Friday October 23, 2009 - 13:40:37 GMT
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Black Swan Capital - www.blackswantrading.com
What Happens in Europe Stays in Europe ...
â˘ Bank of England Is More Likely to Expand Bond Purchases After Slump in GDP (Bloomberg)
â˘ German Business Confidence Rises to 13âMonth High as Recovery Accelerates (Bloomberg)
âBe courteous to all, but intimate with few, and let those few be well tried before you give them your confidence. True friendship is a plant of slow grow, and must undergo and withstand the shocks of adversity before it is entitled to the appellation.â
FX Trading â What Happens in Europe Stays in Europe ...
Thereâs a very good and littleâknown movie starring Anthony Hopkins. The title: Worldâs Fastest Indian. Itâs about a New Zealand man who made it his lifeâs goal to break the land speed record on his motorcycle. Itâs been called a âfeelâgoodâ story.
Kind of like this latest rally in risk.
I continue to look at the markets as a feelâgood story for investors. After getting totally demoralized from the credit crunch fallout, investors have had the opportunity to restore a good portion of their portfolio values in a relatively short amount of time.
The funny thing is: they seem to be a little too caught up in the show. The show being the lengths policyâmakers have gone to restore confidence and reverse the negative wealth effect. It has worked. And we all know the result up to this point.
The currency market has practically returned to preâcrisis sentiment, i.e. an allâor nothing bet against the buck. At times weâve expected the dollar to find support when it has not. But considering the view thatâs developed among global investors, it does not surprise us that the dollar is under pressure. There are key deficiencies that need be addressed in the US.
What we continue to wonder, though, is why the euro has been able to shake off pressure.
Perhaps itâs because what happens in Europe stays in Europe.
There are no secrets about whatâs going on in the US; the globe is able to neatly dispense our issues between each other at light speed. And itâs not that Europe is able to keep its problems under wraps. But it doesnât have to ... the market takes care of that for them.
Ongoing concerns over the financial system in Europe, the health of banks and the uncertain potential of returning to sustainable trend growth are all being swept under the rug.
Letâs forget the fact that credit isnât getting to consumers and small businesses. Credit to euro area residents from monetary financial institutions is virtually at a standstill: [Charts not available in text format.]
Letâs forget that European banks have not wiped clean their toxic debt.
Letâs forget that many banks still rely on shortâterm money from the ECB because they canât fund themselves.
Letâs forget that inventory restocking and stimulus money are not sustainable means of growth.
Letâs forget that consumer prices and household spending are falling.
Itâs Friday; letâs forget about all that stuff. Just watch out for the big lump under the rug.
John Ross Crooks III
Black Swan Capital LLC
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