Loading ...The key for the ECB holding Yoorp together is avoiding the “fragmentation” of Southern European sovereign credit spreads. We don’t know how their new “anti-fragmentation instrument” will do it – and neither do they, yet. They held an emergency ECB meeting to agree to agree about talking about it.
A full-blooded European Sovereign Credit Crisis is coming, and perversely it’s going to give us a clear investment winner! I am not for one second suggesting Italy is an attractive investment proposition, but it’s a screaming speculative opportunity! Buy Italy!
That’s because keeping Italy, and a number of other key debt-stressed members in the Euro remains the defining policy of the ECB, and thus the European Union. Like any good comedy – it’s all a matter of timing, and I would hazard a guess anything over 4% is as good an entry point?
Buy Italy. Sell Germany. Simples. First part of the Great Divergence trade.
The second part is to ignore anyone who says Sell Dollars.
Why would you? The US may longer be the globally trusted world policeman, but it’s still the global hegemon. There is not a credible dollar replacement. When crisis comes to sell – US Treasuries remain the ultimate safe haven, and if folk sell Treasuries it’s because they need dollars to pay as the benchmark for all commodity and finished goods trade.