The Euro; A whiff of ERM 1992,,, ECB not independent anymore

* Euro already suffering from rescueefforts post shortcovering - Euro set to weaken further.


1.23 first stop on the road to parity. Politicians are low on communicationskills, understanding, or both. "They" believe they are supporting the Euro with the latest humungous package. In reality, theyve just undermined it - exposing it to a collapse.

Why?


Lets see;
- Lost independence by the ECB, now also an administrator for the EU commission


- The ECB is buying junk bonds - diluting the creditquality of their portfolio and thus, the Euro.


- No Euro country apart from Finland is currently sticking to the Maastricht criteria.


- ECB and politicians is trying to bailout their own economies and bond markets in order to "save" the Euro. In essence conducting intervention. Intervention has historically never succeeded when Macrofundamentals have been pointing the wrong way, and yes - they are.

- Increase of the supply of Eur as the ECB buys its "own" bonds as those flows will later be nonsterilised.

- Madoff, ECB,,,,, This seems almost like a Ponzi scheme. Only the first appliers will get funds from the "common" fund. Then the coffers will be empty.

- Lack of trust for the Eur from centralbanks globally as governing rules set to ensure stability and value are changed without notice.


- For the last 10 years, centralbanks across the globe have been diversifying their FX reserves into Eur. I doubt those programmes will continue as before. Eur to suffer.


* It seems likely there will be a constitutional court hearing in Germany re the legality of Germany bailing out other Euro countries. This will likely be announced by the end of this week. This have the potential to shake the markets substantially in the case of non approval (not likely) from the German constitutional court. Even the hearing itself could make markets uncomfortable.


* Heads up; Since Greece and the rest of the PIIGS is nothing else than the Baltics and Latvia magnified by 20 and more, Im looking for the Baltic story to come back on the agenda. Banks to suffer in that case.

- LIBOR, has moved from 80 to 110 over the last months. Any moves higher should be monitored.





* What happens when Trillions of Euro sovereign debt is added to already indebted countries simoultaneously with extremely tight fiscal policy at the same time as Asia is struggling with inflation ,tightening monetary and fiscal policies, stimulating domestic demand instead of exports, reducing currencyreserves in the process?

Well, the long answer; Asian currencies will strengthen, G7 currencies will weaken. ; Asian countries will generate growth, exporting inflation, G7 countries will experience deflation(Eurozone). US struggling. Whats the short answer?; Stagflation. No growth with inflation.





* Whats the scope from here?

Towards the end of this week, I expect consolidation with an upward bias in equities, commodities. The euro to remain heavy. By the end of the week, more bearishness in equities, commodities(except gold) due to the expected German Constitutional Court announcement of hearing re Germany legality as paying part of the bailout package (38%).

- Eur to continue suffering, you just aint seen nothi´n yet.

-I am short Eur/Usd, Eur/Jpy. For a test of 1.25 and 116.

- Oil to continue suffering, I am long SOIL ETF.

- I am long GLD options (ETF). I will look to go long "new" gold though; Silver, Platinum. Gold is "old" Gold, owned by the centralbanks,,, - not that good.










As usual, good luck


















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