I have little concern that the US will fall back into any sort of crisis in the economy. This is not 2008. Washington will very likely kick the can after the election. I believe it is very likely Romney now wins after the jobs report, and no probable uptick in the economy before November. The Republicans will hold the House. The Senate is up for grabs. If this is the outcome of the election, then they will very likely just extend tax rates, push forward any real decision on the debt ceiling and budget issues, defer the sequester and the other issues until summer of 2013. There is nothing Romney can do in the very short term to make a dramatic difference, but what will happen is there will be a change, and that alone will bring optimism and make a difference in the willingness of capital to start to make bets, and to move money into productive use. However, that also is not an overnight event and takes a long time to play out.

The real issues are Europe and Iran. It is very clear Iran is betting that Obama will not do anything on his own. They see him doing nothing in Syria and fleeing Iraq and now Afghanistan. It is clear they perceive him as weak and they have Russia protecting them in the UN. Israel will attack, but whether they wait for Romney, or just decide to go for it in September, is unknown. But in the end they will attack Iran because there is no other choice. When Obama did not aggressively support the revolution in 2009, and now, by not doing anything at all in Syria, there is no chance of an uprising in Iran. Obama’s lack of leadership and his unwillingness to do anything more than talk and levy some sanctins, has guaranteed that Israel has no alternative. It is only timing.

Greece is toast no matter what support it gets, and no matter who wins their election. It is a failed state. Spain will get saved because not to, is too disastrous to contemplate. However, the Euro has never made any sense to me, and it is now coming apart. There was never any possible way to meld 17 very different cultures into an effective economic system when there is no central control over fiscal or political decision making. Germany should have learned from World War II that even with absolute military and police control, they could not control the various cultures over a long period. Nobody wants Merkel telling them how to run their country. It is completely unclear what the eventual system will be in Europe, but it cannot continue to lurch from crisis to crisis, and German taxpayers are not going to recapitalize all of southern Europe over which they have no real political control. The IMF does not have the capacity to do it either. The real fear is the election of a hard right, or hard left, leader in a major country, and a rise in an extremist movement which then leads to major social unrest or worse. The seeds of the 1930’s are all in place in Europe to spawn another very bad scenario if they are not careful. As a result, Europe will remain in turmoil for several more years, and will not be a driver of economic rebound in the US. It will remain a drag.

In short, the US is not going to see any major economic rebound for a long time. Things may not get real bad again, but we may be in stall speed for another year. No economic models have a metric for fear, which is why so many forecasters missed the jobs number by so much on Friday. Their models said all is Ok, but they forgot to watch the Ten Year yield, which is my metric for fear. When the ten year yield drops, so do jobs, because everyone is afraid to invest or ACact. When it starts to rise materially again, then we will know the economy is on the rise because capital will be moving into riskier assets and usages. My mother, who lived through the depression and World War II, always told me, don’t worry, eventually it all works out, and it will be OK again. It just takes time. If you invest for the long term, it will all work out if you buy well today.