Submitted by Mark J. Grant, author of Out of the Box,
“…and tomorrow looked in my face more steadily than I could look at it”
-Charles Dickens, Great Expectations
Tomorrow is not the ordinary run-of-the-mill tomorrow. It will not be a day like all others trapped two days ahead of yesterday and one day ahead of today. September 18 is a twenty-four hour period earmarked with the possibilities of change far past the normal occurrences of stepping from one day into the next and it will be eyes wide open and not half-shut as the markets appreciate what may be coming our way.
The least of the events will be found in Italy. There is a vote on Mr. Berlusconi remaining in politics and, if pushed aside, the old badger may roar loud enough to send the government of Mr. Letta into the annuals of history. I do not discount the prominence of the man or his very Italian temperament and Rome may once again shake the porticos of the European markets. Perhaps Mr. Berlusconi has been studying Nero and we shall see what burns and then what is left in ashes.
When I look at the European Union it is not the EU-17 and each country one amongst many. This is the façade that the Continent tries to play charades with for its own particular purposes. In my mind it is Germany and then sixteen other nations that follow in its path that is the correct way to understand the dynamics of European policies. For the last six months the mantra has been that peace and harmony must prevail so that Ms. Merkel can be re-elected and so that the unbroken road of the last several years continues. The answer will come on September 22 and then the bratwurst and the beer and the few days of celebration. No dirges of Wagner will be allowed. Then the problems of Spain, Italy, Portugal, Cyprus and Greece will re-surface and the harsh reality will be dealt with in a much stronger fashion than before the German elections. That is my opinion. Playtime will be over and time-outs will be demanded. This is but a few scant days after tomorrow.
A very soon tomorrow will bring the decision of the Fed concerning tapering into focus. Ok, a kind of fuzzy, hard to see and wispy focus. The one thing that I can assure you of is that whatever is to come our way it will not be a singular event. You will hear from the imbibers of Cool Aid and other mischievous reality altering drinks that it could be a one-off event. Tomorrow a process will be started, it will probably go in fits and starts but do not blind yourself; it will be the beginning of the journey to cut back on the propping up of the markets by the Fed. The boys in the bond pits, real and imagined, have already got the joke with the long end of the curve correcting into the announcement while the equity boys cheer at the Summers’ hike and pretend that their game has no ending. My guess would be, after the announcement, that equities decline and bonds rally as the folks in Fixed Income understood the punch line first.
I have long thought that the stock markets have been propped up by the largesse of the Fed and their $100mm monthly tithing. If the prop, in part, is to be removed then the old man on his crutch may not be quite so stable. It has been a great experiment, perhaps even a grand undertaking but now the game has reached the ninth inning and while extra innings lie in the hopes and prayers of many that is not the bet I would make.
We do not live in tomorrow. We cannot find it in any of our title-deeds. The man who owns whole blocks of real estate, and great ships on the sea, does not own a single minute of tomorrow. Tomorrow! It is a mysterious possibility, not yet born. It lies under the seal of midnight–behind the veil of glittering constellations.
-E. H. CHAPIN, Living Words
So tomorrow we shall see what comes. I will be here to share it with you given the grace of He that might be able to see into the future.
Full steam ahead!