The Risk is Back on in Europe-The ECB will end its liquidity program.

The ECB is planning to end its LTRO program. The LTRO program is a loan program that enables European banks to borrow money for three years at a cost of 1%. The program essentially was the silver bullet that eased European bond market anxiety in late 2011, because it brought the yield on Italian 10 year bond from 7.5% down to 5.5%. As many of you know, the risk of the Euro collapsing last year was high without some intervention by our FED and the ECB. The FED lent our dollars to the Europeans and the ECB lent more cheap money to European banks and the combined effort took the risk off the table. Since they are ending one of the programs, the risk of the Euro breaking down and heading to par with the U.S. dollar is back on. The short run impact is greater volatitlity and less uncertainty for the U.S. stock market. Toward the end of 2011 the European debt crisis was the leader for the US stock market and this model will return shortly.




http://www.cnbc.com/id/46477139/

Deja vu? Is this 2010 all over again?

The economy looks similar to the end of 2009 and the beginning of 2010. During the end of 2009 and the beginning of 2010, inventory growth led the recovery. The same pattern may be developing in 2012. If this is the case then the first several months of the year will be strong for the stock market, but then may slow toward the middle of the year.