August 17, 2012
For those who are logic-minded, the current state of the world can, unfortunately, be seen as a function of Europe. The age of decoupling has ended, and the era of globalization has begun. The effect of the EU on the U.S. is quite obvious, and I will give two simple examples from just within the past couple weeks.
European Central Bank President Mario Draghi announced July 26 that the ECB is prepared to do whatever it takes. On this simple statement, the markets rallied with hopes of a faster recovery. The S&P 500 rallied an astonishing 3.59 percent July 25-27! If that doesn’t show the fear currently in the market, then I don’t know what does.
Draghi made another announcement Aug. 2 that revealed to the markets the daunting truth —that there is no real plan in place. This negative news shot the markets much lower, only increasing the volatility in the market from traders whose strategy was to “buy on the rumors and sell on the news.” So, what is my point, you may ask?