The Greek credit markets got hammered today, as at one point the 2-year note had risen 88 basis points in yield. We are concluding that the markets are going to question just how serious the Greek government might default on their debt. At the same time, the market is going to test the hypothesis of the European Union all for one or one for all concept. The goal and result of the Soros challenge to the European Monetary Union was to find out how far the Brits and others would go to defend the philosophical construct of the EMU. After bringing the Bank of England to its knees, the OLD Lady surrendered. It realized the cost to Britain was too great.
It appears that market participants wish to find out how far the Greeks will go to meet the strictures of the EU. The question we pose: Will the Germans allow a massive”loan” to the Greeks, or will the IMF interfere to aid the profligate PIIGS? This is the challenge that awaits the markets, but it seems that the entire global financial system is beginning to understand the ramifications of a debt default.
January 20, 2010 at 5:14 pm |
I think the ECB and/or the EU will in the end rescue Greece; Spain will be next in line, and both will be before the ides of June. I look for the Euro to sink into the $1.25ish range before its all said and done.
http://themeanoldinvestor.blogspot.com/2009/12/outlook-for-2010.html
January 20, 2010 at 9:25 pm |
Yra,
This question is in response to the Mad Hedge Fund Trader interview. Do you think a stronger U.S. dollar and the Chinese monetary tightening, which can lessen commodity demand, will have an adverse effect on gold and silver plays in 2010?
January 20, 2010 at 10:21 pm |
this is the big question–i think there will be a short term impact as/if the dollar strengthens and the chinese curb their bubble–but the the end result will be the politicos will panic if job growth does not soon take hold—that is why i believe presently gold is a deflation argument