Europe’s PIIGheadedness

One crazy week begins with global markets getting creamed without US markets trading.
Labor Day afternoon shows the beginning of the cratering of the EU. Greek bonds show default is almost certain with 2-yr bonds at 52% yield.
Italian bank stocks and CDSs are moving in opposite directions. Equity prices at year lows while cost of capital to banks has risen to new highs.
Other EU banks in Spain, France and Belgium having difficulties accessing overnight funds, aka 2008.

Stefaan Decraene CEO of Dexia, the second largest bank in Belgium behind Fortris has resigned. Dexia has been labeled as a troubled bank for the last six months.
German banking execs including Deutsche Bank’s Ackmann preaching that a bailout is needed as many EU banks cannot price sovereign bonds on market-to-market basis because they would be labeled insolvent for their exposure.
Spot gold prices closed above $1,900 an ounce on fears that EU banks will be shuttered before Jean-Claude Trichet can get a Union bond offering together. The bond may be backed by gold in some weight, whether it will be 50% backed or 5% backed, which is the level far more likely to be enacted because there is not enough of the precious metal to do any larger level for the amount of funds needed to bailout the Euro.
I would say the future of the euro is bleaker and could be severely altered or even gone by year’ end.


One thought on “Europe’s PIIGheadedness

  1. Dear Mr. Gray, several months ago I had contacted my retirement broker to get me 100% out of the market and into gold and silver. He inturn told me that I had listened to too many nuts on late night radio and to not freak out. I shared an array of economic facts that he could dispute and stood my ground that I wanted to be in 50% gold and 50% silver. With that being said he replied that I should buy gold (“gld” stock symbol) certificates and silver (“slv” stock symbol). He said that gold and silver certificates are exactly like owning the gold and silver but that they keep it. Moreover, by doing it this way I would not have to pay taxes and penalties on liquidating my IRA. He said its the best of both worlds, no one can steal it and I don’t have to pay taxes, and I can get back into the market with out loosing a ton to the government.

    Is my broker correct and did I do right by his instruction? I previously saw an article that discussed how gold and silver stock certificates (which I now have) are worthless as if the dollar and the stock market collaspe – there virtually is no gold or silver backing it up like I think. Is this true? I am having a heck of a time finding someone who knows what I’m talking about and can give me the truth, and not what I need to hear.


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