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The Euro: OFF With Its Head!
First off, I
wanted to address the Euro situation.
During a recent discussion with one of my closest European contacts, it
struck me that Europe wasn’t going to have a full-scale Crisis before now. The
reason for this is simple:
No one wants a Crisis during the holidays.
With social
unrest already erupting into full-scale riots in Europe, the last things
European politicians could afford would be a currency Crisis over the holidays.
After all, EVERYONE is off of work at that time, not just the unemployed. So
the potential riots would have been enormous.
Add to this
the emotional charge of everyone finding out they’re broke during a time which
is usually one of cheer and celebration, and you would have the makings of a
REAL systemic disaster.
For these
reasons, the “powers that be” were going to do everything they could to
postpone a Crisis from hitting Europe at the end of 2010. They simply could not
afford to do otherwise.
On top of
this, most financial firms’ employees were already on holiday by December 20,
so the likelihood of heavy selling occurring during the final weeks of December
2010 was minimal (in order to get a Crisis you need the whole electronic herd
to head for the exits).
However, now
that the holidays are over and traders are starting to straggle back to their
desks, we’re going to start seeing some fireworks in the European markets.
Indeed, the
Euro has broken below the trendline that was sustaining it for the last few
months.
It has since
gone on a massive short covering bounce, which looks as though it could be
forming a Head & Shoulders top. However, for this to be confirmed we need
to see the Euro turn downward soon.
Of course,
all of this is just financial speculation and trading models. No sane person could
possibly invest in the Euro today based on fundamentals. After all we’ve
already seen Greece ask for an extension of its bailout payments from three to
30 YEARS. And it’s not as though investors are interested in buying bonds from
Spain or Portugal (see the recent bond buying activity from the ECB). And then
of course there’s the Irish wild-card now that the elections will be held in
late February.
If we’re
honest about things, there is no WAY the Euro will exist in its current form
for much longer. The whole thing is just one big leaking ship that the ECB
keeps trying to plug with extra Euros.
At some
point, and I cannot specifically say when, this whole enterprise will prove
useless and the Eurozone will either be broken into separate sections or disintegrated
up altogether. History tells us that during times of social strife it is common
for people to turn on foreigners. And it’s not like Europe doesn’t have a
history of wars between its countries. So I’m leaning towards the latter
option.
And at that
point, it will be off with the Euro’s head!
Good
Investing!
Graham Summers
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The EUR is a short. However, it may only be a short at 1.50s, given that everyone and his brother would like to short at 1.40. KILL THE SHORTS seems to be a mantra well worth heeding in these policy driven markets. The Irish move up elections and whoosh, everyone has a sudden urge to BUY EUR ?
Comparing the EUR to the USD is simply apples and oranges. Whether you like it or not, the USD is the world's reserve currency and will remain as such for a long long time.
When the world has rebalanced, meaning labor cost has more or less normalized between the large emerging economies like China, with the West, and when that normalization entails Chinese current account deficits, a freely convertible currency and the lifting of capital controls over the RMB, then China will become another reserve currency, but not THE reserve currency. If you want to bet 100 years down the road, well that is the stuff of sci fi and movie rights.
What an idiotic analysis. I lose more respect for Graham Summers by the day.
So, what are you calling for trades?
Another Yank talkjob. Your little euro shorting games backfired big time. Fundamentals are just fine, when compared to the money printing USA.
The euro owes it's buoyancy to several factors :
1. IMF/EU bailouts of Greece and Ireland
2. Asian central bank buying
3.Promises by China to purchase the bonds of faltering member states
4.Pledge ( fulfilled ) by Japan to buy a chunk of EFSF bonds
5.ECB bond purchases
6.An endless stream of cheerleading from EU/ECB officials
7.Hawkish comments from Mr.Trichet
8.Investors/central banks dumping the USD like it's riddled with STDs
Basically the entire world has come together in a desperate attempt to protect the integrity of the euro . Make no mistake , the whole sorry affair absolutely reaks of desperation .
Right on. Numbers 1 - 5 are all money printing operations, just with different colors on the (electronic) paper.
At least the Euro is currently taking PM's with it, can't say that about bENNIeBuXs.
The Euro has something going for it, which is rarely mentioned. And, predictably, not mentioned in this essay which is little more than a regurgitation of the conventional wisdom. The declining marginal utility of the 5000th bearish article on the Euro is a sight to behold.
GG
Chart looks pretty random to me. Going up and down like a groom's pr**k.
FYI: appealing to people's fear and greed is the fastest way to sell subscriptions to a financial newsletter. Rhetoric 101.
US dollar and the Euro are Cinderella's ugly sisters. Cinderella is the new queen; that awaits her pumpkin, her prince charming. You know the guy with slit eyes...
Banzai ... or its equivalent in ho chin chai!
I find this article to be nothing more then wild speculation plus the author advertizing his stuff...
1,39 would be my shorting kickoff. Maybe 1,4 to be sure.
After that, you can't go wrong with shorting the Euro.
But like you said it, I don't understand why the euro is getting stronger, but so did the dollar when all the bad news came out at once.
Count me in at 1.39-1.40 too, it wouldn't feel right not profiting from the EU's demise after all they scammed off us... don't get mad, get even
that's what they mean "sharing the wealth" :)
Sorry you are wrong about the Euro. Mostly becasue it's not in China's interest to see Europe fracture and splinter. See here for what I am talking about
http://screwtapefiles.blogspot.com/
yep, euro is here to stay.... also if you look at it as a beautycontest..... dollar queen is muuuuuch uglier
correction : the Euro AND the Dollar are BOTH in deep shit.
It doesn't matter who's worse off if they both smell like shit.
I disagree about the USD. I like this guy's analysis:
http://thebuttonwoodtree.wordpress.com/2011/02/01/up-next-for-the-eurusd-tango/
Looking at the long term ebb & flow of the Dollar, it appears to be starting a secular bull run.
yes, but the shit smells different, and has different origins.
You might even say that dollar is shit, and euro is puke.
What would you eat if you had to? Shit or puke?
I prefer puke... because you could still get some undigested rest
nice one + 1
:-)
You've never seen me vommit after half a bottle of whiskey and after eating 4 cheese rolls.