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Wednesday, January 27, 2010
When will the Euro Collapse?
In our 11 BIG SUPRISES FOR THE NEXT DECADE we predicted that the first big surprise will be the collapse of Euro zone, starting with the default/devaluation of Greece. In an earlier article we explained what will be the POSSIBLE IMPLCATIONS of a Greek default on government bonds across the world and in Israel in particular.
Well, things have been developing very fast in the last few months with Greek 10 year government bonds reaching 6.72%. For those of us who are not blind this is a clear message- the market believes Greece is going to default and we agree.
Not only that but as we predicted the bond yields of the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) have been rising steadily over the past month since a default of Greece will imply that they do not have an implicit guarantee on behalf of Germany, just like the collapse of Lehman Brothers took down the bonds of major banks around the world in September of 08.
Needless to say, the dollar has been strengthening, to the big surprise of the vast majority of economists and investors. As we predicted in are 11 Big Suprises for the next decade piece.
Beside all of the above, the risk in sovereign debt has started to impact the CDS market of Government paper ACROSS THE BOARD, and bond yields will surely follow. The only two countries who are still considered safe by the bond market are Germany and the United States.
The solvency of those two countries will also come in to question but in meantime they are benefiting from the negative trend in other place. As can be seen in the clip bellow, Dr. Marc Faber has recently expressed his worries about the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) and the fate of the European Union.
.
When will the Euro Collapse?
In our 11 BIG SUPRISES FOR THE NEXT DECADE we predicted that the first big surprise will be the collapse of Euro zone, starting with the default/devaluation of Greece. In an earlier article we explained what will be the POSSIBLE IMPLCATIONS of a Greek default on government bonds across the world and in Israel in particular.
Well, things have been developing very fast in the last few months with Greek 10 year government bonds reaching 6.72%. For those of us who are not blind this is a clear message- the market believes Greece is going to default and we agree.
Not only that but as we predicted the bond yields of the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) have been rising steadily over the past month since a default of Greece will imply that they do not have an implicit guarantee on behalf of Germany, just like the collapse of Lehman Brothers took down the bonds of major banks around the world in September of 08.
Needless to say, the dollar has been strengthening, to the big surprise of the vast majority of economists and investors. As we predicted in are 11 Big Suprises for the next decade piece.
Beside all of the above, the risk in sovereign debt has started to impact the CDS market of Government paper ACROSS THE BOARD, and bond yields will surely follow. The only two countries who are still considered safe by the bond market are Germany and the United States.
The solvency of those two countries will also come in to question but in meantime they are benefiting from the negative trend in other place. As can be seen in the clip bellow, Dr. Marc Faber has recently expressed his worries about the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) and the fate of the European Union.
.
