Tuesday, November 15, 2011


I'm sorryabout the format of the last post, butit wasn't my fault.  Google is up to their old tricks resulting in wierd and not-so-wonderful things occuring.  My brand new IPad performed flawlessly and for a change so did I.

In any case, the important thing is that Massimo was dead-on.  Everything he predicted came to pass except the drop in Italian yields witnessed by the 10 year shooting up to well above 7% today.  The ECB was silent, hence the rise, but I think Massimo's theory is still correct; it would have been unseemly to jump in immediately after THE resignation.  Very stylish of Sr. Draghi.

Oddly, however, even with the big jump in the yield there was very little going on. Given the announcement of the formation of a new government whose members will be revealed tomorrow this was to be expected and the movement seems to have been caused by an absence of buyers rather than heavy selling.  On the other hand what one did see was the small but steady movement upward in Spanish and--yes--French yields.  The mind game seems to be that if the Massimo scenario turns out to be true, who is the next one to go after?  If I were some modern day George Soros, France would be the pick, for contagion here gets the entire Euro Zone and most of the world sick.  It's short-sellers heaven and all one needs is a little help from your friends at Standard & Poors.  If this were to occur--and we should all prayit does not--it seems to me that there is no way that the United States could remain on the side lines no matter what the fiscal or political cost.  In an effort not to minimize the risk, the world economy could be in grave danger.

The Euros could not have messed this up any more than if the Devil himself wrote the script.  Months--yea--a year--ago the demise of Greece would have caused ripples to be sure but politics, petty jealousies,  hubris (especially on the part of Sarkozy), short-sightedness on the part of the Euro banks who could have nipped the crisis in the bud by recognizing that sometimes losses need be taken, fanned what was a small fire into a now five-alarmer.  It may now be too late as the gloom of the present situation became deeper today in the revised outlook for European growth in the fourth quarter: essentially nil.  If the market responds well to the names in the new Italian goverment, time may well have been bought but in the mean time the crosshairs are settling on the next victim.  Targeting.

Carter is back with a most interesting comment.  One thing Carter, old friend, you have to travel more...especially to Italy.  It's the Doges Palace, Caravaggio and Ciao!  Just trying to help.

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