Kass: Super Mario Buffers
NEW YORK (Real Money) -- This morning, in response to a plan already telegraphed last weekend by Mario Draghi to buy short-term sovereign debt of ailing countries, the S&P 500 futures advanced by 9 handles.
I plan to sell/short this news for several basic reasons:
- Not only is Europe slipping more rapidly into a deeper recession but the implementation of serious and effective longer-term policy responses remains unlikely. Band-Aid policy measures of providing liquidity (which aids the transmission of monetary policy) remain the operative palliative, and they will likely continue for some time to come. Easing and the temporary purchase by the ECB of sovereign debt from peripheral countries will not durably counter insolvency but, ultimately, the solvency problem will be addressed by a painful debt restructuring. While Europe is geographically united, it is culturally and politically diverse, and a surrender of national sovereignty to the required extent necessary is unlikely. In time, the euro will probably be pulled apart as tensions increase across geographic and socioeconomic fault lines. In other words, there will be many more Thursdays with Mario.
Looking beyond our noses, higher stock futures and Mario's efforts, I remain of the view that the U.S. stock market could be tracing a triple-top and that it is quite possible that the year's highs have already been seen.