A few years ago, economists argued over what shape the bottom of the recession would be.  Would it be V-shaped, which suggested a quick recovery?  Or, would it be U-shaped, which suggested bumping along the bottom for awhile before starting the recovery?  I argued the bottom would look more like the Nike Swoosh, which suggested bumping along the bottom before starting a slow recovery.  I think I was right.

It is not too early to ask the same question about the European crisis.  Because it is a financial type of crisis, it has terrified the financial markets.  We have been hoping for a V-shaped recovery, which would only happen if Merkel, Sarkozy, Draghi, and Monti walked into a press conference and shared a big, sloppy kiss.  Let us pray for that bazooka-approach.

Or, the trajectory may have changed with the decision of the ECB a few weeks ago to guarantee liquidity in the banking system by virtually eliminating any near-term debt when they issued three-year loans at low rates to member banks.  Now, Merkel has finally realized that economic growth will do more to resolve the crisis than austerity will.  That is not to say austerity is not necessary.  It is saying austerity is only one half of the one-two punch.

I suspect she is using this growth discussion to cloak the transfer of budget approvals for the weak nations into the care of the stronger nations, like Germany.  If so, she is mighty smart indeed.

This is a good example of why portfolios should not be all-cash right now.  Resolution of this financial crisis may also resemble the recovery of our economy, i.e., a Nike Swoosh.