Stocks were mixed yesterday on more debt concerns coming out of Europe
While the purchase of bonds by Japan gave the Euro a moment of pause, this will not stop the downward trend of the Euro. I think sovereign debt will lead to a 5 year low. BTW, the 5 year low is just under the 1 year low, but it sounds more dramatic! LOL
In Portugal you have the Govt. stating their debt is ok, but the private sector stating it isn't. Well the private sector will win that battle. Portugal will insource their debt to the bailout fund.
Lookout Spain and Italy. Their cost of borrowing will increase dramatically just like Portugal. But my gut reaction is that they will be ok. I think global recovery will help spare them.
Japan is "assisting" Portugal for one reason alone, CURRENCY STABILITY. The Yen has been appreciating against the dollar for 8 years. If the bottom drops out of the Euro, the Yen is screwed. That being said, it has to be much cheaper to support Portugal in the short term vice Spain and Italy down the road.
I am no economist, but let's face it, the writing is on the wall for a $1.15 USD/Euro (13% down from this post). I am in "I" at $1.17 @ about 30% for the long haul. I think $1.50 could be attained with a 4 year horizon. That is an annualized 7% a hear for 4 years.
This is either an indication that buyers are willing to step up on these dips, or the break could be a weakening of support.
I am bearish towards this point of the game. I slowly pulling out of the market until we get a sell signal at which point I'll pull out the rest until we get a good entry point. Even though the $ has seen recent strength, I think well see the $ and Euro decline rapidly. over the next year. Best of luck to everyone with a short time horizon.
- E
