By Alex Salomon
1. A bit of humor to start… I heard from an extremely reliable source, a friend of an acquaintance’s of my third cousin’s who vacationed in Utah back in the days that, really, German Chancellor Angela Merkel was a secret agent planted by the Mormon Church in the ’80s in East Germany to patiently wait for Mitt Romney to make his move and help him win the US Presidential election by sabotaging any impulse the global economy could muster. Now, this information is super top secret and also very very reliable.
The only hitch? I just heard from a third cousin of a friend’s of an acquaintance’s who works at an investment bank that Merkel is really the majority partner in a super top secret Hedge Fund geared towards the demise of global growth and the European Union. She is short everything in the world!
Please don’t share these reports as my sources would no longer trust me with valuable information if they knew I divulged top secrets.
2. Bad jokes aside, and on a more serious note, let’s talk about a real paradigm shift in Europe and maybe a ray of hope: there is growing pressure to launch “Euro-Project Bonds.” Project bonds, for what? The not so savvy use would be to create them for yet more bridges and highways: the EU (27-country zone) is already the most equipped with infrastructure per capita, by pretty much any metric. On the other hand, what about using “Euro-Project Bonds” to create true Energy growth and independence in the EU? The EU currently has an annual $550B energy import deficit, up from $130B in 2002. Fostering innovation, “Energy Independence” could arguably reduce the import deficit and by some accounts, create 10MM, maybe 15MM new jobs (in a zone that has a total of 23MM unemployed). That impulse could be a true paradigm shift: it’s healthy for the EU economy, it promotes true growth, and it does not involve political divides among Euro partners.
Thereby, I am really hoping that Angela Merkel is the majority partner in a super top secret Hedge Fund geared towards creative growth and innovation.
3. You don’t like “Euro-Energy Bonds”? Fine, there is another idea that has been floating around for about two years (already two years!), from Jacques Delpla, a French economist. The long, official version of the idea can be found here: Blue Bonds for Europe and it is starting to gather major stream. Here is an excerpt from their executive summary: “The first part [of Sovereign Debts], up to 60% of GDP, should be pooled as ‘Blue’ bonds with senior status, to be jointly and severally guaranteed by participating countries. All debt beyond that should be issued as purely national ‘Red’ bonds with junior status. While not a panacea for the current euro crisis […]” it creates a quasi Bad Bank for the “errors of the past” (little lies among friends) and mutualized Euro-Bonds for the core, manageable debt.
Of course, Germany and Northern EU countries would link this solution to broad constitutional changes for all EU members, introducing Constitutionally-guaranteed balanced budgets, more federalized powers and greater fiscal union.
The risks from the “old ways” are also abundantly clear as States could be tempted to lie or abuse the system or cheat on their officially reported numbers and therefore, part of the federal changes would call for penalties, audits, supra-powers.
Whether the solution is “Project Bonds” or “Good Bonds / Bad Bonds”, there is a growing sense of hope and crisis resolution in Europe… Remember, it is okay to dream!
4. Our modern world is getting more and more juiced up on sources of instant news… CNN 24/7 was the first overdose of “always on”, but then it has progressively increased (maybe, even, gotten worse?) and social networks will only increase the pace of information. Yet, I sense a growing paradox between the instant news and the “real pace of life”, which is much slower. For instance, take the “mood” on June 1st on the heels of the US Payroll report when the US economy had “only” created 69,000 jobs: the feel was that “we were all doomed.”
Now, just two weeks later, hope has risen, which opens the door for a new question: is this bounce going to last? Just like it took a flat March & April to prepare for a quick May slide, if a new bounce is in place, it could push into summer… through earnings and into a slow lull of a July rally.
My conclusion? No matter how a faster news cycle feels (due to social network and continuous information), it actually takes much longer to change real life directions! That’s an ongoing paradox and social networks are only going to enhance it!
Accurate real-time information is faster than ever, yet real life is still pacing more slowly which has me wondering whether relying on too fast a time frame actually renders valid information, invalid? (or partially invalid).
5. Finally, my most important thought of the week? Happy Father’s day!! To all the fathers, the grand fathers, the great grand fathers, and the aspiring fathers.
I had plenty to vibe about on my weekly thoughts about the state of democratic values, the grand parody of politics and economics, but I am going to spare everyone my thoughts about Jamie Dimon’s comical “grilling and hearing” by the US Senate or the grand disconnect between shareholders and CEOs illustrated by the $12MM awarded to the departing CEOs of Research in Motion. But in fairness, it has been a week for hope, so I’ll choose to part with an exemplary exercise in honesty from Nokia’s CEO (albeit timed too late… way too late!).
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Twitter: @alex__salomon @seeitmarket Facebook: See It Market
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of his employer or any other person or entity.
