Countdown to December 9
12/07/2011 6:30 am EST
European leaders are meeting on December 9, and MoneyShow’s Jim Jubak discusses what the markets are expecting and what may happen if the expectations are not met.
For the week ahead—well, actually not the week ahead…it’s like nine or ten days—it’s countdown week!…week and a half.
The big date we’re looking for right now is December 9. That’s the big Summit Meeting between all the European leaders—not just the leaders of the Eurozone, but everybody inside the European community are all getting together.
The markets are really starting to assume that some kind of "solution" is going to come out of this meeting. We’re not really expecting a solution that solves the Euro debt crisis. We’re looking for something that sort of takes it from the front burner, throws a few things at it and puts it on a simmer so we’re not looking at panic anymore.
That’s what the markets are starting to expect. That’s being built into some of these rallies.
So, as we get close to that, the danger comes…well:
- If nothing credible comes out of this meeting, there’s going to be a big disappointment.
- If something credible comes out of the meeting, it’s quite possible we’ll still see the market go up a little.
- If something substantial—you know, wow!—comes out of the meeting, we will even get the rally going further on this news.
This really is the date when the Europeans have to figure out some mechanism for backstopping Italy and Spain. Whether there can be some mechanism put together that’s got enough money in it so that the bond markets will feel like, "Hey, if Italy and Spain run into problems raising money at a reasonable price (which is anything less than 7%), I think this organization, this vehicle, will step in and support those bonds."
Without that, I think we’re looking at something that’s regarded as a failure. That would have significant consequences for the stock market and for the Eurozone and the survival of the Euro as a whole.
So, watch it. We’re looking at December 9 as our big date right now.