I said this recently in another thread that traders do see the bulls eye as plain as a day. Well I may not carry much credibility amongst some of you here but an interesting tid bit of news came across.
Basically Kathleen Daffney who is a fund co-manager for $19.1Billion fund says she refuses to invest in US treasuries because it is a poor investment with poor outlook. And I do agree
Some of you ask but why is then that Barclay, China, and other investors and traders are buying heavily into US treasuries. Answer is quite simple, its a lazy solution by picking the best of the worst. US has never defaulted YET. Just a run down...
Deutch Bundsbond. Oh my we had a major scare last week when they could not sell nearly half of their Bundsbond (treasury notes). Some claim that the interest rate offered is too low. Well then it means that there is a consensus of lack of trust in Bundsbond.
Japanese Oh my their debt to GDP is whopping 200% and more and still climbing. Wanna risk it?
France Oh my they are on the hit list from the credit agencies. Bit of scare about Dexia SA and so much exposure to Italy and Spain. They can't get away fast enough when the two implodes. France if I remember correctly has the highest exposure to Italian and Spanish debt. Their banking system got caught sleeping at wheels. Credit Agricole and BNP Paribas, both French banks, could take down France.
Belgium Oh my not doing too well with the country split between Flemish and French speakers. They don't see eye to eye, and without a formal government for the past 500days and counting. And oh Dexia SA is part Belgium and needs to be bailed out.
Luxemborg Oh my they too have their hands stuck in Dexia cookie jar.
If Dexia SA goes, it will take down France, Belgium and Luxemborg. The latter two is tiny so not so big a deal unless you are citizen of the country.
Italy hey do I have a deal for you a shiny used Fiat. Runs great. Might even take Lire for payment.
Spain Oh my... It's flamed out as well. Pesos anyone??
UK well... lets think for a minute. How big is there economy? Oh that's right they too have austerity program in place. Besides I could never understand their currency system Pound is how many pence or was that shillings. arrghhh!!!!
Switzerland. Swiss franc is getting mighty expensive but the economy is too small to absorb all that "liquidity".
Canada, NZ, Aussie land, S Korea...
What is really troubling is that if you read "This time is Different: Eight Centuries of Financial Folly" and look at where we are on the time line series, its not that hard to see where we are. The timeline series of interest is the number of sovereign nations who are in default at the given time. Each one of the peaks max out around 50% and the rate at which this percentage spike and some of the other metric really don't change over each of these peaks. Its not pretty. Also the timeline series has repeated consistently over 5 cycles... My point being that Europe with Greece, Portugl, Italy, Spain are just the begining of this debt crisis. It will swallow up France, Austria and Germany itself. Hungary was downgraded to junk bond status this past week. When Germany is unable to withstand the default of nearby nations, it will signal the collapse of the Euro. It will take down Netherland, UK, Sweden, Finland, Denmark...
We are just a few short years, may not even be that long, before the world financial system will be in major crisis with most all credits frozen. And once the credit is frozen, it is really hard to get it unfroze.
Some say that we should be on gold standard instead of fiat currency. Well the short answer to that is gold standard just makes things worse as the currency can not adjust its valuation fast enough to reflect the changes in the economy. Meanwhile we can what ??? Oh I don't know.. Get prepared for the financial winter.
And I'm usually an optimist never dour. BTW, "This time is different" is really good even as a reference for economic data.