EU Agreement: Bad for Germany, Bad for the World

Summary version—full article available at Seeking Alpha: http://seekingalpha.com/article/312904-eurozone-agreement-bad-for-germany-bad-for-the-world

At this week’s European Union summit, the 17 nations of the euro currency bloc, along with a few hopeful entrants, agreed to Germany’s condition of tighter, integrated fiscal oversight of national budgets.

The problem with the planned arrangement is that, like all previous attempts to resolve the eurozone’s government debt crisis (sovereign debt is is a misnomer for eurozone), it is doomed to fail.

The German government has become a riskier credit as a result of this week’s agreements. And that indicates that while Germany got what it wanted, what Germany wants is wrong for Germany, wrong for Europe, and wrong for the world.

IMPORTANT DISCLOSURES: Symmetry Capital Management, LLC (SCM) is a Pennsylvania registered investment advisor that offers discretionary investment management to individuals and institutions. This publication is for informational, educational, and entertainment purposes only. It is not an offer to sell or a solicitation to buy securities, or to engage in any investment strategy. Past performance is not indicative of future results. This material does not take into account your personal investment objectives, your personal financial situation and needs, or your personal tolerance for risk. Thus, any investment strategies or securities discussed may not be suitable for you. You should be aware of the real risk of loss that accompanies any investment strategy or security. It is strongly recommended that you consider seeking advice from your own investment advisor(s) when considering any particular strategy or investment.  We do not guarantee any specific outcome or profit from any strategy or security discussed herein. The opinions expressed are based on information believed to be reliable, but SCM does not warrant its completeness or accuracy, and you should not rely on it as such. All views and positions are subject to change without notice.

Do Something Good Day

Today is the birthday of a close friend from my Villanova b-school days, Jaron Taaffe, who passed away unexpectedly at the age of 28 in 2007, shortly after becoming engaged. He had been instrumental in developing the concept of Symmetry Capital, and was almost a founding co-partner. At Jaron’s memorial service, his older brother Damon asked us all to make December seventh ‘do something good day’ (an article that Damon wrote about his brother in 2009 is available here). To honor Jaron, we try to do some good today and every day, and encourage others to do the same.

Wherever there is a human being, there is an opportunity for a kindness. 

Seneca, Roman Philosopher

RIP, friend.

Treasury Debt Ceiling Looming Large

According to the Treasury’s daily statement for the last day of November, total public debt subject to the Congressional debt limit of $15.194 trillion is now $15.067 trillion—only $127 billion (less than 1%) away. At the current monthly run rate of around $90 billion, the ceiling is likely to be reached early in 2012.

The debt agreement from August of this year empowers President Obama to raise the limit by another $1.2 trillion. However, that only buys about an additional 13 months, depending upon how economic and financial variables shake out in the quarters ahead, and the sequestration feature of the law is designed to offset every dollar of that increase beginning in 2013.

In other words, unless federal politicians can do some slick backstepping in the next 13 months—which the prospect of an election year makes all the more challenging, I think—then the enlarged federal deficits that have made our economy the envy of the austerity-smitten world of late will rapidly contract, with severe financial and economic consequences to follow, including even higher debt-to-GDP levels (unless, of course, the private sector makes an unexpectedly swift return to health and takes the credit baton in hand once again—an outcome we don’t advise holding one’s breath for).

IMPORTANT DISCLOSURES: Symmetry Capital Management, LLC (SCM) is a Pennsylvania registered investment advisor that offers discretionary investment management to individuals and institutions. This publication is for informational, educational, and entertainment purposes only. It is not an offer to sell or a solicitation to buy securities, or to engage in any investment strategy. Past performance is not indicative of future results. This material does not take into account your personal investment objectives, your personal financial situation and needs, or your personal tolerance for risk. Thus, any investment strategies or securities discussed may not be suitable for you. You should be aware of the real risk of loss that accompanies any investment strategy or security. It is strongly recommended that you consider seeking advice from your own investment advisor(s) when considering any particular strategy or investment.  We do not guarantee any specific outcome or profit from any strategy or security discussed herein. The opinions expressed are based on information believed to be reliable, but SCM does not warrant its completeness or accuracy, and you should not rely on it as such. All views and positions are subject to change without notice.