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Mark's Market Blog

11-18-11: OWS: Coming Soon to a Town Near You

By Mark Lawrence

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Markets dropped significantly this week on deep concerns about the European banking system. Italy is surviving on ECB bond buys, which cannot continue, and Spain is rapidly approaching their point of no return. More importantly now the fear is spreading to France, whose banks are built on a foundation of European bonds and will crumble with them. The French are adamant that the ECB must print unlimited money and save everyone; the Germans are adamant that this situation must be faced without printing. Meanwhile "technocrat" unelected governments in Greece and Italy are continuing to bleed their countries dry.


S&P 500 May 19 2011 to November 11, 2011

Forecast for the coming weeks: Europe is politically locked up at least as badly as the US is. This sovereign debt crisis is rapidly spreading to their banks. European banks are calling in loans to meet reserve requirements, all but assuring that Europe will quickly fall into something between a recession and a depression. In this uncertain atmosphere inter-bank lending it all but stopped. In other words, Europe today looks a lot like the US in 2008 just before our crash. Hold on to your butts, we're going for Mr.Toad's Wild Ride.

Occupy Wall Street, the American version of the Arab Spring, the European anti-austerity riots, and the Chinese Lotus Revolution, is spreading rapidly. Now police in multiple cities are diverse as LA, Portland, Oakland and New York are all arresting people. Even bucolic little Davis Ca, the home of U.C.Davis and a bunch of bicycle-riding greens and little else has had an uprising. The central theme of these protests, in my opinion, is that there's a whole cohort of kids 18 to 30 who are facing a share of enormous government debt and have no reasonable economic hope of getting decent employment. It's for this reason that I claim these protests will grow and spread. At U.C.Davis the protests started out to be against the rapidly rising tuition and fees and associated huge college debts. UCD Chancellor Linda Katehi ordered the camping students to vacate the quad, then sent her flying-monkey policemen to enforce her order. Watch this video, and reflect on what it means to be American:

Annette Spicuzza, UC Davis police chief, said officers were forced to use pepper spray when students surrounded them. They used a sweeping motion on the group, per procedure, to avoid injury, she said. "There was no way out of that circle," Spicuzza said. "They were cutting the officers off from their support. It's a very volatile situation." There is currently a petition circling at UCD, reportedly with over 33,000 signitures, asking for Ms.Katehi and Ms.Spicuzza to resign. My oldest son, Richard, is a student at U.C.Davis; this could not hit closer to home for me. Below is a rather moving video of Ms.Katehi and Ms. Spicuzza walking out of an encircled UCD building to her car.

The EU in Brussels is considering pressuring Switzerland and other countries to repatriate deposits from EU citizens to their home country. Switzerland is currently estimated to hold about $82 billion in private deposits from EU citizens. If implemented, this would likely result in EU citizens losing much of their saving to this crisis.

The "Super Committee," the group of senators charged with finding 1.2 trillion in budget cuts for the coming decade, will almost certainly report tomorrow that they have failed to reach a compromise. We need to cut about $12 trillion in the coming decade, so their failure to find even a 10% down payment is deeply troubling. Politicians are staking out positions for the coming elections: democrats can't find a single dollar of wasted entitlements, republicans can't find a single dollar that needs taxing. In about a half hour conversation, my friend Kurt, a self-professed bleeding heart liberal, and me, a self-professed red neck, managed to find about $6 trillion in cuts and taxes we could agree on. But then we're not running for office, we're simply frightened for our country.


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