Just when you thought Europe was stabilizing, along comes Cyprus and a resolution program which has seriously unsettled things again. The precedent set by Cyprus is potentially destabilizing as it has potentially serious implications for depositors and investors in several countries. There is no real way to predict what might come next. Nobody predicted the EU would do what they did in Cyprus, so now there is a new level of risk due to the uncertainty of what could they do next in Spain, Italy, or maybe even France should things in that country continue going poorly. The uncertainty means forecasting risk and adjusting return expectations for the uncertain and unexpected is always hard.

It has become common for the investment community to seemingly shrug off each new crisis as it seems they get a patch and we are on to the next crisis, but what most seem to be ignoring is that none of the crisis are really solved, just taped over. Spain and Spanish banks are still a disaster. Ireland is better, but a long way form recovery. Italy is a perpetual political mess and there is no predicting where that goes, but surely not to a good place given the last election. Greece is stabilized, but that is like saying we slowed the growth of the tumor but recovery is unforeseeable. The Mideast gets worse by the day, and the complete failure of the US to lead or act is just letting the terrorists gain further control in Syria and Libya. Iran is still the issue and this is the year when something major happens.

Washington seems as far from resolving our deficit as ever, and there is no hope that the US economy will really pick up growth to where it needs to be in the next year or maybe two. The only good news is given what just happened in Cyprus, there is likely to continue to be a movement of capital to the US from Europe and other places. The Chinese will continue to move capital here and are potential major investors in US real estate as we are beginning to see.