All The Pieces Are In Place, For the Hustle In Brussels…

The market’s bubblicious buoyancy of the last two weeks has come to a halt.

S&P warning that it will downgrade pretty much all of Europe is what everyone is pointing to as the reason the market stopped running like Forrest Gump, and frankly that’s retarded. If anyone is investing in France (et. al) because it’s AAA, they should have their head chequed. The markets are WAY ahead of ratings agencies. Frankly, I don’t even know why we have ratings agencies covering sovereign debt anymore. But I digress. No, that’s not the real reason the market rally stopped. It’s because we are all waiting for the answer coming out of the EU Summit in Brussels starting Thursday. It’s the trillion dollar question…

What shoe size is going to kick the can o’ debt a bit further down the road?  

My armchair take is this, I don’t expect Europe to disappoint. I’m imagining something Shaq-esque stomping on this one — especially with all of the pieces now in place:

  • The IMF is now under US-friendly Christine Lagarde’s control. Dominic Strauss Kahn was too unpredictable & he when was accused of rape he was forced to resign disgracefully. Conveniently, a month after Largarde’s appointment the accuser changed her story & the charges were dropped against DSK. How this wasn’t on the tin foil hat army’s radar more this year is beyond me… anyway, we are back in the drivers seat of the IMF. Rightfully so, especially since the IMF is Us.
  • The Central Banks waited for the whites of the eyes moment to increase liquidity last week, as banks were on the verge of collapse (again). So, at this moment everyone is flush again, before we flush again. So what better time to give the system an extra shot of adrenaline?
  • American banks have sold off a ton of assets (and still have a long way to go). To buy time, they’ve moved enough risk off the books with accounting shenanigans. The European banks are on their way too. They have also watered down and slowed down enough of the Dodd Frank Act to get their act togethers, managing the message while their lobbyists continue to blow shotgun-sized holes in anything that moves anywhere near one of their golden geese.
  • Earlier this year we weren’t sure what would happen with Italy, which is a WAY bigger problem than Greece and Spain on its own. Well guess what? Mario Monti is now in control… and oh, by the way — he’s Goldman Sachs alum.
  • In all of this mess we needed The ECB to take a strong stand and probably issue bonds. That’s almost a certainty now. Why? The other Mario Brother, Mario Draghi is now in charge — also a Goldman alum. It’s been the idea for the last 12 months, but the powers that be just needed to push on the right levers to make it happen — and it’s going to happen now that the IMF is ready to ante up too. I just love it when a plan comes together.
  • Geitner is working on the EU right now, which pretty much means protect Britain. The brits are sluts for money, we just need to find the right deal. We will.

All that’s left is Germany…

  • On the back of the S&P warning, what’s left for them to worry about?  If they don’t do anything they’ll get downgraded. If they do something that’s not big enough, they’ll probably get downgraded too (and who cares, if you’re still among the best risk in a world gone mad). But she doesn’t want the ECB to be able to trump Germany’s standing as the only adult in the room. She’s got an ego and a lot of Germany’s money riding on this. But with the IMF and ECB absolutely willing to help here, it’s pretty reasonable for her to say yes now politically. (Read The Guardian’s Germany Is Finally Getting the Eurozone it Wants) So, I expect Angela Merkel to saddle up to the Ok Corral now.

We shall see, but to me — This looks like the Hustle In Brussels. (and yeh, It doesn’t exactly rhyme, I know. It was either Hustle or Tussle.  Or I could have done the whole ‘Muscles from Brussels’ theme, I just didn’t want to get all Jean Claude Van Damme up in here) 

…And just look at all of the other Goldman people ready to run this one. Don’t Hate The Playa…