Tuesday, September 13, 2011

Europe In State Of Financial Collapse

CNBC has an article with hedge fund manager Julian Robertson where he discusses the problems in Europe which don't seem to end:
Robertson told Bartiromo "our political leadership is doing nothing to really help us get out of this current situation. Worldwide, Europe is just in a state of financial collapse." Bartiromo asked if he was expecting a default in Greece and Robertson replied, "Oh, yes." But default expectations do not stop there. Robertson believes there are real concerns for Portugal, even Italy as well.

Recently, I heard a long time investment adviser suggest shorting the Euro. He said that you rarely get a chance to be part of history, and shorting a soon to be disappearing currency is a rare chance.

 Bloomberg is reporting that "Italian Bonds Slide as Demand Falls at Five-Year Sale; Greek Debt Slumps".

Italy’s bonds fell, with two-year yields rising to the highest since before the European Central Bank began buying the nation’s debt last month, as concern the debt crisis is worsening sapped demand at a note sale today.
Greek two-year notes slid for a 10th day, pushing yields toward 77 percent, as credit-default swaps showed the nation has a 98 percent chance of default in the next five years. Italy sold 3.9 billion euros ($5.3 billion) of five-year notes at an average yield of 5.60 percent, up from 4.93 percent at the previous auction of similar-maturity debt in July. Demand dropped to 1.28 times the amount on offer, from 1.93 times.
The Financial Times reports that "Greek bond yields rise to unprecedented levels"

Greek bond markets have gone off the scale. As investor concerns over a potential debt default by Athens mount, the country’s debt has entered territory previously uncharted by a European sovereign.
Yields have risen by 150 percentage points on some bonds in the space of three months and volumes have slumped, almost to nothing on some days.
A trader at one big bank said: “Yield levels are unprecedented. Even other severely distressed sovereigns are not paying anything near the yield levels of Greece.”
Another trader added: “There are barely any trades on some days, so we have to make up the prices. As a primary dealer, we are under obligation to make a market and at least offer a price that we would buy and sell Greek debt.”

The old saying goes; "When they are crying, start buying", but the question is are there more tears to come? My feeling is that yes, there are more tears to come, and the market is going to head further down from here.

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