Oct 4

The bad news dates from Oct 4. Contrary to the conventional wisdom, the problem with the recent rapid rise in SP prices is the adjunct rise in the value of the Euro. If the prospects for higher equity prices remain attached to the (inane) idea that the EZ currency must rise, then days like today will keep popping up.

The concept that the American "expansion" is contingent on currency debasement has always been a stretch. The Euros need to find a way to lower their fiat without correlation cowboys wrecking the world in the process. A firmer footing for the green-back and the right fiscal mix would set the recovery on a higher trajectory. For now, the delivery of "weak" funding currency into a speculative idea can move a market but not an economy. Carry trades running on and off will not instill medium term confidence to business management.

A range trade is solidifying in the market psyche. If true, the result had better be a confidence boost on Main St. At 139 this morning the Euro makes no economic sense for anyone. We will know we are heading out of this mess when the buck can rally and the equity market doesn't melt.

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