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Europe Concerns Continue . . .Watching Bonds November 26, 2011

Posted by Tom in Thoughts.

This will be my last short posting, as I move back to a desk top computer with a large screen (small laptops are wonderful, but . . .).

The world markets continue to struggle, and the concerns (still) center on the European Debt Crisis.  The problem is that there is no actual good solution.  Who will take the loss and / or who will guarantee the credit of insolvent countries ?  Since no one wants to take a 40-50% loss, that would put many banks into bankruptcy and the Germans don’t want to “co-sign” for insolvent nations (understandable).  Right now, we’re at a stale mate.  And the world markets are concerned.

This affects every economy, the US and the Emerging Market nations as well.  The Euro zone is slipping into a recession,  even Germany is feeling the slow down.  There are proposals that would give the European Central Bank (ECB) more “Fed like” power but that requires a major re-write of the EU charter, plus voting on it.  That will take time.

US regulators are concerned that US banks and insurance companies have issued default insurance on EU debt.  That would be a “double whammy” to our economy.  Slowing exports and another banking crisis would pull the US back into a deep recession.  So . . . what to do?  Watch US Treasury Bonds.  The rates continue lower because of demand (it’s considered a safe haven).  If we see the prices increase (rates go down) or stable, then things are at least OK.  If prices go down (rates go up), especially in a hurry, look out.

Right now, there are not many sectors that are doing well.  Short ETF’s, the US Dollar and Treasury Bonds are about it.  Have a good week.


1. Elektrische Zahnbuerste - November 27, 2011

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