| Cockroaches In The House |
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At lunch today I overheard the best analogy yet, regarding the Greece financial crisis. There is never one cockroach, for every one you see there are a hundred more. Then the trader went on to list several large economies that are on the brink of collapse. The most interesting name on the list was California. The come lately names were there as well: Portugal, Spain and Ireland. Not mentioned, China, probably because it won’t collapse but a bubble is likely. The reason for so much talk about the Greece issue was that rumors have started to surface that the EU was going to step in and prop up the debt ridden country. Some traders are seeing this as welcome news. What they are failing to remember is that as soon as that happens, the hands of the other countries listed above will be out as well. Once the checks begin to be written, the appeal of the Euro Zone and its relative light debt takes a hit. Their debt, small compared to the cash laid out by the US in the last two years, was one reason for the EURUSD rise over the last year. Once the perception that they may have waited too long to shore up broken economies becomes set in stone, they will be labeled the laggard and the Euro will fall even further. The US will win in the short term, 3- 9 months, by default. The DJIA will shrink to 8500-9000 levels and the reality that the “recovery” was tenuous at best will sink in. This mess is going to take years to correct. Those that thought it was over were optimist at best, foolish at worst. The counter theory is for declines in the Euro, Equities and commodities, with gains in Treasuries and the USD. |