12/01/2012

The Europe and US fundamentals are now squared.

Europe came in with very good prospects for Spain's sovereign problems. Could easily borrow 10 billion out of 170 this year for around 5 percent long bonds. Spain has only 60 percent of BNP as debt, better than Germany for instance. Italy is the only country that I have doubts about still, but Thursday auction was OK but next week will show longer bonds.
Even if Greece cannot make it and Italy will have problems I now believe that the Euro zone will make it and that the Euro will be OK.

I think that the problematic state will be the U.S. during the coming months with no increase in Christmas retail and an increase in number for new unemployment help.
No one can tell which is worse off for 2012, US or Europe. All the good things about America during Christmas just crashed today and US is back to square one will lots of problems ahead. If the dollar starts falling or China get less money the Fed will have to buy most of the new notes and bonds and that situation is much worse than what could happen in Europe. And think about this. How long can the U.S. auction notes for less than two percent. Certainly not forever. Add the political situation and it smells problems.

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