — none of which plays to professional investors’ traditional strengths, or particularly suits their preferred methods of analysis. No wonder everyone is praying that one way or another it will be over soon.
Well, maybe we should pray and prepare for the inevitable — see US. Banks Prepare For Euro Break on page 13 of yesterday’s FT and also dig up and have a look at U.S. Banks Haunted By Specter of Eurozone on page 15. But here is the real kiss of death —Rome Has No Flans for Cash Request on page 4. From the sublime to the ridiculous. The article states that:
Italian policy makers have sought to assure financial markets that Italy is in good shape and has no intention of making an early request for intervention by eurozone bailout funds; at least not unless Spain goes first.
We’re supposed to find encouragement from that, especially those last seven words?
And didn’t Spain tell everyone loudly three months ago that it too would not be in any need of external financial intervention?
2. The sharp run-up in food prices