Forecasts from 1986
A reader just sent in an old forecast from 1986. It stated back then the Sovereign Debt Crisis would begin 26 years from the birth of the G5 in 1985 = 2011. It then goes on to state that the potential for a new monetary system will emerge in 2016.
This demonstrates what I have been saying all along. This is NOT personal opinion. It is called research and using TIME.
The IMF & ECB Cannot Prevent the Euro Crisis – Welcome the Pandemic of Uncertainty = High Volatility
So far the Dow has held the previous day’s low and a higher close today will still point to a bounce into tomorrow, However, we are in the midst of a Pandemic of Uncertainty. This is becoming critical in Europe. While I am enjoying the weather here in Germany, the atmosphere is clearly uncertain spawning serious confusion. We can see we are returning to a period of volatility thanks to uncertainty from next week forward.
In Greece, the interest rates on government bonds rose to 9%. Premier Antonis Samaras last week could barely survive a confidence vote. The left party of Alexis Tsipras is according to surveys already at the top. Further cuts in the social system are in fact no longer enforceable for the government in Athens.
Spain also has suddenly higher interest rates on its debt. Also, Portugal (+13%), Ireland (+13.5%) and Italy (+9.9%) have significantly higher interest rates in order to keep the perpetual borrowing going. The interest rates of these countries are forced through the intervention of Mario Draghi on artificial record levels and are now at levels that do not correspond to the real risks in the least: 10-year bonds from Spain trading at 2.29, Ireland 1.94 and Italy 2.64 is simply insane. This is the astonishing bubble and it is unsustainable.
Kicking the tires here in Europe reveals investors are starting to fear new elections and apparently do not believe the ECB’s ability to save all euro countries. The EU announced that it would provide more tax money from Europe available to the Greek banks. Even Angela Merkel has been forced to admit the Euro Crisis is not over just yet., however, sounds unusually bleak.
So Where is the Bubble?
While those who advocated stocks in various institutions are being demoted and the bond bulls yell I told you so, as Melon famously said in the start of the 1929 Crash thatGentlemen Buy Bonds, what is really going on in the markets cannot be seen without looking at the cross-connections. Why? Sometimes you just cannot see the trend because of the panic and noise.
Are we really witnessing a stock meltdown? What is the impact of such a move? Some yell buy gold and others yell it’s the currency. Sit down. Take a deep breath and think logically for one moment. Our model is still short at the weekly level and it would reenter a short position making a new low today on the Daily level and a close below 15824. A Friday closing below 16170 keeps the markets bearish despite that fact there is little retail participation. This may be labelled as the “Rich Man’s Panic of 2014″.
So what is really going on? We are seeing a panic into bonds at the institutional level. There is a race on to see who can hand government their money faster. The Dow futures prior to opening fell back below 15900. That warns that a close below 15824 could signal a continued meltdown and that warns this is a bubble in bonds. Just making new intraday lows today may be enough to press the market lower into Friday. Don’t forget, a weekly closing BELOW 15960 will warn of a possible drop into the 14000 zone where the real important support begins.
A crash in stocks sends even more money into the arms of government. This inflates their position assuming they really do not have to ever worry about budgets because the crazy public will always buy. Yet the French auctions did not go well today. We are starting to see the subtle shifts in selectivity among government bonds. This the crack in the facade.
The bubble is in government bonds. We need a sharp correction in stocks to set the stage for the future. Doing so, will send more money into bonds. The more money that concentrates in government debt the higher the likelihood of the bloodbath 2015.75 into 2020. This will wipe out institutions from banks to pension funds like never before.
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