11/20/11
The European conundrum drags on. After a few days of being away from the paper markets and seeing brisk activity at the Baltimore coin show, it's back to the reality of watching these fiat markets. As more panic sets in to sell a bunch of euro debt-junk, I picture a long line of cars waiting to go through the tolls. The wait is getting so bad that two cars at a time are trying to go through. Watch for signs of further disorder in the European bond markets in the week ahead. There's only about a Trillion in Italian bonds that need redistributing. Yikes.
What moves are left in the Chess game? The king should have died long ago but is still moving around on the board. Seems like its time to fish or cut bait as in European mass unity/disunity and unite and print new euro bonds like mad, or call the whole EU thing off due to irreconcilable differences. IMHO the real key holder is Germany. If they walk, we're going to see some very negative stock market action. Markets in general will be pummeled. We could see a circuit breaker type day for Wall Street. Even out dear friend gold could take a shellacking since the fiat bunch are well trained to sell everything and flock to the dollar.
Printing euro bonds, we know, would be a temporary stop gap, but if they can do it they sure will. But Angela has got to be paying attention to what is happened to her ilk Spain. We are seeing the winds of change. The socialists are getting ousted in favor the conservatves. Spanish Voters Set to Throw Out Socialists in Election. Germany's Merkel has got to be pay close attention. In the end, she's out to protect her own neck.
Some of the canaries are flying around, meaning not dead yet, but their fate might not be too positive. Here's an indicator to watch. The TED spread. Wiki has a quick definition for those who are not familiar: “The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills").” It's on the rise again. Not a positive. The trouble with this indicator is that it can slowly rise and then boom – it skyrockets. At 50 basis points, the spread is at its maximum historic norm which usually averages around 30 bps. During the last crisis, TED ballooned to 200 basis points. Keep at eye on it. http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND.
The EIB bond spread (European investment bank bonds) went berserk on Friday. A Bloomberg terminal grab from Zero Hedge. My goodness... http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2011/10/20111119_EIB_5Y%20EUR%20denom%20bond%20spread%20exploded.png
As if all of this wasn't enough to add to the investment gloom, we have our own bunch of monkeys in Washington – The Super Committee, failing to engage in good representative representing. Their task was to forge an agreement to at least show a pretense for fiscal rectitude, although their original goals actually include NO plan for cutting our debt, only to cut the rate in which is grows, which is complete folly to begin with. But I digress. Bottom line, we're back to the threat of another debt downgrade by S&P as the nation will go on some sort of politically concocted fiscal autopilot as we have now crossed the $15 trillion official debt number – which is actually quite a bit higher if you include off budget items, the insanely bloated Fed balance sheet, etc. Just sayin'.
Oh, the stresses are all over: Can Europe's Crisis Force US Funds to Break the Buck?
There's little doubt in my mind that we are about to see some interesting fireworks not only in the markets but to societies. Because of its people, it's size, resources, etc., the long term outlook for America should be bullish (should be, but we are almost as divided as the nation was in 1860). But there may be many pieces to pick up to resume that bullish U.S. Outlook. Perhaps things are getting overblown concerning the woes of Europe and its impact on the U.S (though there are many debatable points, and we certainly have big problems here to tackle), but China and Asia have been shifted to the back burner. If Europe finances do collapse and there is an ensuing major economic downturn across the pond, what impact does that have on China and thus the U.S? Yes, we are global in a village sort of way. That's a far more important question that we will explore in future blog posts.
I was at the Whitman Coin Show in Baltimore Thursday through Saturday. It was excellent show made all the more exciting as I witnessed the launching of Certified Assets Management International. Company co-founder and co president, Robert Higgins, and his team are a force to be reckoned with in the coin and bullion business. For people like me of modest means, this stuff is eye candy, yet for others the trading of high ticket, museum quality rarities occurs on a regular basis on the bourse floor: Photo of the Day – Keep the change… for $300K. Also very exciting is the launching of five new coin funds that offer investors a viable alternative to the weak performance of the benchmark S&P 500. Details are here: http://www.certifiedassets.com/inv/the-funds/coin-funds-overview/. Yes, finally alternatives to $GLD, $SLV, etc.
The Financial Labyrinth
While on our coin adventure in Baltimore, my son Nathan and I, went back to the hotel for a little R&R. What does he decide to watch on tv? No, not the Cartoon Channel, but a History Channel show about Greek mythology and the myth about the dreadful and dark Labyrinth on the Island of Crete. In a strange sort of way Greece and all of the debt laden countries of Europe today are seemingly trapped in a Labyrinth and about to be devoured by a debt monster. Some things never change.
What moves are left in the Chess game? The king should have died long ago but is still moving around on the board. Seems like its time to fish or cut bait as in European mass unity/disunity and unite and print new euro bonds like mad, or call the whole EU thing off due to irreconcilable differences. IMHO the real key holder is Germany. If they walk, we're going to see some very negative stock market action. Markets in general will be pummeled. We could see a circuit breaker type day for Wall Street. Even out dear friend gold could take a shellacking since the fiat bunch are well trained to sell everything and flock to the dollar.
Printing euro bonds, we know, would be a temporary stop gap, but if they can do it they sure will. But Angela has got to be paying attention to what is happened to her ilk Spain. We are seeing the winds of change. The socialists are getting ousted in favor the conservatves. Spanish Voters Set to Throw Out Socialists in Election. Germany's Merkel has got to be pay close attention. In the end, she's out to protect her own neck.
Some of the canaries are flying around, meaning not dead yet, but their fate might not be too positive. Here's an indicator to watch. The TED spread. Wiki has a quick definition for those who are not familiar: “The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills").” It's on the rise again. Not a positive. The trouble with this indicator is that it can slowly rise and then boom – it skyrockets. At 50 basis points, the spread is at its maximum historic norm which usually averages around 30 bps. During the last crisis, TED ballooned to 200 basis points. Keep at eye on it. http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND.
The EIB bond spread (European investment bank bonds) went berserk on Friday. A Bloomberg terminal grab from Zero Hedge. My goodness... http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2011/10/20111119_EIB_5Y%20EUR%20denom%20bond%20spread%20exploded.png
As if all of this wasn't enough to add to the investment gloom, we have our own bunch of monkeys in Washington – The Super Committee, failing to engage in good representative representing. Their task was to forge an agreement to at least show a pretense for fiscal rectitude, although their original goals actually include NO plan for cutting our debt, only to cut the rate in which is grows, which is complete folly to begin with. But I digress. Bottom line, we're back to the threat of another debt downgrade by S&P as the nation will go on some sort of politically concocted fiscal autopilot as we have now crossed the $15 trillion official debt number – which is actually quite a bit higher if you include off budget items, the insanely bloated Fed balance sheet, etc. Just sayin'.
Oh, the stresses are all over: Can Europe's Crisis Force US Funds to Break the Buck?
There's little doubt in my mind that we are about to see some interesting fireworks not only in the markets but to societies. Because of its people, it's size, resources, etc., the long term outlook for America should be bullish (should be, but we are almost as divided as the nation was in 1860). But there may be many pieces to pick up to resume that bullish U.S. Outlook. Perhaps things are getting overblown concerning the woes of Europe and its impact on the U.S (though there are many debatable points, and we certainly have big problems here to tackle), but China and Asia have been shifted to the back burner. If Europe finances do collapse and there is an ensuing major economic downturn across the pond, what impact does that have on China and thus the U.S? Yes, we are global in a village sort of way. That's a far more important question that we will explore in future blog posts.
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