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Europe: The Can Kicking Stops Here…
Let’s
address the Euro.
Most of the
“risk on” trade today hinges on the Euro holding up. If the Euro collapses,
then stocks and commodities will follow suit (a weak Euro pushes the US Dollar
higher).
With that in
mind, the weekly Euro chart shows the currency is very close to making a
breakdown below its trendline:
A break of
this line would herald a drop to at least 126 and likely 124. This, in turn,
would mean stocks and commodities falling off a cliff. While this outcome is
not guaranteed, it is my favored scenario given the ongoing destruction in the
Euro-zone:
ECB fails to fully offset government bond buys
The
European Central Bank failed to attract the 73.5 billion euros from banks on
Tuesday needed to offset its seven-month run of euro zone government bond purchases,
instead managing to draw just over 60 billion.
http://www.reuters.com/article/idUSTRE6BR1JZ20101228
However,
it’s never a great idea to be too married to a forecast. And there is the potential for a quick Euro pop in
the short-term.
As you can
see, the last two months have formed something of a falling wedge pattern for
the Euro. The bottom trendline coincides with the weekly trendline dating back
to June ‘10. In contrast, the top trendline (the descending one) has only
developed in the last month and a half.
One key item
to note is the fact that even with light holiday volume, traders have failed to
take out the upper trendline of this pattern. This lends credence to my view
that the likely break from this pattern will be downward. However, as of right
now, the pattern has not yet broken. So it’s unclear where we are heading next
here.
However,
we’re getting darn close to a break.
However, any
Euro rally here will prove short-lived. The Eurozone has kicked the can as far
as possible down the road. This year (2011) will prove to be the year it all
hits the fan. I believe we’re likely to see the Eurozone broken up within 12
months time. How exactly this break will occur, I don’t know. But the Eurozone,
in its current form, is done.
Good Investing!
Graham Summers
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it interesting u dont see iceland in the news, they said screw u to foreign bail outs, seems to have worked. does anybody wonder why ireland, greece, spain, portugal,etc... doesn't say screw u too. I would love to know how much money the banksters are throwing at the political leaders of the PIIGS to transfer the private debt to the public sector of these countries. How long will the people put up with this? I realize the public entitlements r enough to break their backs alone, but adding the private debts to? The people really must have a strong back and a WEAK mind. Lets hope they get smart quick and go look at iceland
No, I dont wonder why. And I dont understand why people should.
Iceland is a long story as I reported many times. They carried out a plan over nearly two decades to tackle their inherent inflation troubles and the final stroke was repudiation on debt.
They brought nothing new in their plan. The most surprising was they were allowed to get away with it.
Calling Ireland and the others to implement only the final stroke is like telling somebody that buying the same suitcase a bank robbing was performed with is enough to see the robbed cash materialize in the suitcase.
The PRC had this movie "shelved" over here. Perhaps it will play on EU screens first:
http://www.moonbattery.com/red-dawn-remake-poster.jpg
http://liveforfilms.files.wordpress.com/2009/12/red-dawn-remake-set-phot...
http://chinadivide.com/wp-content/uploads/2010/03/red-dawn-2010-remake-p...
I love these posters
And the subtle Orwellian propaganda of the financial PTB triumphs once again.
No, if the Euro collapses, the only thing that will thereby be pushed higher is the US Dollar Index, not the US dollar itself. The two are NOT the same thing, not by a long shot. But since this depression began in 2008, I have noticed radically greater mention of the US Dollar Index by mainstream, pro-establishment pundits, primarily I believe to focus attention away from the continual and never-ending erosion in value of the dollar (and, of course, all fiat currencies), regardless of short-term moves in this contrived and artifical US Dollar Index.
If I am on a sinking ship and you are on a sinking ship, and your ship suddenly begins to take on water faster than mine, sinking lower than mine in the process, does that imply that my ship is now rising out of the water?
And for those who believe I am off base in my criticism of the dollar index as a measure of ANYTHING real and absolute, answer me this: Does the dollar, today around 80 on the US Dollar Index, have the same purchasing power (or anything even close to it) as when the index was also at 80 25 years ago?
You are exactly correct. Here's how I explain it to people. The dollar index is a basket of currencies (mostly heavily weighted to the Euro). That basket had been thrown off the top of the Empire State building. Now, within that basket, the Euro may rise (or fall) with respect to the USD, the pound may rise or fall, they jockey for relative value with respect to each other, as 'competitive devaluation' plays out. But never forget that the entire basket is in freefall. That falling basket is the overall buying power of all the fiat currencies with respect to real goods and services.
People talk about a big dollar rally (in terms of the DX index). Great. The dollar pokes its head out of the top of the basket, becoming relatively strong with respect to all the other fiat currencies in the basket. Is it rising, even at that point, faster than the basket is falling off the building? Heck, no. All that relative strength will do is offset, to a small extent, the 'fiat fall', at the expense of other currencies, only to a small degree, and only for a short time. What people need to focus on is the freefalling fiat basket, not the insignificant relative jockeying withing the basket.
In my opinion the best way to judge this is not gold, silver, or commodities (although I am a big fan of all of them), but a 'middle class purchasing power index'. Since no one seems to feel there is any value in creating one, I just create my own, based on items the 'Average Joe' uses, in the proportions he may use them in. True 'Average Joe' buying power. Then you'll see what the fiats are doing. Just one man's two cents.
It is 1983 and a half right now...
"If I am on a sinking ship and you are on a sinking ship, and your ship suddenly begins to take on water faster than mine, sinking lower than mine in the process, does that imply that my ship is now rising out of the water?"
...uh, just give me a second to get these deck chairs re-arranged...let's see now, I think your question depends more on the observer than the observed...or the reference point one has chosen as a benchmark upon which to base the relativ measurements...as we all know, the PM's are not really going up in "value"...it is the tide going out for the fiats....
The people I hear over here are talking about 2 types of euro's.
There won't be a brake up in terms of countries leaving the EU.
But it will be the currency that is the backbone of the EU that is going to change.
I've already seen a proof coin of this and what is different is the size.
What I mean is this: Take for example the 1 euro coin. Every country has 1 euro coins and these are minted in the country that puts on the seal. The difference will be the size of coins that will vary.
Meaning that countries that offer low value to the euro will need to mint more expensive euro's. Countries that offer a high value to the EU may mint less expensive coins. But the facial values will remain the same.
Interesting, it could work but if "they" lied about their debt before, they still can again.
Also, who/where is the Euro minted & printed?
Fun boy. Early April's fool
Minting? What about notes? What about digital zeros?