In the financial world, no news is good news. By that measure, boy are things bad.
That’s not to say it’s the end of financial life as we know it, but reading the news out of Europe you might come to that conclusion. What’s astonishing is the growing feeling that the public cannot and should not take on socialized risk any longer, meaning that banks are going to have to fend for themselves. The same medicine appears to be popular for nations that have run up huge tabs.
This is no longer about Occupy Wall Street or even Occupy Main Street. This is turning into a worldwide rebellion.
Of all the news today the most important is Greek Prime Minister Papandreou’s announcement that the brokered deal made up of a 50% default with a 50% bailout of Greek debt would be put up to a referendum. This deal is extremely unpopular at home because it also requires serious belt tightening as Greece moves towards a balanced budget. While most of Europe was talking about how to rescue Greece almost no one got around to asking the Greeks if they even want to be “rescued” in the first place. Papandreou, a wily old politician, apparently decided he was not going to shove this down his nation’s throat – probably more to save his own hide than out of any noble instinct. The result is even more delay for the years-long crisis and rising chaos in Greece itself as the government first has to survive parliamentary procedures.
That’s bad enough as it stands. But the inability to solve the Greek situation has raised questions about what will be done with Italy, a problem on the order of €3.5 trillion as a worst-case. Wanna talk about “too big to fail”?
The G20, or 20 largest economies, are meeting in Cannes and this will be on the top of the agenda. Europe will probably ask the US and the developing world to pitch in. Yes, there is a good chance that Brasil might help bail out Europe. That’s how strange it’s gotten.
Caught up in all this is MF Global, a horribly named investment house gone horribly wrong. They bought up a lot of Euro debt that looked like it might default very cheap, a play that would have paid off if the Euro crisis had been solved with a big bailout. It has to be the worst bet in the history of making very bad bets. They were financed by JP Morgan, which has been remarkably public about protecting its rights in bankruptcy court. This story has a “where the is smoke there could be fire” feel to it that could play out badly. At the very least, we may yet get out of this story why Big Boyz like John Corzine, partner at MF Global, have been willing to throw the dice so hard for an expected bailout. Stay tuned.
While the leadership crises of various kinds play out, there is some good news here in the US. Jobs are being created – not at a rapid enough clip to end unemployment, but upwards of 100k per month. We saw this same result in September and had to wonder if it was a fluke after a flat August, but the pace apparently continued in October. Leading the charge are smaller companies, which appear to be hiring faster than large ones right now. Big companies have fewer planned layoffs through the end of the year as well, meaning that the “churn” of restructuring may be moving towards general growth. It’s still slow, but it’s going the right direction.
But any turnaround is happening without leadership of any kind. Politicians are stuck bailing out big institutions of various kinds while the people of this nation are getting on with the business of ending the Depression on their own. It’s enough to make a Libertarian out of anyone.
Small companies hiring a few people to expand and keep up never make much in the way of news. What gets the media’s attention is what happens to big companies and nations, which is to say that the news is likely to be lousy for a long time. We got through October with remarkably little news and a few decent days on Wall Street. November? Not been a good one so far. Perhaps its best to not stay tuned after all.