This page has been archived and commenting is disabled.
If You're Basing Your Investments On This... You MIght Want to Rethink It.
For weeks now, investors have invested based on the idea that the Fed would announce some major program during its Fed’s June FOMC from June 19-20. The whole notion was absurd for several reasons.
First off, even the Fed doves such as Charles Evans and Bill Dudley have begun to state in public that the consequences of more QE outweigh the benefits. Bernanke’s been saying this since May 2011. The fact that his more dovish colleagues now agree with him makes the likelihood of more QE minimal.
Moreover, the Fed has already become a political hot button for the 2012 Presidential Election. For the Fed to launch a new major program so close to the election now would be a death knell for Obama whom the Fed has been moving to support throughout his Presidency (Obama did re-elect Bernanke after all).
Indeed, all of the primary arguments for QE have now been rendered moot. In terms of liquidity, banks are sitting on over $1.5 trillion in excess reserves. Interest rates are at record lows. And as for boosting the economy, the Fed now realizes that QE pushes the cost of living up which will in turn make the Fed a target of political outrage (again, this is an election year).
Finally, we have to consider the Spanish €100 billion bailout.
NO US entity was involved in this move (neither the IMF nor the Fed). This puts the “prop up the system” job squarely on the EU’s shoulders for now. Americans will not stand for a US bailout of Europe, so until a major bank fails or we enter a full-scale crisis head on (which hasn’t happened yet), I believe the Fed will continue to resort to more symbolic and verbal interventions.
In simple terms, we’ve gone from a time in which the Fed can unveil new massive programs to help the US economy to a time when the Fed can only act when it absolutely has to (a major bank collapses or the system begins to collapse a la 2008).
We’re now seeing the same game occurring in Europe: investors hoping and praying that EU leaders will somehow pull a rabbit out of a hat.
They won’t.
Germany has been implementing measures to permit it to leave the EU for months now. Moreover, Angela Merkel has made it clear that she will not permit Eurobonds with German backing, nor will she permit a pooled banking system.
The reasons are obvious. The EU’s less solvent countries want free money. Germany won’t give it to them. Any and all German funds will only be allowed with the guarantee of certain conditions being met.
As we’ve already seen with Greece, those on the receiving end of the bailout gravy train are not prone to meeting “conditions.” Spain is no different: not only has it missed its budget deficit requirements several times but it is now openly ignoring demands from those propping it up:
Spain PM not to implement IMF suggestions for now
Spain will not immediately implement the International Monetary Fund's latest recommendations, which include cutting government workers' wages further, because they are nonbinding advice, the prime minister said Saturday.
The IMF is one of three organizations Mariano Rajoy's government turned to for an assessment of the state of Spain's banking sector ahead of a (EURO)100 billion ($125 billion) bailout for failing lenders.
http://www.businessweek.com/ap/2012-06/D9VEB8UG1.htm
In simple terms, Germany may be willing to prop up the EU, but only if its demands are met. The track record for the PIIGS in terms of meeting demands is abysmal. Moreover, implementing such measures takes months if not years. Given that Spain’s ten-year is back over 7% and Italy is now begging informally for a bailout, the EU doesn’t have that time.
With that in mind, I believe the market has topped and we will be heading lower in the coming months, culminating in the collapse of the EU in its current form and very likely the EU banking system.
If you have not already take steps to prepare for this, I highly recommend doing so now.
On that note, if you’re not preparing for the collapse of the EU’s banking system, 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
- advertisements -
http://www.kosmetikstudio-hamburg.net
At that point the Fed won't be able to do anything.
Industrial world is running out of 'money-good' collateral, a world built on lies and institutionalized theft. Nothing- nobody is credit-worthy.
We are down to simple facts:
If you are German, these facts provide no way to make this work.
Not a lot of good choices here.
Unless a big bank fails (or appears to)... Gee, yeah, That's a LONG-SHOT, NOT!
Big mover today is JPM (and the Silly Rabbits think it's healthcare), down 4.5+%. 9 billion in potential losses, yeah, so much for the hedges they had. It couldn't be more clear that the financial sector is blowing pure smoke, and since everything is built upon this sector I'd have to say that the economy IS going to puke. To state with such certainty that the Fed isn't going to QE is, I'm thinking, like trying to predict the future (and only _I_ can do that!)- nice try!
My portfolio is half red today--my gold and silver miners. The half that is green is mostly Graham's picks. God forbid he should make a buck on his newsletter. As Captain Trips used to say, "Don't you let that deal go down." I'm only in it for the gold.
Whether the Fed makes a public statement about it or not, they will just continue to do what they're really good at, printing money. The only things in doubt is the speed at which they print, and the sectors of the economy that will be hit with the resultant price inflation first.
"..Americans will not stand for a US bailout of Europe..."
what nonsense! they bailed out europe in 1915, 1940 and will do so again. it doesn't matter what americans want - it is what the banksters and politicians want and i am here to tell you that sheep go wherever they are led....
a people who allow armed military to wantonly roam their streets, search their bodies, and accept compulsory health care are in no position to "not stand for" anything.
besides, the fed has been stealthily bailing out europe since at least 2008....this article is horse shit.
"and accept compulsory health care"
and accept compulsory heath INSURANCE
Get it right! (The ENTIRE health/insurance/pharmaceutical profession/racket is no more than one big subsidy to the "food" industry; they all feed off each other [yeah, pun].)
And yet, somehow, no banks are massively failing as they should. We are in full blown secret bailout mode right now. The complete lack of casualties is too obvious.
"I went bankrupt gradually, then suddenly."
I'm only here for the comments.
Graham, until you have a Noble prize as I do, I professionaly advise to SHUT YOUR BIG FAT PIE HOLE.
More crap. Stop posting.
lol he caught me again god damn it. he should put the news letter sale in the first line.
Not only is this Graham idiot completely out of his depth, this piece contradicts his last one. So now Germany may be willing to bail out the periphery Graham? So much for all that confidence last week.
What a clown.