2011Sep6 I Owe! I...Oh!

 It is said that the world is in a state of bankruptcy, that the
            world owes the world more than the world can pay. ~ Ralph Waldo Emerson 

Europe: 

The European Union continues to paint itself into a corner. It has plenty of red paint left but it is definitely running out of corner. 

Greece has once again failed to meet budget and  spending targets imposed by the European Central Bank. This puts the next bail-out payment at risk and raises the chances of outright default up a notch.

There are protests in the streets of Italy today. Tens of thousands of striking workers, students and pensioners joined marches in cities from Palermo to Turin, voicing opposition to the proposed 45.5 billion euro austerity package and discontent with Berlusconi's government. 

The ECB has already noted that Italy is too large to bail-out and will do everything in its power to get their spending under control while there is still time. Hopefully Italy sees this as a priority also.

Germany's federal constitutional court is expected Wednesday to render its decision on a lawsuit challenging the country's participation in euro-zone bailouts, marking another source of potential turmoil for the region's unsettled financial markets.

 

The court is ruling on two separate complaints from economics professors and politicians over the legality of Germany's participation in the first Greek bailout approved last May and the establishment of the European Financial Stability Facility, or EFSF, which serves as the euro-zone rescue fund.

If any of these situations goes poorly, it could mean the end of the European Union and the euro in short order. While that might be a good thing for the dollar, it will be very bad for equity markets world wide. 

Markets:

Equity markets are down in most of the world today. It is important to remember that we are safely in cash at this point to preserve capital. We monitor markets constantly looking for attractive re-entry points. This requires us to recognize the emotions involved with volatile markets and filter them out. This diagram says it well;