Click here to read this article in pdf format: november-24-2010 We usually publish on Mondays, but this time, we wanted to see things play out before coming back. We stand therefore by our forecast published back in September, when most saw the European Financial Stability Facility as a source of strength for the Euro, while [...]
Click here to read this article in pdf format: november-24-2010
We usually publish on Mondays, but this time, we wanted to see things play out before coming back. We stand therefore by our forecast published back in September, when most saw the European Financial Stability Facility as a source of strength for the Euro, while we publicly disagreed: We saw this facility as a the key that would trigger chaos within the Union. The chart below (source: Bloomberg) redeems us: the Euro fell by four cents vs. the USD, since the Irish requested access to the facility.
In our last letter, we suggested that the best way to understand the ongoing action within the EU is to use a “game theory” approach, of a non-cooperative nature, we should add. We put forth three main players: Ireland, Rest of peripherals and Core Europe. Now that the bailout for Ireland is news, a new dynamics unfolded. Early yesterday, Bloomberg reported German Chancellor Angela Merkel declaring that the prospect of serial European bailouts was “exceptionally serious”. However, we listened to the speech ourselves (Click here to watch it ) and believe the press may have taken Ms. Merkel out of context, which implies that the markets may have overreacted but also, that there is more in hand here .
Now that Ireland seems to have gotten away with its corporate tax structure, other “participants” in line (i.e. Portugal) have learned something: Time is on their side. Why? Because marginally, once a country’s sovereign yield shoots up and becomes the next in line, the marginal pain is bigger for Core Europe. When Greece’s bubble went bust, Ireland felt the pain, Core Europe barely felt it. When Ireland’s bubble goes bust, Portugal feels the pain and Core Europe begins to take notice. By the time Portugal’s bubble goes bust, the pain for Spain will be felt and Core Europe will be very uncomfortable, since France or Italy will be the next in line and Germany simply can’t afford this.
Therefore, the sooner Core Europe deals with Portugal, the cheaper it will be to cut the pain. How does Core Europe force Portugal to come to terms? By pushing their sovereign yields higher than the policy makers of the first-in-line countries expected. How? By going on record, like Ms. Merkel did yesterday, saying that the situation is exceptionally serious. That way, Portugal’s credit risk jumps 35bps to 490bps threatening with a margin increase at LCH Clearnet. This move leaves the first-in-line country unable to raise capital and asking for help to the EU and European Central Bank (sooner, rather than later! This is the point!). To us, this makes sense…Otherwise, why would someone as serious as Ms. Merkel say what she said with such a brutal sincerity? When are politicians sincere?
Where does this all leave us? It leaves us with a change in our view: We think the EU is far more serious about the survival of the Euro than we had previously thought. The problem is nevertheless still institutional, the Euro will have to continue depreciating and fiscal austerity will remain in place. However, if they succeed, it may well have again a chance to become the world’s reserve currency, if the US doesn’t correct their monetary mistakes. Why? Because the only way to succeed is through a dramatic institutional change, a true federal pan-European structure. In the meantime, the opportunity to become a reserve asset grows for gold by the day, because the risks of failure are just too big to be ignored.
Martin Sibileau
February 10th, 2012 at 2:20 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 10th, 2012 at 2:24 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 10th, 2012 at 2:53 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 10th, 2012 at 4:41 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 10th, 2012 at 4:44 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 10th, 2012 at 5:32 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 10th, 2012 at 6:25 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 10th, 2012 at 6:41 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 10th, 2012 at 7:27 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 10th, 2012 at 8:26 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 11th, 2012 at 12:56 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 11th, 2012 at 2:27 PM
Links…
[...]Sites of interest we have a link to[...]……
February 11th, 2012 at 3:29 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 11th, 2012 at 4:50 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 11th, 2012 at 5:17 PM
Links…
[...]Sites of interest we have a link to[...]……
February 11th, 2012 at 5:28 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 11th, 2012 at 5:59 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 11th, 2012 at 6:39 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 12th, 2012 at 8:07 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 8:19 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 10:11 AM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 11:06 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 12th, 2012 at 1:39 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 2:38 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 12th, 2012 at 5:06 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 7:02 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 12th, 2012 at 8:17 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 12th, 2012 at 8:21 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 12th, 2012 at 8:48 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 12th, 2012 at 9:16 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 6:00 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 13th, 2012 at 7:24 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 13th, 2012 at 8:33 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 13th, 2012 at 9:31 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 13th, 2012 at 10:47 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 10:49 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 4:51 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 13th, 2012 at 5:48 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 13th, 2012 at 6:14 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 14th, 2012 at 7:48 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 14th, 2012 at 7:50 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 8:19 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 14th, 2012 at 9:52 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 10:49 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 14th, 2012 at 11:09 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 14th, 2012 at 11:18 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 14th, 2012 at 12:20 PM
great site dod…
you have a great blog here! would you like to make some invite posts on my blog?…
February 14th, 2012 at 1:29 PM
You made some decent points there…
I looked on the internet for the issue and found most individuals will go along with with your website….
February 14th, 2012 at 1:47 PM
Simply Amazing!…
I discovered your blog site on google and check a few of your early posts. Continue to keep up the very good operate. I just additional up your RSS feed to my MSN News Reader. Seeking forward to reading more from you later on!……
February 14th, 2012 at 5:45 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 15th, 2012 at 3:42 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 15th, 2012 at 4:31 AM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 4:37 AM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 4:41 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 7:47 AM
Youre so cool!…
Spot on with this write-up, I truly think this website needs much more consideration. I’ll probably be again to read much more, thanks for that info….
February 15th, 2012 at 8:04 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 8:28 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 15th, 2012 at 8:30 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 8:52 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 15th, 2012 at 9:49 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 9:51 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 15th, 2012 at 11:18 AM
You made some decent points there…
I looked on the internet for the issue and found most individuals will go along with with your website….
February 15th, 2012 at 5:14 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 15th, 2012 at 5:39 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 15th, 2012 at 7:32 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 15th, 2012 at 7:33 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 15th, 2012 at 7:58 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 15th, 2012 at 9:21 PM
Youre so cool!…
Youre so cool! I dont suppose Ive read anything like this before. So nice to find somebody with some original thoughts on this subject. realy thank you for starting this up. this website is something that is needed on the web, someone with a little ori…
February 16th, 2012 at 1:21 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]…
February 16th, 2012 at 1:55 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 2:50 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 16th, 2012 at 4:40 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 16th, 2012 at 4:48 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 8:43 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 9:40 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 4:43 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 7:33 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 16th, 2012 at 7:38 PM
great blog here…
There are some interesting points in time in this article but I don’t know if I see all of them center to heart. There is some validity but I will take hold opinion until I look into it further. Good article , thanks and we want more! Added to FeedBurn…
February 16th, 2012 at 8:37 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 16th, 2012 at 8:44 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 17th, 2012 at 3:48 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 17th, 2012 at 4:48 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 17th, 2012 at 9:47 AM
excerpts…
this is my excerpts……
February 17th, 2012 at 11:00 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 17th, 2012 at 12:59 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 18th, 2012 at 5:49 PM
Simply Amazing!…
I discovered your blog site on google and check a few of your early posts. Continue to keep up the very good operate. I just additional up your RSS feed to my MSN News Reader. Seeking forward to reading more from you later on!……
February 19th, 2012 at 10:34 AM
Youre so cool!…
Youre so cool! I dont suppose Ive read anything like this before. So nice to find somebody with some original thoughts on this subject. realy thank you for starting this up. this website is something that is needed on the web, someone with a little ori…
February 19th, 2012 at 12:25 PM
very nice post…
very nice post, i certainly love this website, keep on it…