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Tuesday, June 12, 2012

Market Thought... no euphoria

Were the actions over the weekend meaningless?  I don't think so. Seems like Europe is rolling out their version of TARP, to finally stem their bank runs.

Of course, looking at this from the perspective of debt-on-debt, it sucks. But the debt-on-debt view is kind of disingenuous because it ignores the actions taken. It ignores:

1. major structural reforms

2. a willingness from the ECB

3. Germany has toned down the austerity chatter, and is showing a willingness to now entertain the progress of a Eurobond and experiment. 

I try to be as objective as possible.  Since my 're-evaluation' post there were a few developments:

1. US jobs payroll numbers were crappier then desired. (Although the jobless numbers were okay.)

2. China's PMI was also crappier then desired.

3. The above EU developments. (I view them as pretty good.)

Economically speaking, the bears have a good reason to tout their thesis.  Especially if the US jobs data continues to be crap, and China does not pick up.  But valuations matter, and China will be politically forced to tap their +3Trillion in reserves if need be.

I am a surprised US banks did not rally today. Knowing the EU banks will not cause a domino effect, and the US housing data continues to improve, I expected the US banks to start making up some lost ground and start pushing towards book value again.  Which would mean GS pushes toward 120-130. (Normally I would think JPM should start approaching 46, but they have to work out their trading mess.)

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