Market Outlook for week of September 5, 2011

During the 1992 Presidential Campaign, Clinton Advisor and political strategist James Carville kept the focus of the campaign with the iconic phrase "It's the Economy, Stupid."

Someone needs to remind today's mainstream press that this summer's issues in the financial markets aren't the result of "political brinkmanship" or a related downgrade of US debt by Standard & Poor's.

In short (no pun intended): "It's Europe Stupid."

It should be pointed out that Europe is just a symptom (as was sub-prime, and Greece) of a Global Financial structure that is trying to debase its way into paying for promises, both public and private, that can never be met.

Having said that, Europe remains the current flash point that has the potential to drive the Global Financial Crisis to a new and deeper trough than that of 2008.

Today's session in Europe could be a walk in the park preview of what is to come when the Euro Zone rescue measures ultimately fail.

Additional items to watch this week will be Tuesday's approval vote by France in regards to the French portion of the Greek bailout tab. Of perhaps greater concern to the market is Wednesday's ruling by a German court in regards to the legality of German government action in response to the bail outs.

On the home front all eyes will be on President Obama's appearance before a joint session of congress to present his jobs "plan." Just as important will be the Republican response. The Republicans face the real possibility of putting themselves in a box on economic/ stimulus matters should they gain the Senate or Presidency in 2012.

The real budget killer is the long term position of entitlement programs. Shorter term "investments" in infrastructure or pro-growth tax policy, will have to be funded from somewhere. An adamant refusal to engage in any kind of spending would be a mistake on the part of Republicans.

Perhaps the Republicans can hire Mr. Carville to adjust the phrase yet again to: "It's the Entitlements, Stupid."

Finally, someone may want to check in on the poor souls who were dancing on the grave of the gold "bubble" last week. Gold is again sitting near the $1,900 mark, and while it may not be the easy trade it was five years ago, those who are dismissing the price action as just a bubble don't seem to understand what is going on in the financial world.

"It's the Global Fiat Currency Bubble, Stupid."