Welcome Back Europe

Today was the start of the school year here in France. Le rentrée. Welcome back DSK, welcome back BNP and Societe Generale. Wasn’t it better on the beach (or in prison)?

Merger Rumors? That’s a silly desperate long-shot: a lazy distraction.

The EUR.USD has broken under 1.40000. That’s a psychological level that’s held since this past July.

It’s Europe’s turn to scramble. There are parallels to the lovely little Republican -Democratic debt ceiling pissing match. But the obvious difference is that there are 17 members in the Eurozone each trying to cover their constituents proverbial backside.

It’s like 17 Tea Parties running amuck at the Republican National Convention!

American talking-heads say Europe is headed for disaster. Journalists looking for a story are like traders looking for resistance and breakouts. “The EU has to breakup, there could be civil war…” Count on UBS and ZeroHedge to titillate the gossiping financial classes with end-of-world scenerios. Here’s an example (link) and here’s another (link). And why not FT-Alphavilles “Who is the doomiest of all?”

Even if the end-of-world is near, it feels like we’re being “hard sold” a short position from a used car salesman. That’s a great sign to be sceptical. The unexpected move from the Swiss ($EURCHF) got me thinking about all that I don’t know. What other surprises might drop from the sky this week?

I have a good short position on the Euro but I’m starting do doubt it’s longevity. The Eurozone is a mess, agreed, but it’s structural. Therefore, fixable… Right? Who cares if the Greeks leave the Eurozone? Italy and Spain have huge black market economies, they’ll get by. Bridges and Tea Party extremists might save the US but you have to admit, consumption (demand) is maybe even MORE important… But is it AS important in Europe? They’re mostly Socialist, relatively poor, and good savers. European countries have historically dealt with far worse. Think German unification or Franco. But thinking about the US, since the civil war, what significant transformation have Americans’ “overcome”? September 11th? The jury is out still.

The perceived problems in Europe are potentially ‘less real’, than the perceived problems in the US. Just saying…

Lets assume the real problem is demand as NYDealbook says and this blog puts into perspective. Americans will consume, no doubt, and they want to consume. But unless “the world” consumes, and consumes American innovation and American debt, the political walking-dead, tea partiers, and spineless Democrats, will lead us all down the path of a wasted decade (or two).

As that happens, I will be watching: GLD, EURUSD, ES_F, SPY.

Voila, welcome back to school, youngsters.

Side note: I love this blog! Bronte Capital “Risk management and sounding crazy