The not so good news of November 12 or maybe the Merkel crash is over?

oAngela Merkel follows the path of Paulson/ Fed in 2008 where egregious promises about support were completely destroyed by announcements that sharehldser should suffer, then that tier 1 bond holders must be punished and then that all bond holders must lose almost everything of threatened banks/ countries. At the end too big to fail will be tried by a spectatcular bankruptcy of now maybe Greece and/or Portugal and/or Ireland. Spain and Italy are luckily not that easy to speculate down to ashes, but also for them the Merkel carsh is not a Goldilocks scenario for them. That is why new solidarity must be shown by expensive help to recover some of the lost trust in the PIIGS. In the VS mocht Bernanke was to the rescue with QE1. The ECB has now to buy much more than in previous month of PIIGS government bonds (they did start buying at nice levels when big haircuts can be avoided). Several European banks have to be saved by dumping of too dangerous government bonds in supra national pools (or in case of Germany in their own special funds; that is why German banks have been get rid of many bad loans).
o The euro broke down through 1,37 versus the dollar to 1,36, what chartists brought to the conclusion that the structural trend of the euro versus the dollar is not up (the dollar is not a one way road down to zero against the euro despite QE2).
o The Chinese equity market fell more than 5% on a delayed wake up call about the bad inflation numbers. They make an interest hike unavoidable and other not nice things of the Peoples Bank of China. Also was the market down because of the Merkel crash with the growed worries on the Euro perphery, Cisco’s thoughts about an uncertain future. We need to hear first what the measures are to fight inflation and speculation in Chinese real estate (not good for steel compnaies like Arcelor Mittal) and the official hike, then Chinese equities can go up again.
o Korea could not recover from its flash crash in the last minute of Nov 11(thanks to a big sell order of Deutsche Bank that maybe will be punished for that). This is bad for the confidence of investors in Asia: not only in the US, but also in Asia suddenly without any bad news the market can go down tremendously.
o The Baltic Dry Index is going down, through chart technical barriers, not a good sign for the growth of the world trade.
o Real estate investors were shocked by a survey in IPE that because of Solvency II 74% of the insurers in Europe will revise its investment policy for real estate (read: lower their % invested in real estate).
o Technical correction in the US looms because the % of equitioes above th 50 days average fell below 80%. The prudent investors wait (or sell) until that number has declined to 20-40% above 50 days average before they buy (back).

I thnnk you must not become too bearish on all bad news of e.g. above.
1. 6-9 billion QE2 buying by the Fed (POMO) every day from now on has led to the proverb: a POMO a day keeps the bear market away. On Novemebr 12 the Fed started with buying of $7.2B and will not stop for the time being, only around Thankgivingsday is will be less. (see pictures where Bernanke begs and prays for a success of QE2 and the summary of Ritholtz from The Big Picture of Bernanke's explanation of QE2 on October 16, sending implied inflation up further as you could guess)
2. The Irish crisis is now at long last frontpage news(for example the Dutch Financieel Dagblad opened with: Irisih crisis contagious and the other headings were almost as sad: hospitals fear financial disaster; (insureres) falling between two world; notaries more often in default). Brokers are starting again to inundate us with conference calls like: European Periphery Meltdown. European leaders know they were stupid with their declarations on October 29 (and October 18 and..) so thhey definitely will come to the rescue (85% of Irish bonds is held abroad, so Gemeny/UK will do their best to do something nice for Ireland. All those rumours about € 80 B + support will be not totally false.
3. Technically is not everything bad: the call/ put rate of the Dutch equity market (see chart of Tostrams) is discounting already quite some pessimism for the short run. Numbers are of November 11 and on November 12 the decline probably will have continued. Then you are at levels where you saw in the past months nice recoveries.
4. Morgan Stanley was enthousiastic about Intel, also because of their new Sandy Bridge chips (good for making charts and videosand better than what Nvidia and AMD seem to have). The ICT Revolution is still powerfully going on. Cisco -16% is exaggerated, analysts should have seen that Cisco was not a miracle.