Posts Tagged ‘EU Summit’

Notes From Underground: Will the European Summit Yield Another Financial Valley?

June 28, 2012

If it is Thursday it must be another major Euro summit in Brussels. There is so much chatter about the outcomes and German capitulation that is impossible to conjecture the result. Will George Soros’s apocalyptic prognosis bear fruit or will the European policymakers provide enough initial capital to help stem the financial cliff for another three months and allow the EURO ELITE to enjoy the beaches of Spain and Greece? So before we return to the SUMMIT let’s examine a few other financial thoughts.

***ARE THE SWISS GOING TO COMMIT FINANCIAL SUICIDE? HYPOTHESIS: The Swiss National Bank has resigned itself to defend the 1.20 EUR/CHF crossrate and in so doing has committed to buy EUROS at that level. The question the SNB needs to ask is what happens if the GERMANS were to abandon the EURO and leave the PIIGS at trough and create a DEUTSCHE MARK ZONE? The Swiss would be the bagholders for a huge amount of depreciating EUROS while the most valuable part of the EURO project was denominated in D-MARKS.

There is speculation that it is the SWISS who are pushing German SCHATZ to record lows as the SNB is buying two-year German paper with the EUROS they buy to maintain the cross. I have no certainty to this but if I ran the SNB that is certainly one way I would hedge my exposure. If the SNB is not buying German DEBT, then the answer to the question is that they stand to commit FINANCIAL SUICIDE. This possibility is just another variable in the game of disruption caused by the credit crisis in Europe.

***An interesting story yesterday was that the long-awaited merger between XSTRATA and GLENCORE looked to be falling apart. Some large shareholders in Xstrata were pressing the BOARD to ask for an increased price and thus were threatening to block the merger. RUMORS AROSE THAT GLENCORE WOULD WALK AWAY FROM THE DEAL BECAUSE OF ALL THE ACRIMONY. This merger has been the biggest commodity story of the year and if the two parties were going to cancel the deal  it would seem that GLENCORE FELT IT WAS PAYING TOO MUCH FOR XSTRATA IN AN ENVIRONMENT OF SOFTENING COMMODITY PRICES (except grains).

There have been several stories about the Chinese economy slowing and the impact the slowdown is having on raw material prices. Rumors abound about bulk cargo ships sitting off Chinese ports and nobody desiring to take delivery of pre-arranged shipment for lack of funds. If global commodity prices are headed lower, GLENCORE may believe that it could make a better deal in the future for XSTRATA. It seems that XSTRATA’s newfound greed is giving GLENCORE the excuse to walk on the deal. IF GLENCORE ALLOWS THE DEAL TO COLLAPSE BY NOT MEETING XSTRATA’s INCREASED DEMANDS,IT MAY BE A PRECURSOR TO FALLING COMMODITY PRICES.

IF THIS IS CORRECT, A TRADE THAT WOULD COME TO MIND IS LONG GOLD AND SHORT COPPER. COMMODITY PRICES REFLECTING INTERNATIONAL SLACK WILL SIGNAL THE WORLD’S CENTRAL BANKS THROWING ALL CAUTION TO THE WIND ON THE NEXT ROUND OF QE. This is something to pay close attention to as the rumors of a Chinese slowdown begin to gain traction. Looking at the world right now I would advise XSTRATA TO TAKE THE MONEY AND RUN.

Notes From Underground: Oh Where Oh Where Can Tim Geithner Be, Oh Where Oh Where Can He Be?

December 12, 2011

Last week, Secretary Geithner was in Europe prior to the SUMMIT in an effort to influence European policy makers. The Obama administration has been trying to impress upon Europe’s key planners that it was of the utmost importance to get ahead of the CREDIT CRISIS and stop solely reacting. It seems that the U.S. Treasury Secretary failed miserably to convince Merkel and the others that the BIG BAZOOKA needed to be fired. As usual, the EUROCRATS tried to FOOL the financial markets they disdain. Chancellor Merkel has openly stated that she will not be coerced by an UNELECTED FORCE CALLED THE MARKET.

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Notes From Underground: ECB DAY IS HERE-A GUIDE FOR THE PERPLEXED

December 7, 2011

Thursday, DECEMBER 8 will it be a day that lives in INFAMY. The Bank of England will be the first mover tomorrow morning as the BOE announces its interest rate policy at 6:00 CST. It is expected that Mervyn King will direct the MPC board to keep rates steady and to keep the QE program at its present 275 BILLION POUNDS. At 6:45 CST the ECB will announce what it plans to do amidst the turmoil. Most analysts expect a 25 basis cut as Mario Draghi undoes the second inane rate increase promoted by Trichet. The more important factor will be if the ECB announces some type of ECB large-scale asset program in an effort to mirror the FED and BOE.

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Notes From Underground: Europe Has the World Living On Hope

December 6, 2011
Courtesy of Leon Russell:
I’M UP ON THE TIGHTROPE,ONE SIDES HATE AND ONE IS HOPE
IT’S A CIRCUS GAME WITH YOU AND ME
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Notes From Underground: Canada’s government is a fallen angel while Merkel’s CDU suffers a severe setback

March 27, 2011

The weekend news was not economic but political as governments all over the globe suffered major setbacks. The Liberals secured a “NO CONFIDENCE” vote in the Canadian Parliament and bring down the Harper Government. I know that Michael Ignatieff will claim that he is perserving the democratic basis of Canada as the ruling party was brought down on an issue of CONTEMPT. The only thing that appears contemptuous is the ego of Ignatieff. He claims that the TORIES are out of touch and out of control. The election is called for May 2 and then the electors will have the final say on who is out of touch. This will be the fourth general election in seven years and let’s hope the citizens of Canada show their anger and elect an outright majority so Canada can get on governing itself.

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Notes From Underground: DOES DOMESTIC POLITICS TRUMP ALLEGIANCE TO LARGER POLITICAL ENTITIES?

March 24, 2011

It seems that overnight many traders were selling the EURO because of news that the Portuguese Government was to fall. As I have written about this before, it is certainly no surprise. The only surprise was its timing as it comes as the “RUBBER STAMP SUMMIT” is taking place today and tomorrow. Also, the credit rating agencies downgraded many Spanish Banks, making the EU SUMMIT that much more volatile. Throw in the French anger toward the Germans regarding its Libyan decision and the mood in Europe continues to darken.

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