About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, October 01, 2012

Eurozone Status Check

Euro monetary policy is moving ever so slowly toward positive territory as central
banks battle economic weakness, credit contraction and capital flight. But the zone is
still lagging in providing the basic monetary liquidity needed to put in the cornerstone
for eventual growth. Significantly larger increments of liquidity would involve
swapping money flow for elements of sovereignty (e.g Spain currently). The EZ
economy has improved slightly recently, but all boom / bust measures remain in bust
territory. By my standards, the EZ is creeping in the right direction, but the rallies in
the $XEU and the IEV Eurostocks 350 are not fully supported by economic results on
the ground. IEV Chart

In reality, the IEV has probably rallied since early Jun. as much on the prospects for a
sizable new QE program by the Fed as anything else. Euro stocks may thus be functioning
as high beta trades as part of adding risk to a broad equities rally built not just on
the prospect of QE but its eventual success in contributung to US economic growth and
more confidence abroad as well. Fine by me, but this trade could be extra vulnerable to a
correction in the US market unless the ECB can get the aquiesence from sovereigns it does
require to be a more forceful supporter of the EZ's recovery. Note carefully as well the
current  trend of my extended time RSI for the IEV as well as the overbought status of Euro
shares on the MACD.

I read today where youth unemployment in Greece is up to 55%. And segments I see on BBC
TV tell me that humanitarian needs are creeping into the deeper suffering countries in the EZ.
You have to watch this very negative wave. To mix a metaphor, the austerian thinkers and
administrators are taking their smoke breaks ever closer to the EZ fuel dump despite the
"no smoking" signs in the area.

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