All eyes on europe

[muldoon]

This is essentially a continuation of the bloomberg thread.  However I started a new one for this because I believe tonight to be a watershed event that warrants a fresh look and perspective on things. 

Right now, as in tonight, there is an absolute disaster in the making over in Europe going on.  Tonight there are some huge fireworks underway, and the net affect is a clear reversal in the us dollar.

Basically the story is relatively simple, Greece is about to default on its' sovereign debt.  But along with Greece is Ireland, Spain, Portugal, and Italy in the same boat.  They all share a common currency in the euro and all of them are running out of options.  Today some 1.47trillion in ECB/Bankof England covered bonds were also downgraded which questions the cashflow of ECB banks.  The dollar in turn has been rocketing - absoutely shot north tonight.  The front month futures being at 77.66 last I saw.

Greece is cooked - I am fairly certain of that.  Not only are they insolvent, (on top of continued downgrades) it comes out that they have not paid bills since 2005?  wth? http://www.ft.com/cms/s/0/b0d436c0-ea90-11de-a9f5-00144feab49a.html

They were offered a "bailout" from the IMF which they turned down.  In a way I say good for them, I cannot think of a single country that has actually been helped by the IMF, usually its a slow drag out process by which the IMF extracts all usable assets from the private and public while letting the country swim in misery.  Nope.  Greece said no to it and are now without recourse in getting additional funding.  If they see another downgrade (very likely in my opinion), they will swirl the bowl and be flushed.  A Greece default rocks the Euro, and sends capital flowing everywhere seeking safety. 

This is a key reversal for the usdx, well, anything north of mid 76 was key, but this is on heavy volume and strong.  When Europe opens in a few hours I expect it to continue the watershed. 

In a few decades, we will read about this in history books, but for the observant - tonight is the start of the death of the Euro.  Think of revisiting 1930s world to watch the CreditAnsctatz collapse if you had a time machine.  A key moment in history.   

If you are short us dollars tonights futures markets would be the place to get out of such a thing.  Expect fireworks.  I do.

[harry51]

The reaction of Germany and the other more solvent European Community countries will be interesting to observe.

This is also a great illustration of the old saw that "everything is relative", considering this flight to quality is a flight to the dollar, warts and all.

[peternap]

Good post as always Muldoon.

I agree completely that short dollars is no place to be. but I'm not certain long is a good position either. There's still too much going on on all fronts.

I'm still seeing a meltdown in the progress and don't want to be long anything right now.