U.S. equity markets are pricing in headlines and ignoring reality. The stock market rally continues despite real unemployment still north of 20%, debt-to-GDP over 100%, and a European financial system on a hair trigger. Wondering whether capital markets traders can see the forest for the trees is an exercise in futility. I learned from personal experience years ago that financial markets professionals rarely see the forest, the trees, the underbrush, or the wildlife simultaneously thanks to the bonuses that drop out of the blue sky. All of that money is just too darn pretty.
What lies ahead will not be pretty for most people on Wall Street. The C-suite execs are pumping their media contacts with Facebook IPO chatter. The deals in the 2012 pipeline will float the last possible chances for financial insiders' sudden wealth in this generation. The next round of wealth creation comes after the eurozone breakup and the daisy chain ripple across the Atlantic, whenever that comes and however bad that will be. Liquidity events after the deluge may look more unconventional than what we have traditionally seen in this country. The spectrum will run from desktop manufacturing at the community level to financial repression at the national level. Creating wealth after 2012, at least for this observer, will have little to do with anticipating the stock market's reaction to headline news out of insolvent countries.