Euro, Stocks, Commodities Retreat as Bailout Optimism Ebbs

Yesterday morning the financial community was cheering the Shock & Awe the trillion dollar pan-european bailout. The Shock & Awe occurred when the euro dropped 200 points from the above $1.30 level. Expect the PPT to at work today.

Jim

The euro halted a two-day gain and stocks fell, with Chinese equities entering a bear market, amid concern Europe’s indebted nations will struggle to cut deficits even after an almost $1 trillion emergency loan package.

Shock and awe bailouts are similar to the predator and prey relationship between elk and wolves in Montana. The Elk, unable to find suitable grazing to replenish their energy stocks, are slowly weakened by the harsh Montana winter. The wolves, however, find their energy levels spiking as they prey on the ever increasing numbers of weak. The bailout of the Euro is nothing more than providing than a bushel of corn to the starving elk. As long as the wolves gain energy from fresh kills of weak countries, states, and municipalities, they will be harder and harder to keep at bay.



I am watching bonds like a hawk. Once bond begin to falter as a quasi safe haven within the limited three asset universe of stocks, bonds, and dollars, the linear world within precious metals will be quickly discarded.

Source: bloomberg.com