The last 10 minutes of trading was nasty today. Let's reflect on it. Everyone has universally decided that Europe's gone back into bear-market mode, so we have to as well.
First, I agree that Europe is in bear-market mode. Worse, it has far fall because other than Spain, those markets have been real darned good. Don't forget that they were all up not that long ago.
However, I do not think that the European Union (EU) is going to wipe out the banks that it just funded to buy all of that sovereign debt. That's just too hypocritical -- even for those guys!
I think Europe will muddle through. I know you don't want to hear this after today but our banks simply aren't that exposed and have too much capital for me to tell you to short them. It just doesn't add up.
Second, I do believe that there are plenty of hedge funds, who, after blowing out all of their longs that they established to make themselves look good at the end of the previous quarter, got long again yesterday! I am not kidding.
Third, the hedge funds just love to get short when Europe is weak, so they can cover in the morning -- and we left work unable to even think about why that market could rally over there.
Somehow, though, I think the much better trade is to get short something in Europe, find some stock exposure, and then go long over here. You are only playing the spillover effect, rather than betting on the real tsunami.
To me this has, alas, become a total stock-picker's environment. Hence, my previous piece highlighting all of those terrific growth stocks that withstood the onslaught today.
Ultimately, I think today was business as usual. Tiring. Difficult to navigate, but, ultimately very much 2012, and not 2011.
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