Rolfe Winkler
Option ARMageddon
Euro’s deep dive continues…
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As of this writing, the euro is cliff-diving again. It’s now down near $1.22, a four-year low. The proximate cause of the sell-off is a German plan to ban naked short-selling in stocks and certain government bonds.
Some thoughts from currency strategist Win Thin of Brown Brothers Harriman:
Euro selling has accelerated, which we can attribute to two possible factors. First, the German ban seems to be a bit of “flailing.” Given the questions we raised in our earlier note, it appears to be half-baked and not really thought out, and plays into market doubts about European policy-making credibility. The second, and perhaps more important, factor is the fact that if the Europeans are in effect trying to take away legitimate investment vehicles, then investors that are negative on Greece and Portugal can only take recourse in limited ways, the biggest one being to simply short the euro.
emphasis mine
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Markets have become a very risky place both on the long and short side with governments coming up with new “bailouts” and “regulations” almost each day it seems.The new German ban on “naked short selling” effective from midnight has led to US markets declining along with the usual suspects like the Euro and the Pound.Oil seems to have decisively broken its trading band of roughly between $70-$87 since the last 6 months, probably indicating that the the markets might have made an intermediate high.Read more at http://greenworldinvestor.com
If only Milton Friedman were alive today.
He would be shouting from the rooftops that we need Friedmanite helicopter drops and tax cuts financed out of printed money.
Moving debt from one place to another just cannot work any longer. Sovereigns need to delever. The private sector needs to delever.
The only was for this to happen is for the monetary base to increase dramatically.
It won’t be inflationary because the debt overhang is gigantic all over the world.