ECB Considers how to Prevent the Greek Exit


Author Larry Berman

Posted: 30 May 2012 re-posted from etfcm

With the ECB considering options to keep the Grexit risk off the table by way of Eurobonds and swap lines, the markets should be pacified in the short run, but we will not know how easy or toxic the Grexit might be until the June 17th election and the Fed’s response, if any, until June 20th. So bounces for now should be limited to the 1340-1365 range, though a good European band-aid could surprisingly calm the markets and give them a much bigger lift than we think is likely.

With China slowing hard and commodity prices confirming as much, there are no shortages of things for investors to be anxious about. Thankfully, for now, most are not concerned with how toxic the US debt picture is and to what degree 2013 will usher in a forced recession due to a need to balance the budget and avoid another debt downgrade—but we digress, not many are looking at that right now. Right now, all are concerned with the bank runs that are spreading in Europe.

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Global Debt Problems are Toxic and Likely to End Badly


Author Larry Berman

Posted: 16 May 2012 re-posted from etfcm

We have suggested the downside target for the correction phase is at least 1290, but we did think the 1340 area would initially hold—it has not. The Greek tragedy is manageable from what we understand, but the Portuguese squeeze and Irish break dance, followed by the Spanish paella and Italian salami, is too much for Germany to quaff given France’s new found “AA” foie gras.

Investors are forgetting that the reserve currency of the world, the mighty Greenback—is bankrupt and owes 800% of GDP in unfunded Social Security and Medicare. Even if they patch up Europe for a while with another LTRO or some other alphabet soup, the debt problems in the world are toxic and will most likely end badly. The Euro will likely break up and trillions in debt will need to be written off or monetized globally.

If anyone has another solution, we are searching hard for one, this will likely take years to fully play out. Don’t fret the day-to-day noise and miss the big picture. One needs to take money off the table when the markets are strong and have cash to buy the bargains when they develop.

 

Economy Watch: New Year, Same Old Nervousness in Euro Zone


Economy Watch: New Year, Same Old Nervousness in Euro Zone.

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