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NEW YORK (RealMoney) --
Repeat after me: We are not Europe. Repeat after me: We are not in 2008. Why is that?
First, three reasons why we are not Europe:
1. We have one currency that works and one central bank that's on its game, recognizing that the issue is deflation, not inflation, and doing everything it can to try to get the economy moving.
Who knows where we would be without Bernanke? I'd say we'd be a lot closer to Europe, for certain.
2. We can react much faster than Europe.
My old friend Tim Massad, who is in charge of TARP disposal, made it very clear that the U.S. acted forcefully and swiftly to solve its problems. The corollary is that Europe has acted slowly and with no real firepower to solve its problems.
3. We have a great mix of natural resources -- if we would just use them correctly -- and labor that is still the best in the world, despite widespread belief that we don't.
It is not 2008. Here are three reasons why it isn't:
1. I cannot recall a time when our corporate balance sheets have been this good.
Look at what Morgan Stanley (MS)
has done since 2008: It has shrunk its balance sheet, raised billions of cash, brought on Smith Barney for a nice source of consistent income and corralled a big-time investor, Mitsubishi, which owns more than 20% and could easily put more money in if needed.
2. Earnings, while not as robust as we would like because of Europe, are holding up fairly well, while the S&P 500 multiple on future earnings is at an amazingly low 10x earnings.
Hardly a crash level. With all of that money on the balance sheet and all of these earnings, it is natural to presume that there will be tons of dividend increases, not cuts as there were the last time around.
3. We have backstops galore in the system now, post-Lehman, and we have a Federal Reserve and Treasury working in tandem to keep it that way.
You have to believe that we do not have an institution out there that could crush us.
Today is a classic display day of all of these points. We are down, in keeping with Europe, as usual, then we get excellent auto sales -- not good, but excellent -- and a strong purchasing managers' index, and we rally. If Europe were simply to collapse Greece and quasi-nationalize every bank that would be crushed by its sovereign holdings, then we would rally and stay up. But we can't, because the futures will be down again tomorrow when we come in because of, yes, Europe.
So why can't we pop? Why don't we get so negative that the sentiment turns us? Because this is not a market that trades on earnings, it trades on politics, and politics can justify the sentiment and freeze people from coming in, despite all six reasons that I gave above.
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