The media has focused a lot of its attention on Europe recently—and deservedly so. The meta-stories generally concern weakness in one country or another or the slow disintegration of hope for Greece. I wrote a couple of weeks ago about how I thought Europe would end up pulling itself together for political reasons—the fear of history, mostly—but I did not really delve into what would have to happen to make that the case.

In July, I spoke at the Commonwealth Live! networking tour. The conversations I had there, as well as the increasing sense that Europe is continuing to deteriorate, suggested that I should lay out how I see the evolution of the eurozone and how it might succeed or fail. This thought process will obviously adjust to conditions on the ground, and one reason for writing it down is to track the changes as we move forward.

The big story over the weekend and on Monday was the Paul Ryan vice presidential selection. The U.S. presidential race really started with that announcement. Yes, I know that we have had months of Republican primaries and you could argue that the race began when Romney wrapped up the nomination. But until this weekend we did not really know what the race would be about.

Once again, nothing particularly new or noteworthy on economics, politics, or finance in the papers. One article I did find interesting was on a tidal power project here in Maine that’s nearing completion: “The Search for Energy Takes a Turn Underwater” on page A8 of the New York Times (NYT). Apparently, this will be the first commercial tidal power station. If it’s successful, it could lead to further development.

As I have outlined before, energy is the one big area where the U.S. is vulnerable, but the fact that we keep exploring different ways to generate energy should help solve the problem—and probably sooner rather than later. There is an unavoidable gestation period for new technologies, but when they do hit, they can have huge effects in a short period of time. Fracking is the best example I can think of—it has already changed the natural gas world—but there are others as well. Tidal power may or may not be one of them, but this potential energy source has been under development for a while, and it’s getting close to viability.

Sorry to miss yesterday’s post, but I spent the day in Story Land. For those of you not from New England, this is a small amusement park built around fairy tales—Cinderella’s castle, Heidi’s grandfather’s hut, the Three Billy Goats Gruff, and similar exhibits. It is perfect for small children, and my four-year-old son had what was possibly the best day of his life. We opened and closed the park and had a two-hour drive each way—thus, the day was not conducive to posting a blog.

It was an interesting day, though. From my son’s perspective, the whole thing was free, as it was paid for by a higher power (me). The visitors covered an amazingly wide range of people—Hasidim, Muslims, WASPs (me again), multiple races and socio-economic classes—all united in letting our kids have fun. The park itself was very well designed, well run, and incredibly effective at extracting money from dad’s wallet.

As far as I am concerned, the big news today is yesterday’s successful landing of the NASA rover on Mars. We haven’t had all that many space triumphs recently, so here’s to the engineers who made it happen! The Wall Street Journal (WSJ) had it on page A1—where it belonged—with “Rover Probes Secrets of Mars,” the Financial Times (FT) had it on page 1 with “Curiosity sets out to answer mysteries of Mars” and on page 5 with “Mars robot puts US back on the map,” and the New York Times (NYT) had it all the way back on A9 with “After Safe Landing a Rover Sends Images From Mars.” What was the NYT thinking?

The other big story is the ongoing lobster roll investigation. I went up to Linda Bean’s in Freeport, across from the L.L. Bean store there, to check out one of the WSJ best, and I am sorry to say that I was disappointed. The roll was only so-so, as it was overtoasted and needed more butter. There were lots of large pieces of firm lobster, which was excellent, but there was not enough seasoning and mayo. You don’t need a lot, but you do need some. Overall, probably a 7 or 8 out of 10, which is definitely not bad, but not best in class, either.

http://www.youtube.com/watch?v=GnJ5dnFJjrA 

This week, I am writing from Maine, so the posts will probably be somewhat shorter than normal and the timing may be erratic. I am taking the chance to research lobster rolls up here—for your benefit, of course. After reading a Wall Street Journal (WSJ) story on the best lobster rolls in Maine, I feel obligated to do my own research. Further reports as the story develops.

A quiet weekend, with the only meta-story being the Friday rally, variously attributed to a Spanish bailout hint in the Financial Times (FT) and to job gains in the WSJ. Monday really had no meta-stories, but the papers displayed interesting differences in focus.

Financial markets take one step back, two steps forward

The latest financial market glitch leads the papers today. The problems generated by Knight Capital with its new and undertested trading program rattled the markets, raised systemic questions, and may well have killed the company. The Financial Times (FT) focuses on the firm with “Software glitch leaves brokerage Knight nursing loss of $440M,” while the New York Times (NYT) takes two looks at the revealed risks with “Errant Trades Reveal a Risk Few Expected” on the front page and “An Automated Jolt for the Markets” on the front business page. The Wall Street Journal (WSJ) is relatively restrained, with the headline “Loss Sweeps Trading Firm” on the front page.

The consequences to the firm, in the end, will not matter to the markets. The consequences of the systemic risks that were revealed, however, are a lot more important. I have to say that this gets back to the issue I discussed in the “Taking a Ferrari into the Back Country” post regarding how we have optimized the system. Knight was clearly focusing on speed to deployment and optimizing for speed under competitive pressures, rather than optimizing for robustness. If every piece of the system is like this, small wonder it is fragile. Every event like this makes it more important to optimize for robustness—or at least introduce it into the discussion.

The papers are all about slowing global growth today, featuring articles that talk about how the U.S. has gone from grow-grow in the first quarter to slow-grow in the second: “Wary Fed Is Poised to Act” on page A1 of the Wall Street Journal (WSJ), “Fed hints at fresh action on economy” on page 1 of the Financial Times (FT), and “Fed Defers New Action But Growth Has Slowed” on page B1 of the New York Times (NYT).

Other countries and areas have been hit as well: the NYT has “Local Governments Face Fiscal Peril, State Comptroller Warns” on page A15, the FT has “Asian output hit by global headwinds” on page 1 and “Weakness in Europe and Asia dents US revenues” on page 13, and the WSJ has “Factories Lose Steam As Global Fears Rise” on page A2. Even hedge funds are shrinking, as seen in “A Hedge Fund Too Big To Profit” on page B1 of the NYT and “Bacon to pay investors $2bn” on page 13 of the FT, which talk about the voluntary downsizing of a large and famous hedge fund.