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Something big is up, and it’s
possible the Euro is going into a real crisis within two months…Is this the
next big market surprise ala Lehman? Not exactly like Lehman, but of the scale of that
crisis that shook the entire world and almost caused worldwide bank shutdowns
in Fall 2008? I am beginning to think so, and have been discussing this
looming new worry for subscribers, IE we are right at the cusp of something
big for the Euro and the European Union, not only financially but very much
so politically. Imagine what a real Euro crisis would do to – everything!
Alert that Euro on
verge of real crisis
We are so concerned by recent
developments with Greece as a canary in the coal mine for the Euro that we
just issued an alert to subscribers that we foresee a big blow up for the
Euro in about roughly one month’s time. That is USD bullish and gold bullish,
and bearish for about everything else out there. And this has many other
implications for US Treasury bonds, the China Yuan revaluation issue and many
others. This Euro situation is a huge potential bombshell, possibly
outgunning all previous huge crises we faced over the last 2.5 years. That’s
right, the Euro situation can outgun all the worst financial chaos we have
seen so far, and lead to massive currency instability worldwide. This is a
big deal if it happens as we foresee.
If you noticed in the last
week or so of trading days, the USD and gold often went up together. Gold and
the USD are fundamentally inverse, the USD pricing most commodities, even
gold if you will – especially gold. That particular gold / USD inverse is
tied to the fact that the USD is still the world’s paper reserve currency
still and is not losing that status yet – and gold is the world’s precious
metal reserve currency.
When the USD and gold
rise together, trouble is near
Now, when both rise together,
you can be assured that flight to safety and liquidity/cash is in effect…
The biggest reason for the USD
rising at this time is flight to safety due to concerns about the Euro. And
money coming out of emerging markets that are peaked out and falling. The
Euro makes up over half of the US Dollar index currency basket. So, when the
Euro has trouble, the USD is the biggest beneficiary along with gold.
‘This Ain’t
happening.’
It became clear last week that
the EU bailout with the IMF for Greece was basically hot air. Greek bond
spreads rose last week to their highest level versus Germany last week; the
bond markets saying the proposed Greek bailout deal was just smoke and
mirrors. Since this Greece story has been out for months, it became clear
that all the Club med states and the so called PIIGS (I don’t like that term
but everyone is using it to refer to those states, Portugal, Ireland, Italy,
Greece and Spain) are even larger versions of the looming Greek tragedy, with
even larger debt problems. And their time is running out this year too.
Must have $20 billion
within two months
Why is Greece causing such a
stir, its economy is small compared to say Spain, who is next in line in this
crisis…? Because Greece has to refinance about $50 billion worth of bonds
over the next number of months, a big $20 billion chunk due to roll over in
two months. Greece is now at the door of insolvency.
The fact that the EU cannot
come to terms with a relatively small bailout of $50 billion for Greece shows
the internal dissention
in the EU over the bailouts of the Club Med guys (PIIGS),
with Germany finding it politically impossible to sign a deal. Greece is
being left to its own devices. That ain’t good. Not good at all.
IMF solves nothing
Getting the IMF involved is
viewed by markets as a last ditch effort, and reflects terribly on the EU
monetary union and political union. It is said that using the IMF here merely
confirms the political paralysis in the EU over this situation, and reflects
terribly on the EU and the Euro. Major political paralysis is not something a
major potential reserve currency can tolerate. Calls in Germany and elsewhere
to kick out repeat EMU (European monetary union) offenders with huge
financial deficits, Greece running something like a 13 pct of GDP deficit
yearly. It’s going bankrupt.
Money is fleeing the country.
A big surge of money flight to international banks in Switzerland, UK, Cyprus
in the last week or so. In short, Greece is rapidly developing a sovereign
bond crisis. That is nothing new, but the timing is, in light of the fact
they need about $20 billion over the next
two months. And money fleeing the country…is particularly
worrisome.
There are many facets to this
EU situation and they are bleak as hell for the Euro. This appears to be the
next looming ‘big one’ crisis. We have kept subscribers well informed of
potential outcomes for the Euro, and we also called the USD rally at end of
Nov 2009, and a gold bottom in Dec 2008. We have made a lot of great currency
calls way ahead (by months) of anyone I know of. We also called the 2008
summer commodity peak in April 08 warning the USD would rally, again months ahead
of anyone I know of.
We have some basic defensive
strategies to cover these potential events - a market crash and a possible
Yuan revaluation. In any case, we have made some incredible calls for the
last two years on the overall markets, calling huge swings in the USD,
currencies, gold and commodity markets at key times, predicting trends that
lasted 6 or more months out from our calls. There is a chart showing several
of the major ones we called in the last 2 years on our site. Our newsletter
is 44 issues a year with mid week email alerts.
Even though our newsletter is
named PrudentSquirrel, it is probably one of the best currency newsletters
for big currency calls you will find out there. The name reflects our ultra
conservatism.
We invite you to stop by and
have a look.
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