While we wait for Europe to develop and implement a plan to deal with their sovereign debt problems, we find out that central banks around the world intervened to add liquidity.  The stock market appears to like the news as markets are rallying this Wednesday morning  11/30/02011.  My first thought on the response, is exactly how does this solve the core problem?

The market rally this morning appears to be led by material type stocks, which typically do well in a falling dollar environment.  The US Dollar index this morning is at approximately 78.25 and has fallen quite a bit on the news of this latest global central bank intervention.  

While it is wonderful to see asset prices rallying, my mind starts to ask questions.  If the intervention was global, just how bad was the potential contamination threat from Europe?  Just how will central banks intervene if and when the sovereign debt crisis infects the entire global financial system?

The whole mess, (and all the intervention to prevent more European chaos) eerily reminds me of our liquidity problem in 2008.  It appears that if political solutions are not agreed upon (or much less actually implemented) central banks are more than willing to intervene.   You would think this would be particularly comforting, (especially working in the financial industry) but unfortunately this just makes me more worried longer term as there are potential unintended consequences to excess liquidity flooding the financial system. 

I have already grown weary of the politics associated with nominating a Republican candidate and the ensuing presidential election in 2012.  Even though I am already exhausted with the daily nuances we even haven't really officially started the presidential campaign.  Wow, how nauseating will this be?  I am sure that partisan politics, (as bad as it already is) will only get worse as we lead up to the election in November. 

The European financial mess is enough to fill the headlines, but Iran is doing its best to grab some spotlight.  Iranians attacked the British embassy in Iran recently, and this will not help as the world attempts to deal with their nuclear programs.   Not sure what this potential problem will evolve into, but it isn't likely to improve in the near term. 

Remember, the world is always full of news related noise that pundits like to use as the cause of market movements.  The most difficult determination is attempting to ascertain the true cause, and any potential ramifications that are not already priced into today's assets.  This sometimes seems as much art as science and nobody can be correct all the time.  Remember the old adage; the market can stay irrational longer than you can stay solvent.  Of course, if you are not trading, (or using excess leverage) and are a longer term investor you should not have the need to worry as much about short term volatility.  Maybe this liquidity induced stock market gain is the start of a Santa Claus rally?

People were out in full force on black Friday spending their hard earned dollars scooping up bargains.  Store sales were supposedly good, but I am not sure how those deeply discounted items actually helped profit margins.  But I guess businesses would rather sell them for something than have them sit on store shelves taking up space.  It will be interesting to see if the increased activity lasts through the entire Christmas season?