So, what next?
Yesterday we had a bit of a dip, but nothing tragic and this morning Europe is down half a point (China closed all week and Japan is just silly) on TERRIBLE PMI reports across the board and the PMI for the EuroZone hit 20-month lows indicating growth has slowed to its weakest levels since before the ECB unleashed its stimulus program in March of last year.
Now we know how long massive stimulus can prop up the markets – 20 months – then the clear failure resumes. Once again it is obvious that the UK's Brexit was merely the first rat with the good sense to get off a sinking ship.
We all know about Deutsche Bank's (DB) horrific troubles but Credit Suisse (CS) are down from $27.50 a share last summer to $13.39 at yeasterdya's close and while we may have some faith that Germany will ride in and save the day for DB, who is going to bail out CS if they run into trouble? The entire GDP of Switerland is $685Bn, not even enough to cover CS's derivative exposure – even if the Swiss were inclined to bail out what is essentially a European Bank that grew out of their small country (8M people).
Europe is actually in a great deal of turmoil with Germany, France and Spain all with pending elections while Italy is voting on a constitutional referendum in December, which would radically alter their Government and pave their own path to exit the EU. That's why we've seen the ECB capitulating a bit this week and saying perhaps it is time to "normalize" rates as EU savers, unlike US savers, are good at math and understand the damage that ZIRP is doing to their retirement accounts.
Spain doesn't even have a Government at the moment and hasn't had one all year, since the PM Rajoy miscalculated and called for an election, in which his party failed to gain a large enough majority to re-elect him. After two grueling national elections in six months, and with a third vote possible in December, no party has won enough seats or forged the coalition needed to form a government. But, after trudging…