I have a 4 month old daughter, so I had a pretty awesome father's day to say the least. My wife let me do something that I rarely get to do anymore...
You know it-- Eat REAL (no turkey for this dad!) bacon. It was amazing.
Tune in for Wizard Speak Tomorrow
For those out there that believe in magic, Master Wizard Ben Wizzie will address his minions tomorrow in what will surely be the most anticipated say nothing speech he has had since his last post rate decision say nothing speech. We will hear about 'stubborn' unemployment numbers, 'slow, yet sustained' economic recoveries and 'easing' inflation pressures that should help cure both unemployment and slow recoveries. After that he will pull a rabbit out of a hat, put a stripper in a box and cut her in half and try to pull a silver dollar out from behind Lebron James' ear-- but he will only be able to find three quarters.
While Ben Wizzie's speech and post-speech press conference will be the buzz of the day, the real issue for all the markets should be (and will be over the next 12 months) Europe, the Euro and the Euro have's vs the Euro have not's.
The Already Infected Euro Zone Forest
I spent my Father's Day in the small mountain town of Grand Lake, Colorado. Grand Lake is a true blast from the past Colorado mountain town. There is only one street in the entire town that runs about 6 blocks and houses a combination of ice cream stores, T-shirt shops and bars. It is one of those 'My Parents went to Grand Lake and all I got was this Crummy T-Shirt' kinda tourist trap for about 14 weeks a year. It is one of those towns that lives for their 4th of July fireworks over the lake. Most of the year there is literally one road in and one road out (and that was true this weekend as the seasonal road, Trail Ridge Road, was closed due to 5 feet of weekend snow!). While the lake is beautiful, the one thing you notice when you pull into this one horse town is the acres upon acres of dead pine trees-- victims of the pine beetle that feeds on the lodge pole pine tree that is (should I say was) the dominant tree in much of Grand County and the Grand Lake area.
Pine Beetles can not be stopped... once they show up it is inevitable that the mature forests will be destroyed. The destruction can, and does, take years. At first, the needles show a faint red, but over many seasons the whole tree's needles will turn red as the tree dies. A season or two after, the needles fall completely of the tree and the tree stands like a arbor skeleton, next to thousands of other dead trees... ghost like and lifeless... the entire forest transformed.
Greece is essentially no different than Grand Lake. For that matter, so is Spain, Italy and Portugal. These countries are infected with beetles that are slowly taking them down. For years the town of Grand Lake did everything imaginable to try and stop the beetles while saving the forest. They continued to spray chemicals that did nothing, hoping that 'this year's batch' would kill the beetles... but the beetles can not be stopped. Europe and the Euro have similar problems. They have tried to stabilize Greece, but it has failed. They again will try to bail-out Greece with high hopes that 'this restructuring' will be the one, but ultimately all of these attempts will end in failures... one after another. Greece, Spain. Italy, Portugal... the Euro itself?
The one flaw for Grand Lake was the idea that the beetles could be stopped. Instead, Grand Lake should have been looking for ways to rebuild for when the forests were dead. How could this have been done? Plant different trees like Aspen that are not susceptible to the beetle? Clear trees at the first sign of infestation? The answer to that question, I don't know. Europe needs to start putting together their plans for countries that will inevitably default instead of kicking the can down the street by trying to save them through restructuring insanity-like plans that have always failed in the past.
Today Grand Lake is a beautiful town surrounded by hundreds of thousands of dead trees in all directions. Some say that this is nature, and that is the way it is supposed to happen. Some say the worst is over for Grand Lake, and that now they can focus on building a new forest.
However, the cost of not having a plan will soon show it's ugly head for Grand Lake. Today Grand Lake is a beautiful town surrounded by hundreds of thousands of dead, dry, fallen over, rotting trees. The forest is a sea of fuel for a forest fire. With no other vegetation in place and no clearing measures for the dead forest, a single rouge match, a bottle-rocket that flies off course or a smoldering cigarette tossed from a passing car will torch the whole area. After the forest burns, the trees, whose root systems are essential to holding together the jagged mountain side soil, will be gone. Until regrowth can happen, any large rain or snow melt will be susceptible to mudslides. This process could happen this summer or it could take years, but it is only a matter of time until it happens.
We will have to see what the cost of doing nothing is for the Euro-zone. The Euro itself may not go up in flames like Grand Lake, but there will be fireworks.
The beetles can not be stopped.