The Greek exit from the euro looks more and more real by the day, and I've discussed it as a foregone conclusion since late 2009 (yes, I was a bit early).
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Portugal, and yields, and Iran - oh my! None of these are new stories.
Portugal is bigger than Greece - but we knew that. Moreover, we knew Portugal was in dire straits. We knew Germany was already hesitant to provide more assistance and would demand higher guarantees.
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Here's the issue: most fund managers are used to taking some time off in August, or at least in the July-August period at some point. This year, their plans were thwarted by what can only be described as PAIN. So Joe Manager didn't have his time off, and wasn't able to de-stress.
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In a nutshell, this article summarizes the problems we are facing.
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The euro is starting off 2012 weak - that's not news - Spain is having a tough time with sovereign auctions, and Greece will soon be testing the euro's exit mechanisms.
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I have been thinking about vested interests. It seems like everyone talks about vested interests in some way, and usually the conversation trends towards what happens when interests conflict. Here's the problem: interests always conflict.
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Remember when the USD was gasping for its last breath? Remember when Russia decided to diversify its foreign cash holdings along with China and bought up more euros? Remember . .
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Over the past two years I've brought up 1987 periodically as just a mere possibility that has to be factored. I don't want to think back to those days of currency wars, political grandstanding, and crazy volatility, but alas, every time I try to clear my mind . . .
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I have been short the yen since November 2009, but today, I'm closing the directional position (although we're still short yen against Japanese equities). This was a portfolio decisions, rather than a directional decision.
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I assume Berlusconi is having some sleeping problems this week as his government falls; his only consolation is that prognosticators who predicted Italian bond yields would fall when he's gone have turned out to be completely mistaken. The problem with Italy isn't Berlusconi . . . it's Italy.
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Sure, gold is an old relic, but we've held on through the recent hiccups without losing focus.
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And the news keeps rolling in . . . (in no particular order):
- German retail sales down. Interesting in light of the fact that US sales are up while incomes are down (yes, lower savings rate - AGAIN). What does it mean? Consumers will be tapped out faster without HELOCs.
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As the euro continues to disappoint the market, or just live up to my negative expectations, European equities are following the erratic behavior, and for good reason.
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From the
WSJ.com:
Today, Jürgen Stark, Member of the Executive Board and Governing Council of the European Central Bank (ECB), informed President Jean-Claude Trichet that, for personal reasons, he will resign from his position prior to the end of his term of office on 31 May 2014.
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Well, maybe it's just my eyes that are glued to the euro. First, I increased my short euro position, so maybe there's some confirmatory bias in looking at it more closely, but I'm not sure that's it.
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Currency | | 
May 23, 2012 11:20 am | 
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