Europe Comes Together in Desperation

In a matter of a week, the civilized world has witnessed leadership changes atop two democratic nations without election. The reasoning for this abrupt and somewhat unprecedented change in control was “necessity,” and in the place of the apparently inept leaders replaced, we find technocrats who seem perfect for the times.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Europe Comes Together in Desperation

Even though I myself insisted that former Greek Prime Minister Papandreou should query the Greek people before moving forward with the EU’s grand barter, I never in my wildest dreams expected that within hours of publishing, he would actually call for a referendum. After all, such a referendum would effectively decide whether Greece would remain in the eurozone, which was something the Greek government was for months fighting tooth and nail for. Despite the protests and fires that continued on the streets of Greece, it made little sense for the government to give up on a deal that effectively forgave half its debt. We posited that it must thus be a genius political move by George Papandreou, which would effectively give new life to the dead government walking and the PASOK party. After all, the Greek people, if properly educated on the vote, would surely not choose a route that would take them into default and out of the bubble of the civilized European society they have mostly treasured since Greece’s initiation.

I suppose one might say this change in Greece made possible what was previously less likely in Italy, the disposal of the embattled and embarrassing billionaire Prime Minister Silvio Berlusconi. Berlusconi had been shy about implementing the austerity measures his European brethren viewed necessary to prevent crisis contagion. The support of his people was worn thin, as his scandalous session as the Italian Prime Minister dragged on. So by putting off financial reinforcement, Berlusconi sought to keep Italians in cafes rather than on the streets of Rome burning his effigy.

Former European Commissioner for Italy, Mario Monti, the technocrat of choice for the job accepted the role over the weekend. Economic expert, Mario Draghi might have better matched with Greece’s turnover to Papademos, but he’s busy in his new post at the European Central Bank. The ouster of Berlusconi came at once and as a condition for the united passage of austerity. Berlusconi’s opponents in the senate determined to not vote, allowing the measures to pass; it then moved forward to the lower house for passage, and so austerity and Monti have been received in Italy.

The latest European tone has me anticipating Christine Lagarde or Jean-Claude Trichet could shortly move into the captain’s chair in France. Perhaps the final maneuver would be the German Finance Minister Wolfgang Schaeuble’s supplanting Angela Merkel in Germany. Could you ever imagine Ben Bernanke as your president without an election to support the choice? It’s all quite baffling, though the intensifying desperation of Europe is adding impetus if not frenzy to these decisions. These latest government changes are explained as necessary to quell political posturing and to allow for unified effort. These implanted leaders are only seen as temporary fixes. Opposing parties view the next election as their opportunity to restore control. However, in the end, the people will decide who will lead them, and they would seem unlikely to punish these new technocrats, who are economic experts seemingly best qualified for the times. Who knows, this may even be a step toward a truly unified Europe.

FYI: In 2009, Wall Street Greek presciently wrote of the coming turnover of European and global governments.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Madame Lagarde’s Hopeful and Impossible Vision

As I watched the replay of IMF Director Christine Lagarde’s address to the Woodrow Wilson International Center for Scholars, through which she discussed global economic challenges and solutions, I found her described “narrow path” forward akin to navigating through a minefield while taking on fire from the enemy. While it is possible, as she said, it is also highly unlikely to survive, as I suppose very few realize, save perhaps securities markets participants.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Madame Lagarde’s Hopeful and Impossible Vision

With all due respect to the gracious lady, Madame Lagarde painted a scenario that will be extremely difficult to push through, because it not only requires the cooperation of forces within nations (read political opponents), but also between nations which have historically opposed and competed against one another. Hey, we all got along well enough when it was a matter of sharing the riches, but now that it’s a matter of survival, you would expect the dogs to act to their nature. And, by dogs, I mean each of us. Or, will crisis unite us?

To this, she implied that the emerging nations cannot avoid the crisis, as they will need customers for the goods they so efficiently produce and for the natural resources they are so blessed with. And she is right, and China, Russia, Brazil and India know it, but, and more so for some than others, they will only help the developed world for the best price they can exploit. That said, given that their development has been expedited by the purposes of the western world, not to mention all the aid monies that have been extended by developed nations for the sake of those in need in the past, a little grateful payback would be nice now.

If I may extend my critical review: Somehow, I suspect what the emerging nations may attain, and here I’m speaking of any collateral assets, not the more important presence they will gain in the global assemblies of nations (like their stake in the IMF), might be taken back from them later, which would be a great insult to the pride of the prideful Chinese. Perhaps, this stage of the global crisis is only laying the foundation for the next then, where the stability of the civility of the world is once again undermined. Isn’t that already happening in the Middle East and North Africa? Some say democracy is most beautifully taking root there, but I say, the ground is not fertile, and instead its barren plain will simply flood over. While despot dictators ruled, there was also civility and order, but now I see chaos in its place.

Madame Lagarde spoke of balancing between expense management and stimulative spending. It sounds like trying to take a scientific measurement with a plank and two buckets full of stones. It’s a heavy burden, and difficult if not naive to believe accomplishable. And she even acknowledged the dynamic environment, advising governments to recognize and react nimbly to the subtle shifts in economic growth, and to adjust to it, managing between austerity and stimulus for the sake of posterity. It was as if she ideologically placed virtuous, wise and perhaps perfect men in the place of faulty leaders. I found the IMF chief’s multiple usage of the word “virtuous” quite appropriate, if not targeted to tug at the hearts of the Chinese.

God bless her though, because she fills her role well. It is the IMF’s responsibility after all, to play mother and disciplinarian. She has to clean up the mess we’ve made. And you know, some of the ideological discussion I have been critical of here, I declared necessary myself in a recent article. Perhaps it is just my lack of faith in mankind that has caused me to question its will to pursue what is obviously necessary for the survival of the same. Nonetheless, the world’s leaders have quite a load to bear today. Not only must they have the foresight to consider the long-term prosperity of the whole, over the more optimal short-term opportunities for their individual states, but they must then sell this selfless option to a populous that will view it as an unnecessary act of submission. It is quite a noble path Madame Lagarde paves for the world’s leaders. I only hope the struggle does not become too painful before they embark down it.

This story is likely to interest investors in the Dow Jones Industrials Index, including large multinationals that play important roles in the global economy and are thus sensitive to it. Those stocks closed out last week as such:

Stock Name and Symbol	Friday’s % Change
Alcoa (NYSE: AA)	-0.1%
American Express (NYSE: AXP)	+1.5%
Boeing (NYSE: BA)	+1.7%
Bank of America (NYSE: BAC)	-1.4%
Caterpillar (NYSE: CAT)	-0.8%
Cisco Systems (Nasdaq: CSCO)	-0.3%
Chevron (NYSE: CVX)	+0.4%
Dupont (NYSE: DD)	+1.4%
Walt Disney (NYSE: DIS)	-0.1%
General Electric (NYSE: GE)	+1.6%
Home Depot (NYSE: HD)	+1.0%
Hewlett-Packard (NYSE: HPQ)	+1.1%
IBM (NYSE: IBM)	+1.7%
Intel (Nasdaq: INTC)	+2.0%
Johnson & Johnson (NYSE: JNJ)	+0.3%
J.P. Morgan Chase (NYSE: JPM)	-1.1%
Kraft Foods (NYSE: KFT)	+0.3%
Coca-Cola (NYSE: KO)	+0.3%
McDonald’s (NYSE: MCD)	+0.3%
3M Company (NYSE: MMM)	-0.1%
Merck (NYSE: MRK)	+0.6%
Microsoft (Nasdaq: MSFT)	+0.5%
Pfizer (NYSE: PFE)	-1.8%
Procter & Gamble (NYSE: PG)	+2.5%
AT&T (NYSE: T)	+1.4%
Travelers (NYSE: TRV)	+1.5%
United Technologies (NYSE: UTX)	-0.2%
Verizon (NYSE: VZ)	+1.5%
Wal-Mart (NYSE: WMT)	+0.3%
Exxon Mobil (NYSE: XOM)	+0.7%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.