Europocalypse
Europocalypse
Justice Litle, Editorial Director, Taipan Publishing Group
America may be messy, but Europe is teetering on the brink of financial disaster flat-out … that helps explain the strange action in gold and the dollar recently.
Imagine postcard perfect mountain villages. A-frame castles, old world lighting ranges Happy gas door – the kind of place was located in the Pyrenees or Swiss Alps. To complete the big snowflakes fall slowly.
Now, take a step back. Instead of real people, see inside a snow globe.
The snowball that sits on the edge of a large oak table.
Now you see the back of a large well-kept hand – perhaps a dealer's hand – by accident sweep the snowball on the edge of the table. The snow globe descend on the cold marble floor where it broke into pieces.
What we have seen is a metaphor (or is it an analogy, I know) for Europe. The free fall is happening as I write.
The Horror
If the Colonel Kurtz had been a European banker (not a disturbed Flyboy located at the bottom of the Congo), you would know exactly what to say about the fiscal situation the Europe of today:
"The horror … the horror."
Here are some examples of choices of what I mean:
• According to a recent Bloomberg story, "Germany and France, may be forced to witness the rescue of nations [emphasis mine] not only individual banks. "A number European countries are in the difficult position of host to the banks that are simply too large to break, but potentially very large for bail … the sense of the magnitude of bank losses may be larger than the GDP of the country host.
• BCA Research indicates that, with Iceland on as a "gold standard" of credit risk, five sovereigns more about a destination in Iceland are European: Portugal, Ireland, Spain, Italy and the UK.
• Less than two weeks, the British Telegraph had his hand on a "secret" document is sent to Brussels finance ministers high profile. According to the Telegraph, 17 very confidential "report Rescue page provides estimates of toxic assets as high as 16.3 trillion, more than 23 billion dollars U.S. That s billion with a T .. more than the GDP of all countries of the European Union combined. The estimate could be reduced by three quarters and would be a disaster.
• Eastern Europe is subject to its own special circle of hell for the currency, with Prague and Warsaw exchanges plumbing multi-year low. For example, has been the Polish zloty free fall due to "toxic FX options" – the version of the currency of credit default swaps. As reported by FT Alphaville blog, Polish banks Forex whip these toxic derivatives to corporate clients, where the zloty has fallen below a certain level, the options off a Corporate losses spiral garland.
The new odd couple
The mass slaughter taking place in Europe also explains a phenomenon very strange: the breast-buddy pair of gold and the dollar.
When new players get their first experience in the macro outlook "" – You means that this area is the connection? Wow – The gold dollar is a relationship of the first things to learn.
The gold and the dollar, after all, is supposed to be like matter and antimatter. When gold is strong, the dollar is weak (and vice versa). A stable dollar Eddie represents the triumph of the central bank and control of inflation … when gold rose, however, represents the Bank of madness and the ravages of printing. They are the north and south, black and white, yin and yang – you get the picture.
This long-established development why it was strange to see the gold and the dollar recently kicked butt joint. Both are to explore multiple peaks in the month, as if the increase in tandem are the most natural thing in the world. (In my last conversation Macro Trader, I described the yellow metal and the dollar as "The Odd Couple" new ".)
So how does this link back to Europe?
Simple: With all of choking on a continent with primary toxic equivalent to the square, there are three obvious places on Earth left large pools of financial capital of terror to hide – or the U.S. dollar and U.S. Treasuries. (And guess what … they caught two of those three!)
I admit it. I do not foresee that Europe itself into into such trouble. The "old world" is supposed to be quieter and more conservative than the United States – in finance at least – who would have thought the nose-in-the-air Brussels rates could have on enough layers of influence to bully a Texan blush?
What now?
So where are we here? As I said Macro trader members of more than a week, the dollar is a mystery wrapped in an enigma at the moment. We have moved our means of exchange cons bearish to neutral on the ball without taking a position either way forex. There are few coins we like a period much longer term investment, but from a business perspective is watch and wait.
As for gold – it has been for weeks in the macro Operator using stocks of gold and the metal itself – when the stars align, it really align. I think the yellow metal case now.
To borrow a turn of phrase in an interview the former Market Wizards, the sun was near the Earth and the gold is better than money can buy ointment zinc. Greenbacks and U.S. Treasury bonds, the best alternatives for second and third in a world in which Europe and Japan are imploding, offers broad and deep, but liquidity sun protection seriously ugly.
As you can imagine, I will keep an eye on the situation in Europe (and many other events running on Crazy this time) and we'll keep.
Some of you have written to say "Hey, JL, what about that gold in the coffers of the IMF and Fort Knox? Are not you afraid they might try to dump on the market? "
My answer: Not really. Even if the powers that be had the stones to try this maneuver (which I doubt), which proved to be a gesture of suicide. Next week will tell you why …
http://www.taipanpublishinggroup.com/taipan-daily-022009.html
About the Author
Justice Litle is Editorial Director for Taipan Publishing Group. He is also a regular contributor to Taipan Daily, a free investing and trading e-letter, and Editor of Taipan’s Safe Haven Investor and newly introduced service Macro Trader.
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