Follow the Yellow Brick Road

The Wizard of Oz - 2015 Style.....Starring -

Mario Draghi - as the Wizard
Global Investors - as Dorothy
Greece - as Toto
Germany - as the Cowardly Lion
France - as the Scare Crow
Italy - as the Tin Man
ECB - as Glinda the Good Witch
Possible hyper inflation - as the Wicked Witch

Supporting roles representing the Euro-zone played by a variety of Munchkins....

and the Yellow Brick Road - well Gold of course..... which is rallying towards 2014 highs of $1350/oz.....

Good Friday morning! Investors and mkts the world over rallied around the latest move by the ECB......Mario Draghi made good on his promise and launched the 'bazooka' (and yes - it IS about size - no matter what they say...) - so mkts and investors are relieved (for now) but he made it very clear and said it very succinctly....

"What monetary policy can do is create the basis for growth, but for growth to pick up, you need investment; for investment, you need confidence and for confidence, you need structural reform"

Structural reform.......this will become the 2015 rallying cry across the zone as well as around the world.....

The ECB delivered on its promise - in fact delivering slightly more than expected, boosting sentiment and goosing European mkts to new 7 yr highs, The US mkt back to near all time highs, the Euro to 11 yr lows, the dollar to highs last seen in 2004, oil to new 2015 lows, Gold to new 2015 highs.....and so go the mkts. None of this is surprising - just fyi.....

This was a move that the ECB had to make, and should have made a lot sooner - but hey - we'll take what we can get at this point.....the Euro zone is now set to follow a path well-travelled....so the natural question is: Will we see similar benefits accrue to the zone? Yes - we should......although there are some slightly different nuances between Europe and the US, this move does lay the foundations for an economic recovery in Europe and that is a big positive for global growth....

The Germans - long the holdout - have been placated by some of the limits that have been designed into the bond buying program. The ECB will restrict its purchases to 25% of any single bond issuance, and 33% of the ‘instruments’ available from one issuer. This limits the bank’s exposure to the underperforming nations – so Greece (represented by Toto) for example has already used up its quota.

Another key policy design......RISK SHARING - 20% of the purchases will be the responsibility of the ECB - so this means that 80% of any losses or default would be borne primarily by individual national central banks across the zone. This insures that the ECB doesn’t get stuck holding the bag for any major blowups - thus the whole 'structural reform' conversation.

In the end - the overall tone of this QE program is very similar in style and size to what the FED did under Uncle Benny. (Remember him?) And it is worth noting that no matter what Obama says - it was the FED and its actions that has caused the S&P to triple off of the March 2009 lows of 666.79. As a result of yesterday's actions - US mkts should benefit as well by the prospect of an improving Euro zone economy....

So - what's next for the FED???? The pressure is really on now.....A strengthening dollar is now the concern....and any increase in rates will cause the dollar to become even stronger - putting more pressure on oil, key trading partners, US multinationals that sell their goods abroad all at a time when we are still making our way out of the depths of the GFC (Great Financial Crisis). My bet is that they will re-examine the timing and move on rates until they get more data out of this move...

US futures are up another 2 pts this morning......and stocks around the world are in overdrive......bond yields in Europe falling to record lows on the back of the ECB program. The S&P tested resistance at 2050 and busted out.....as sellers finally realized that the BULL is back.....the mkt's next test is the all time highs of 2093....

Earnings continue to dominate the news and today we will hear from GE, HON, MCD, STT, BK, ROK, KMB, KSU.....

Economic data includes the Chicago Fed Index - exp of 0.48, Markit US Manf PMI - exp of 54, Existing Home Sales of 5.08 mil or a 3% increase over last month.....

This morning we learned of the official death of Saudi King Abdullah - so we are seeing oil mkts advance a bit as there is now a cloud of uncertainty over the Middle East.
Immediate analysis suggests that the oil policy just took a turn for the worse as the Saudi's will move to 'over supply' the mkt even more in an attempt to choke everyone else out.... The King was a good friend of the US - he was a rock for the Saudi's....and in a Kingdom of ultra conservatism his legacy will echo volumes in the history of change in that country but that being said - his push for modernization may now come under attack.....and the plot thickens.....

To end the week - Asian mkts hit new highs as they celebrated Draghi's move. Japan + 1.05%, Hong Kong +1.34%, China +0.25% and ASX +1.5%.

European mkts - are all higher after 'the shot heard round the world' caused investors to celebrate. Macro data this morning showed that Euro zone business activity ticked up in January - but the focus remains on the extensive QE program... Remember that next week brings us the Greek elections....so get ready for all of the analysis on possible outcomes and what that means for Greece and the Eurozone. FTSE +0.27%, CAC 40 +2.06%, DAX +1.71%, EUROSTOXX +1.92%, SPAIN +1.13% and ITALY +0.34%.

Champagne Chicken

.A classic dish, easy to prepare, presents beautifully on the plate on a bed of sautéed spinach will leave your guests wondering - How you did it.

Start with skinless pounded chicken breasts - dredge in seasoned flour - (S&P). After you have dusted all of the breasts set aside.

On medium heat melt 3/4 stick of butter and a splash of olive oil in a large sauté pan. When almost sizzling - yet not burning....add the breasts and sauté for about 4 / 5 mins. At this point - turn the breasts over - add about 1 1/2 cups of champagne and sauté for about 10 mins more.

Next add 3/4 cup of heavy cream (or lite cream if you must), chopped Italian parsley and a bit of rosemary powder and continue cooking until it thickens up.

While this is cooking - sauté some fresh spinach in garlic and oil and then make a bed on each plate. When the chicken is done - transfer the breasts to individual plates and top with the champagne cream sauce.

A nice mixed green salad garnished with cherry tomatoes, red onion & cucumber dressed with a champagne vinaigrette finishes off this meal. Choose a lighter bodied red or even a chilled white to complete the presentation.


Buon Appetito.