The build up to Friday's summit in Brussels was deafening. Global investors felt certain that European leaders would put all of their differences behind them. Establish common ground. Pull a rabbit from a beret.
Alas, there was no magic. For all of the sound and fury, it was much ado about nothing.
The Europeans still detest one another. The crisis was not solved. The can was kicked down the road.
Investors still feel like Wile E. Coyote. Chasing that elusive prize. Consistently running over the cliff.
Like those beloved cartoons, the European situation is not that complicated.
A number of the smaller European nations borrowed too much and they lack the wherewithal to pay back their soon-to-mature debts.
Global investors holding European debt are skeptical about the possibility of being paid in full. And so they are selling their bonds. Which sends bond prices lower, and yields higher (there is an inverse relationship between bond prices and bond yields). This further increases borrowing costs. Making for a nasty Catch-22.
So, these highly indebted nations are looking for a large buyer--to counter the effects of all of the selling. Thus far, the U.S., Asia and Latin America have not volunteered. Each having problems of their own.
Last week, the European Central Bank stated that it would not increase its bond purchases either.
Friday's dog and pony show did little. Perhaps the Europeans felt that, by acting like something big was in the offing, a large creditor would step forward and agree to play ball. Nobody did. And so we saw yet another European meeting at which everyone agreed to no longer run up deficits. Kumbaya.
But these promises do nothing to alleviate the immediate debt problems. The debt that will soon come due in Greece, Italy and Spain. Leaving investors right where they started. Holding the bag.
Every issue that plagued Europe prior to Friday's summit? Still there. No euro Bonds will be issued. No guarantor stepped forward. Today feels a lot like, well, last Thursday--minus the hope of what tomorrow may bring.
Further, our much respected economists of the Economic Cycle Research Institute posted a 7.8 in their latest November report. This was even more negative than the prior week's downwardly revised 7.4. Translation? Their call that the U.S. is already in a recession stands.
Before you panic and sell, remember that 26 of the last 29 years have seen markets end the year with a flourish. Money is cheap, inflation is low, and institutional investors face the need to invest somewhere. Anywhere.
Seasonality is in our favor. But that may change after the holidays.
The Europeans have begun to resemble Elmer Fudd. Wooking for that scwewey Wabbit. Wanting some west and wewaxation. Until, at some point, "T-t-t-t-that's all folks!"