iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,408 Blog Posts

The Euro is on the Verge of a Total Breakdown

The dichotomy of Europe spending $80b per mo on QE and US policy to tighten rates is having a profound effect on the euro, which is plunging again today to 104.

To put the decline in context, it’s important to note the currency is down about 50% from its peak and is now entering levels unseen since the early 2000s.

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This trend, naturally, will cause many European asset managers to conduct carry trades, like greedy goblins — borrowing in euros to buy US stocks, which at some point in the future will become a tinder box of volatility when the dollar stops rising.

For now, this trade is dominant and no one seems to care how much the dollar goes up, most likely because foreign interests are making an absolute killing buying American stocks and enjoying the dual benefits of a soaring dollar.

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14 comments

  1. aflow90

    FYI, the ECB is spending $60B per month now. They cut the monthly figure when they announced the extension.

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  2. soupbone

    When the eurozone crisis hits it will leave that continent in shambles for minimum 10 years. They have a wonderfully high standard of living they are hoping to maintain via their German and French arrogance but the arrogance is their downfall. Rising $US is always a troublemaker even if it is not at home so to say. Thinking dollar cost averaging gold on its way down. 5% to 10% portfolio max.

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  3. hattery

    “If you borrow money, you can pay it back with cheaper dollars”
    -People years ago, when dollars were cheaper.

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  4. heaterman

    I think the background behind the rate hike is this.
    The Fed knows they are basically out of bullets. There has to be a strong feeling amongst the govna’s that if another SHTF moment occurs, they have no cushion to left to fall back on in terms of stimulus. They are up against the wall and know they need to buy some more ammo.

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    • it is showtime

      No. 4.6% unemployment. (“4.6”). Meaning they look like a joke if they still couldn’t. Yellen said too high valuations 2 years ago 20% higher now is normal. Indexes still being forced higher both gapopen and intraday (still apparent). Doubt it is pro trump just like markets suddenly became pro brexit. I just think your argument is more 2015.

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  5. stockslueth

    There is always unforeseen consequences, which someone will capitalize on.

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  6. it is showtime

    This was the path
    You all set on
    When you committed to
    A perpetually higher stock market

    K that was 5 give or take years ago
    Bullshitter shitheads talking to you
    The path would solely require
    Maintenance of forever rising

    Obviously that’s
    Not possible,
    All the shit strewn on the side of the road
    Being pointed out in resounding fashion?

    Trash heap accumulates under your statist programmed indexes
    Deepening wind of culmination surrounding your piteous pile

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  7. gorby

    Hey tool keep raising rates.I need a discount
    on my new Jetta.

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  8. jts5362

    How does this party end? Two possible ways:

    1. Relentless Inflation forcing the normalization of rates
    2. War

    US and Euro will never allow systematic defaults and will keep printing money, ban cash and whatever else they come up with for monetary policy. China will continue to add the debt load by making their own rules as they go.

    War seems unlikely. Why? It risks the power of leaders in Russia, China, and Iran. Opportunity cost seems to high to engage in a non-proxy war by these nations.

    The collapse of the EU, possibly but not ready to make the claim that it would end the party for US financial markets.

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