Archive - Nov 24, 2011

Geopolitical risk remains elevated and Middle East tensions are escalating globally with Russia appearing to be prepared to risk conflict over Syria with NATO and the US. Yesterday, Russian President Dmitry Medvedev threatened to target and, if necessary, destroy the U.S. missile defence shield in Europe once it is built. A marked deterioration in US–Russian relations and concerns of a new ‘Cold War’ may support gold prices.  While all the focus has been on Europe, and to a lesser degree the US in recent months, two of the other largest debtor nations in the world, Japan and the UK (including corporate and bank debt), have been under the market's radar.  This will change soon and will likely lead to the next phase of the global financial crisis. The fact that we have a global debt crisis which will almost inevitably lead to an international monetary crisis is as of yet not acknowledged or realized by the markets and the media. Today, the IMF warned in a new report that market concerns over fiscal sustainability could trigger a "sudden spike" in Japanese government bond yields that could "quickly" render the nation's debt unsustainable as well as shake the global economy. 

The entire hopium driven rally from yesterday afternoon on a Reuters report that Germany may be warming up to the idea of Eurobonds destroyed by one word out of place, in this case Merkel's who just said that "she stands firmly against joint Euro-bonds." Translation: market will have to punish EURUSD far more for her to change her mind.

It is in French but it is really a body language kinda gig. They promise to do everything they have to save the euro. In other words they are as clueless as always. The important thing is that Sarkozy just said they have agreed to abstain from making demand on the ECB. So...no more pressure to monetize?

Just a step behind the Chinese as usual, and just in time to kill a modest EURUSD rally. Also on the same day as the first mass strike in Portugal which reminds us that everyone will want a piece of the debt reduction pie.

All you need to read.