Following on from my last post on the EU and IMF potentially in line for a stuffing of their own, Zero Hedge has a very good summary of what appears to be going on in Euroland. One highlight from the article is the possibility that Sarkozy has lined himself up for a right proper rogering (UK vernacular for shafted) by simply opening his mouth :
There is some very clear anger being voiced from the leaders in Europe. French President Sarkozy stuck his foot deeply in his (mouth) on Friday night with these words:
“We will confront speculators mercilessly. They will know once and for all what lies in store for them.”
In my view this was a stupid move. He is saying, “Come on speculators, I will take you all on and crush you!” He has not one chance in a 1,000 to achieve that. His words prove that he has no idea what he is talking about. This not a matter of evil speculators and their evil tools (CDS). This is about massive fiscal imbalances that everyone understands are unsustainable. Borrowing more to fix the problem will be the end game for Europe.
France being one of many to watch for next week I think after that.
As to what else may be in store :
It is likely that as a result of what will be forthcoming there will be some very big swings in market prices on Monday. The Vol. will be going up, not down. The initial result will, no doubt, be a backup in many markets. The Euro will be higher, European sovereign bonds will trade higher; maybe even equities could catch a bid. But the critical question will be, “For how long?” Depending on the resolve of those in charge this could last for a bit. At least a week and more likely a month. But it is doomed to failure. Should we get to June and the benefits of these emergency steps wane there will be yet another crisis. The bonds will fall again as will the Euro. When that happens there will be no second bailout. Sometime in the next two months we will hear that great sucking noise again. And when it is heard there will be no stopping it.
Get your seat belt on speculators. You are about to be attacked. This will be a lifetime opportunity to make money. For investors, stay clear of this. There is nothing but risk and downside. “Risk off” is the right place to be if you don’t have a helmet on. I can’t wait.
We appear to be in for a long Summer of monetary brinkmanship where the ultimate outcome, other than even more debt being added to the pile, will probably result in Greek style unrest in a few more places.
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