Last week's best-performing piece of paper? The Spanish 10-year. This week? It looks like the Italian version. And that's really the story about how we can rally.
These two pieces of paper are putting Europe in a new light. Until these bonds started trading higher, Europe was totally in the grip of the bond vigilantes who were demanding ever higher prices for the bonds of Italy and Spain. I think they were demanding that in part because few thought it possible that these countries could show any discipline and in part because the secondary market was overwhelmed with merchandise as the European banks tried to raise cash from funding markets that were otherwise closed to them.
Now, however, when you couple the austerity plans that have been put in place in Spain and are about to be put in place in Italy -- that is, if the plan discussed this weekend passes -- and the lifeline that Bernanke gave the banks, the pressure is off the secondary market while the countries themselves are making positive adjustments.
If you get those positive adjustments, you break the bond vigilantes' grip and you lower rates and you put in a facility that can backstop both countries and banks on a longer-term basis -- and you actually have a way out.
Which is why we are trading up again today.
Of course, the pressure is being ratcheted up that we will get success at the Dec. 9 meeting with the heads of Europe. If you want to measure the optimism, keep track of Italian yields -- huge move back into the low-6s here -- and of course the CurrencyShares Euro Trust (FXE).
If that wasn't enough good news, SAP (SAP) overpays for a cloud tech play, making some instant money for the holders of SuccessFactors (SFSF) shares and making those short-sellers of Salesforce.com (CRM) get real nervous here.
I am mindful that all of this good news was inconceivable 10 days ago, but it sure is happening. And it allows us to continue to trade in stocks that go well if Europe isn't falling off a cliff, because we sure aren't. My favorites remain the oils because if the euro goes up, they go up. If trade goes up, they go up. If it continues to be cold, they go up.
Lotta ways to win.
Random musings: I will be speaking at the 92nd Street Y at 8 p.m. tonight and signing books after, if you care to attend!