Does the Euro have any chance of succeeding?

One after the other, EU summit keep giving disappointing results to investors, which are praying for a "basuka" style shot, to resolve once for all the problems facing the EU.

The main problems reside in too much debt in same of the weaker countries and in the lack of control over monetary policy, which is needed same times to restore economic growth, this can be through loose monetary policy or through devaluation of the national currency.

As presently built, the EU treaty does not allow any kind of changes in terms of fiscal consolidation, therefore automatic loss of fiscal sovereignty and as we know by the experience until now the politicians cannot get their act together and quickly get to the necessary agreements to allow those treaty changes which would give some kind of relief to the crisis, once in terms of overall the debt to GDP picture is not as bad when you compare it to single countries positions.

Personally I believe they will have to come up with  solution very soon , this because the markets are getting very impatient with the lack of solutions, and as we can see by the chart 1 we had a few sell off's but nothing substantial...until now!!?!

It seems that this year the normally predictable and seasonal Xmas rally and even the January effect will be a missed,  again due to the lack of plausible solutions

There are a few troubling signs that I am following, form the record level of deposits overnight at the ECB, the increasing of the levels in the Libor rates, where the major 5 central banks had to intervene a couple of weeks ago with injections of liquidity.

I strongly believe that the Euro will survive but not in the current form, more fiscal union is needed and maybe even a common treasury to the EU which will issue Euro bonds, now this is somehow hard sell to the Germans but sooner or later they will realise that there is no other way to save the EURO!!

Is it 2008 all over again!?!

I am writing and the Us markets yet to close are in a complete meltdown, this time not because of their own banks but because of the mess in Europe sovereign debt and the poor financial positions Europeans banks are in, due to the exposure on the debt they have to countries as the likes of the PIIGS countries!

Also not helping is the lack of coordinated actions by the major central banks around the world, which finally last week made a coordinated intervention because of the long due shortness of US $ and the lack of access from some Europeans banks had to fund their US $ needs, so they announced a new start of swap line between the major CB and the FED.

Yesterday also the FED spooked the markets, with their lacklustre operation "twist" , which in the end is just a maturity transformation exercise and didn't announced any mew stimulus measures, which the market, ahead of it self had priced in, so once it was confirmed nothing more new was coming from the FED, the only rational reaction would be to correct expectations...

At this precise moments the SPX is trading at the major support and the 50% fibo retracement from the 2009 lows at 1120 if we closed below this level I believe is a cascade down to the next support which is at 1050!

Are we in recession??!!

Are we in a recession already?
According to the latest data it seems or we are already or very close, at least in the US, and if the US economy is in recession and still being the biggest in terms of nominal $ in the world, probably the world economy will follow suit, even as the EM economies are forecast to keep growing at healthy levels, but not enough to off set the weak US and European economic present state.


Let's look at this great chart (courtesy of John Mauldin and street talk advisor's):

As we can see in this chart the US economy is already or very close to recession, and even this being a new formed index, not just the creator have a great street credentials but also the components they used are leading indicators and highly correlated to predicting correctly recessions/growth!

At the same time we have the serious problems in Europe, where not just governments are cutting spending, to balance their overstretched finances plus the banking system there is insolvent, at least mostly of it, therefore will create more pressure in the GDP growth because banks are cutting the amount of money loaned to the broad economy, as a result we saw for i.e last week a lower then forecast German GDP, which is not just the powerhouse of Europe but also is the backer of the ESFS fund created to support the weaker peripheral economies as the case of the PIGS.

The last week, after a start with a relief rally, saw in the end, big losses in all major indexes, not just for the lack of conviction by investor in this market but also because August is a weak month anyway as many traders/investors are in holidays.

In my opinion we still didn't saw a low in this market, as the bond markets are telling us, because it keep going lower in terms of yields, which is a sign that worst times are to come, when investors are willing to accept rela negatives yields to park their money, this is normally a good sign and more we are not seeing an inverted yield, which means recession on the way or already present, because of the QE programs created by the FED which artificially maintains short term  yields low.

Resuming WE ARE GOING LOWER!!

Follow my live trades through twitter @techcherry!!

Welcome with a BANG!!!

Welcome to one of my blogs, where not just you will be able to see any live trades I execute(also through the Twitter feed on the left side) but where I put across my points of view about present economic issues but also any relevant issues and opinions I feel that maybe of some interest to our common goals, to accumulate wealth through speculation and proper and sound investments.


I will for now short and will come back, still this weekend, where I will start to open discussions on the "almost" flash crash of last week, on the new downgrade from S&P credit rating agency to the US, from AAA to AA+ and also on the mountain of worries that Europe have to climb this week to calm and anchor the markets from possible meltdown!


So, see you soon!!