TGIF July 27, 2012

The Games of the 30th Modern Olympiad are here, and the the Markets could certainly use some competitive inspiration from this Global Stage.  Competition is as old as humankind itself.  The drive to perform and succeed is innate.  How best to accomplish it has always been a debate.  In today’s highly contentious Global economic environment, the 2012 games are stacked with implications and ironies.

Londonwill be hosting the games for the 3rd time, more than any other city.  These games will take place in Europe, but won’t be transacted in the Euro currency.  You may recall the British preserved the Pound as their Nation’s currency, despite being a member of the European Union.  One can argue that there have been games played inEurope all year, both politically and economically, and they’ve all been directed in the Euro currency.

The Olympic motto is “Citius, Altius, Fortius”:  In English, these 3 Latin words translate as “Faster, Higher, Stronger”.  These sage words could certainly represent the global sentiment towards the European leaders need to fix its credit crisis.  Unfortunately for the Global Markets, we don’t anticipate medals to be handed out to European countries for their financial and economic merits as quickly as they will be for athletics.  If we try to draw comparisons to an Olympic event and the European credit event, it definitely wouldn’t be the sprint.  More like a series of on-going marathons.  The key requirements are stamina and steady forward motion.

There is definitely a correlation between economic stature and Olympic success.  The US and China are expected to go head-to-head for the Medal count this year, and no surprise they are the #1 and #2 economies in the world.  In fact, the Wall Street Journal did a Medal projection for the games, and 7 of the Top Ten projected nations are also Top Ten economic powers.

Since Stock Markets are generally forward looking as well as discounting mechanisms of future events, you would think host countries would see a run-up ahead of the games followed by a “Sell-the-News” event.  That hasn’t always happened.  Since the Seoul Korea Games in 1988, the stock market in the respective host country actually declined 3 of the 7 years, which includes theUKlast year.  What might be surprising, and a bit comforting to know is the following year enjoyed gains every time.  Also, only once did the DOW decline the year after the Summer games: It was in 2001 following the Dot-com Bubble Burst and the September 11th attacks.

Enjoy the weekend.  Enjoy the Olympics.  It’s a unique event that brings the world together and raises spirits.  It’s very healthy.

By: Mike Frazier

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