Of course it won't...it can't. Just like China cannot stop buying U.S. Treasuries and dollars, it cannot afford to stop buying Euros: 1) the EU is a major trading partner and 2) it's the second most liquid currency which makes it a backstop. But that doesn't mean China won't diversify away from it...likely choices include more oil, metals and commodities. … [Read more...]

For many investors, the current stock price tsunami is a buying opportunity. I'm not so sure. The 3 Month Libor (London Interbank Offered Rate) has gone parabolic suggesting that the level of distrust between banks is not only rising, but rising quickly. People forget that the Libor is not merely the rate banks charge each other for short term lending, but an expression of the risks associated with lending to each other. The higher the rate...the higher the distrust. As for what's driving that...look no further than the PIGS in Europe...they're clearly running the barnyard now despite a trillion dollar bailout. My guess is that banks are leery that, once again, they have more toxic assets … [Read more...]

Today's onslaught (5-20-2010) is exactly what I warned people about in my prior post. And, unless there is a concerted worldwide regulatory response to the CDS mess, get used to 'em. … [Read more...]

A Short URGENT Letter to All Investors Good morning.  Since this crisis began, I’ve been resolute in my opinion and have never wavered - the credit mess will not be resolved until we see the political will for change overpower the rhetoric surrounding Wall Street’s actions.  So I was delighted to see Germany ban naked short selling and naked credit default swaps on the euro-area government bonds yesterday.  Naturally, Wall Street, The Square Mile and the Ginza didn’t like Germany’s decision because it removes a major profit mechanism for the world’s biggest investment banks and trading houses as of midnight Tuesday.  To hear Wall Street tell it, you’d think that Germany … [Read more...]

Per my comments on Fox News this morning, while we could see some sort of relief rally after Thursday's foibles, we are much more likely to see additional downside. This market is long overdue for a correction and has been for some time now. Looking across the pond, the EU has to get the PIGS back in the barnyard or the flu is going to go global with Greece's 110 billion Euro bailout becoming a 1 trillion Euro problem - maybe more. Watch the Libor-OIS spreads carefully. If they don't back off in the next few days, I believe this is an inevitability and that we could be seeing the beginning of end of the Euro if not the EU itself. … [Read more...]

European credit markets are failing to contain the Greek debt crisis. Libor-OIS has soared as banks put up the blast shields against each other and the derivatives index used to protect European banks from failure soared to the highest levels on record. Meanwhile, bond markets have vanished into thin air. The massive social leveraging is going to bite Europe in the butt because it's not just the 110 billion euros for Greece that's on the table here any longer...but the spectre of a 1 trillion or more euros before this is done. … [Read more...]

It's still an overvalued currency and it's increasingly hard to justify that premium given the structural cracks in the foundation. … [Read more...]

German Chancellor Angela Merkel is in a pickle. Campaigning on her refusal to aid Greece until that government committed to bigger savings and austerity measures, she's facing a public in denial. Still, she has stuck to her guns noting that the IMF's 110 billion euro aid package for Greece is about "the future of Europe and the future of Germany." Yup. … [Read more...]

Yesterday's tragic Greek riots in which three bankers were burned to death when demonstrators set their bank on fire could easily happen in the United States. All it's going to take is for Americans to realize that they have been sold down the river in what is the greatest orchestrated robbery of all time. This country is now $14 trillion in debt, Congress is busy regulating labels and descriptions when they should be focused on functions, the regulators still haven't got a clue, and Wall Street together with big business has walked away having fleeced the unsuspecting public and emerged unscathed with billions of tax dollars lining their pockets. If you're one of those who thinks this … [Read more...]