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Graham Summers' Weekly Market Forecast (Do We Still Have Faith? Edition)

Phoenix Capital Research's picture




 

 

The Euro and stocks both gapped sharply up over the weekend on news that EU finance ministers are moving forward with a €100 billion Spanish bailout.

 

A few thoughts on this move:

 

  1. Where is the money coming from? (most EU Governments are broke)
  2. What precedent is this setting? (Ireland is already clamoring for a rewrite to its bailout rules)
  3. How desperate are things that they’re making such a large move so quickly?

 

Regarding this last point, Spanish political leaders have routinely denied needing a bailout for months. This whole bailout feels more than a little rushed given that Spain only formally requested a bailout (if you can even truly claim that) over the weekend: the same period during which a bailout was granted.

 

Moreover, it’s very difficult to believe that this will “solve” Spain’s problems. Let us consider the example of its recently nationalized bank, Bankia.

 

Bankia was formed in 2010 when the Spanish Government merged seven insolvent cajas (regional banks). In plain terms, Bankia was a trainwreck waiting to happen… at least to anyone with a working brain. However, both the bank itself and the Spanish Government decided to maintain a charade that the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying its dividend).

 

Today, Bankia has been nationalized after its initial bailout request ballooned from €5 billion to €24 billion. Moreover, it has also revised its 2011 results from a €309 million profit to a €3 billion LOSS.

 

The point I’m making here is that both the Spanish Government and the Spanish Banks will play “extend and pretend” as long as possible right up until they’re on the brink of collapse.

 

With that in mind, I sincerely doubt €100 billion is going to solve Spain’s problems. The whole bailout reeks of desperation. And it likely will have political and financial implications that will quickly render the benefits of this move moot. Of course, when you’re facing systemic collapse, you don’t have time to debate implications and consequences. But I highly doubt that this move will do much to address Spain’s true problems.

 

Indeed, stocks and the Euro are already coming off their over the weekend highs. This week will be critical for discerning the future of the markets. If risk assets remain aloft, then investors are still willing to believe that the Powers That Be can save/ maintain the markets.

 

But if stocks and the Euro tank this week… after a major bailout move such as this… then watch out, because the REAL Crisis has begun: the Crisis of faith in the actual financial system and the institutions meant to prop it up.

 

If this happens, then it’s GAME OVER for the Euro at the very least.

 

While I hate to admit it, there is a good chance that this is indeed the more likely outcome. The Fed meets on June 19-20 so we could see risk assets remain afloat until then. But if Bernanke doesn’t pull a rabbit out of a hat at that meeting then watch out because things could get very ugly very, very fast.

 

On that note, if you’re not preparing for the collapse of the EU, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

 

This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com

 

Good Investing!

 

Graham Summers

 

PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

 

 

 

 

 

 

 

 

 

 

 

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Mon, 06/11/2012 - 13:02 | 2515234 Eric L. Prentis
Eric L. Prentis's picture

Malinvestment, malinvestment and more malinvestment—the economic consequences of additional bank bailout insanity, throwing good money after bad, is devastating, long-term.

 

The 1% banksters continue to win, screwing the 99%. One-hundred thousand psychopathic banksters should be in prison for five years and barred from the financial industry for another ten years. This is the only way to get the fraudsters out of the political process, so we can implement real economic change.

Mon, 06/11/2012 - 14:43 | 2515575 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"One-hundred thousand psychopathic banksters should be in prison for five years and barred from the financial industry for another ten years. This is the only way to get the fraudsters out of the political process, so we can implement real economic change."

"We need a more permanent solution to our problem".

J.C. Superstar

Mon, 06/11/2012 - 18:04 | 2516169 Zero Govt
Zero Govt's picture

the solution is not economic reform, it's far more simple than that, not that armies of crones, journalists and 'experts' want a simple solution as they all love the job of re-arranging the deckchairs on the Titanic

fuck Govt, ram a pitchfork up its rectum and burn it to a cinder

Govt is the rotten tree on which all the rotten apples (banksters et al) in society cling to

Stop Paying Your Taxes... kill the sucker/s at source

Mon, 06/11/2012 - 12:21 | 2515054 Satan
Satan's picture

A theoretical rubber band can stretch to infinity.

Economics is a human construct. There are no scientifically irrefutable natural laws that govern it. The tipping point of Any object can be calculated. The tipping point of debt cannot. As economic principles get distorted through manipulation in broken markets, it becomes impossible to use those same principles to determine what will happen in the future.

Governments will do whatever it takes to cling on to power . If that means defying economic gravity at the huge expense of future generations then they will.

Mon, 06/11/2012 - 10:55 | 2514558 Zero Govt
Zero Govt's picture

"..to maintain a charade that the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying its dividend)."

Bankia picked up that head feint/fuck technique from Jamie Dimon no???

"..it has also revised its 2011 results from a €309 million profit to a €3 billion LOSS."

the bean counters of the international audit firms are quite pathetic aren't they? They make clowns look like slick suited professionals!

Mon, 06/11/2012 - 10:30 | 2514396 Dead Canary
Dead Canary's picture

Yur preachin to the horses mouth buddy.

Mon, 06/11/2012 - 10:18 | 2514318 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

An analogy:

These bailouts are the same as your mechanic telling U every weekend for 4 years that "Your car is fixed".  Every time U go to pick it up, he needs another week!

By that time, U should figure out he's a liar?????

Mon, 06/11/2012 - 10:08 | 2514263 El Oregonian
El Oregonian's picture

Until the criminals and parasites are actually arrested, tried, and convicted with meaningful prison sentences, then I believe this broken system will finally collapse. We can start with the DOJ Attorney General Eric Holder and work our way through...

Mon, 06/11/2012 - 10:08 | 2514258 XtraBullish
XtraBullish's picture

Blah blah blah....I see the two hands of the broken clock again. To make a shitload of money during the next collapse (or boom), check out my newsletter at www.kidsneedtuitionfees.com or www.helpmepaybills.com - you won't be sorry!

Mon, 06/11/2012 - 09:58 | 2514202 Bullwinkle Moose
Bullwinkle Moose's picture

Graham, I think you're right on, but predicting the exact time of these events is close to impossible. This printing of fiat currency will continue until inflation makes it impossible to print more. That time has hot arrived as of yet. There are many more episodes of this saga to come. Watch for inflation to spiral out of control, then everything will come unglued at once.

Mon, 06/11/2012 - 09:33 | 2514131 Grand Supercycle
Grand Supercycle's picture

Rally Warning from last week:

'Daily chart now gives bullish warning and significant
SPX rally & USDX retracement should commence in a week or so'

http://www.zerohedge.com/news/2012-12-24/market-analysis

Mon, 06/11/2012 - 09:32 | 2514126 MGA_1
MGA_1's picture

Wasn't the Euro supposed to be falling apart now ?

Mon, 06/11/2012 - 11:06 | 2514631 Zero Govt
Zero Govt's picture

the Euro has years to run yet..

Graham is just building himself up into a froth before he disappears with everyones emails

Mon, 06/11/2012 - 09:26 | 2514099 ElvisDog
ElvisDog's picture

It is a good example of how TPTB will keep kicking the can down the road as long as they can, and that they are very good at it. People like Graham shouldn't be so confident when they predict the end of things like the Euro.

Mon, 06/11/2012 - 09:06 | 2514038 mrktwtch2
mrktwtch2's picture

oh no mister doom trying to sell his worthless news letter again..

Mon, 06/11/2012 - 13:44 | 2515326 Jack Sheet
Jack Sheet's picture

The free report recommends ultra-leveraged ETFs. However, in order to get the entrance and exit points you have to subscribe to the paying service, and your inbox gets littered daily with missives similar in quality to the above in the meantime. Also, if Graham's investment advice were so terrific he wouldn't have to write crap like this but could retire to Aspen and live off his investment income.

Mon, 06/11/2012 - 16:04 | 2515857 Treeplanter
Treeplanter's picture

I get his letter. Not much litter.  Very little pitching.  You have to go with your gut like Jesse Livermore, regardless. I passed on several trades that made good money.   He sees the big picture like Jim Rogers.

Mon, 06/11/2012 - 15:26 | 2515718 itisthetimethis...
itisthetimethisistheplace's picture

...and his entry/exit points will be too late or too early. I have no idea how this guy even makes a living apart from the suckers that subscribe to him. Sure, on paper Graham talks a good game, but so do many of the websites he pilfers his verbage from.

Do NOT follow this link or you will be banned from the site!