We have reached my target zone - even exceeded it briefly in a week 8 count. I strongly belief that we will bounce back from those levels and that can be a significant bounce as the EU will hammer out some heavy stuff over the weekend to defend the EURO. Fundamentally the 12 trillion Dollar GDP EU has an average debt 0f 74 % and the 14 trilllion USA GDP has a debt ratio of 90% - that does not make USA stronger obviously. America is economically rather weaker because it has close to zero savings rate and the EU a pretty good one. EU has 2 weak spots which are not economic but still of value to the USA, one is the political strength of USA since it is a real Union and the second is the NUKE arsenal. In a war between EU and USA the winner is without doubt USA question is to what degree is that factored in or has to be. As that is no option at all since they are close allies except for Germany and Italy in historic terms but on todays standards all of them are. In any case the EU will come out with some strong moves this weekend as they have already announced and will come up with facts til the markets open on Monday with one of them being a so called 'stabilization fund', while the FED setup for new swap-lines for Europe plus the ECB will also pull some strings. It will not change the structural crisis but the same is true for the USA the FED bought big parts from the banks toxic assets at bubble prices but that rather prepares USA for a sovereign crisis in the proportion of Greece.
Saturday, May 8, 2010
EURO update
We have reached my target zone - even exceeded it briefly in a week 8 count. I strongly belief that we will bounce back from those levels and that can be a significant bounce as the EU will hammer out some heavy stuff over the weekend to defend the EURO. Fundamentally the 12 trillion Dollar GDP EU has an average debt 0f 74 % and the 14 trilllion USA GDP has a debt ratio of 90% - that does not make USA stronger obviously. America is economically rather weaker because it has close to zero savings rate and the EU a pretty good one. EU has 2 weak spots which are not economic but still of value to the USA, one is the political strength of USA since it is a real Union and the second is the NUKE arsenal. In a war between EU and USA the winner is without doubt USA question is to what degree is that factored in or has to be. As that is no option at all since they are close allies except for Germany and Italy in historic terms but on todays standards all of them are. In any case the EU will come out with some strong moves this weekend as they have already announced and will come up with facts til the markets open on Monday with one of them being a so called 'stabilization fund', while the FED setup for new swap-lines for Europe plus the ECB will also pull some strings. It will not change the structural crisis but the same is true for the USA the FED bought big parts from the banks toxic assets at bubble prices but that rather prepares USA for a sovereign crisis in the proportion of Greece.
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