NEW YORK (Real Money) -- Maybe we should just think of Europe as Germany, because when we got good industrial production out of Germany it was pretty much all that mattered. A 1.6% increase in industrial production meant a 2% increase in stock prices.
That, plus the fact that 60% of the Greek bondholders seem on board for the exchange, wipes out the decline from the other day and then some.
I have to admit that trading has become pretty surreal over there. At the beginning of the week when we got hit, one of the reasons for the decline was that perhaps maybe "only about 60%" of the Greek bondholders would exchange their bonds. Now we discover that as many as 60% might exchange their bonds, and that's a GOOD number!
We were worried about oil trading in the mid-$120s at the beginning of the week, about how it has to come down. Here is oil at $124 ... and we like it!
That's what makes everything so surreal. The same data that gave us pause and made us sell now buoys us and makes us more positive.
That's why I key on the industrial growth as the swing factor. We have all accepted that Europe will muddle through this moment with a recession and big layoffs as part of the war for austerity. So when we get any number that says we won't have a recession, especially when it comes right after a terrible industrial production number that signaled we would, it drives all the markets higher there.
That's why I say maybe we need to, as U.S. equity investors, now think only about Germany going forward if the Greek deal is done. We take Greece off the table, we focus on Germany only, not the rest of Europe because it looks like Greece, and perhaps Portugal, are the only ones that are technically going to default or have defaulted.
In other words, when you take off the apocalypse, you trade on growth. If there is growth, Europe goes higher and takes us with it. If there is no growth, Europe goes lower but may not take us with it.
That's a very positive risk/reward.
I remain concerned about oil because I see it going higher on strength in Europe. But if it can stay in this range, we get used to this range and Germany gets stronger, then this market will surprise -- or at least surprise me -- to the upside.