Another agreement with Larry

Conclusion
Merkel and Sarkozy will soon learn that an orderly break-up of the Euro is not possible. Even the slightest hint that a breakup is being contemplated will cause a global financial disturbance that is so great that any perceived benefits of a break-up will be completely overwhelmed by the costs that will be imposed by the market.
By the same token, Merkel and the Germans are unwilling to do what it takes to save the Euro.
Thus, a situation is fast approaching where a crisis is becoming unavoidable. European leaders cannot break up the Euro without incurring unacceptable costs. At the same time, the costs of saving the euro seem prohibitive. The result of this configuration of choices will likely be paralysis that will lead to outcomes that will be dictated by panicked financial markets rather than carefully planned policies.
Markets will move must faster than the Eurocracy can agree on anything of substance. As detailed here, various markets that have served as leading indicators in the past appear to be getting ahead of the curve already.
In the absence of aggressive intervention by the ECB, I believe that Europe could find itself in the midst of a full-fledged crisis before New Year. This accelerated timing could be averted through a series of aggressive and shrewd actions by European leaders and the ECB. However, investors should prepare for this potential eventuality before New Year.
Under such circumstances I would expect the S&P 500 index (SPX) to ultimately fall to the area between 950 and 1,020 within a matter of just a few months. I expect the Nasdaq Composite (IXIC) to fall to the area around 1,850-2,000. The Dow Jones Industrial Average (DJI) should ultimately decline to an area between the 9,000 and 10,000 level.
This implies declines for the SPY, DIA and QQQ of between 20%-30% from current levels.
Given the magnitude of the risks faced on a six-month time horizon, in my view, it makes little sense for investors to purchase or hold even very attractive equities such as Apple (AAPL), Microsoft (MSFT) or Pepsi (PEP). Investors will probably be best served by raising cash and letting the current highly dangerous situation play itself out. I believe that investors that raise cash now and wait for the storm to pass will likely be highly rewarded for their patience and discipline.

James A Kosterhyz todat in seeking Alpha.