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Miguel Mayor
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Miguel Mayor is an independent investment consultant specialised in tangible assets and diversification of assets and their exposure
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Tangible Wealth Investments
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  • Forget About The ECB Saving The Day Announcements – It Will Only Make Things Worse

    So it happened. Just as I wrote in my last article (Trading for a Dark September and a Darker Fourth Quarter, 3rd September), before Mario Draghi's announcement.

    In face of the deepening of the Euro-crisis, with Spain openly heading towards the need for a full bailout, threatening to bring down Italy and God knows what else with it, and with the Euro-crisis as a whole only getting worse, ECB President Mario Draghi came to save day and made a spectacular "unlimited bond-buying program" announcement.

    The markets immediately switched to 'risk-on' mode again, the EUR rallied and the bond yields of Spain and Italy fell. Also, as most traders and analysts still believe that the Fed will announce QE3 after its September 13th FOMC meeting, the USD was already falling and helping the EUR to go up a little bit - a very short-term move that got stronger following Draghi's comments. In a world where financial markets keep dancing to the tune of central bankers' music, this was as expectable as what will happen next - a major correction.

    So, short the EUR, long the USD, short Spanish and Italian bonds, as their yields will come back up in full force, short German Bonds, as they continue to be in a bubble, and do not trust the recent price action in Gold and Silver as definitive - I believe they will go up a whole lot more, but not just yet, because I do not believe that the Fed will go for QE3 in September. Let me explain.

    We should ask ourselves if things really changed or will change after Mario Draghi's announcements. And, more than that, we should ask ourselves if they will not indeed change but for the worse.

    The truth is that what the ECB announced has solved, and will solve, nothing. It will actually make things even worse - especially for the ECB, which, if it takes this program forward, will be even more leveraged and holding even more toxic and worthless debt. It should be said that the ECB is presently already extremely leveraged, at 38 to 1, and that is before taking any of these announced measures. Also, after LTRO1 and LTRO2, a third of its balance sheet became composed of PIIGS assets. So, if Draghi does succeed in this 'unlimited bond-buying program', it will only place the very Eurozone central bank even closer to the precipice of insolvency. Furthermore, let us not forget that a program such as this adds up to the inflationary ticking timebomb that the ECB has been irresponsibly setting up.

    Also, and as we should remember that Eurozone member states are financially liable for all these endless bailouts of all sorts, what will this do to Germany, which, before these measures, is already dangerously exposed to PIIGS assets? Is Germany so wealthy that it can just take on all these debt-over-debt policies? Is it growing all that much? Remember that Germany is currently paying an interest of 1.35% for its 10-year debt issuance, and that its GDP growth in 2011 was only of 3%, and it is expected to grow only 2% this year and 1% in 2013. Also, we should remember that Germany's economy greatly depends on its exports to its European partners - which are getting increasingly less able to buy German products. This is happening while the German Bunds are in a bubble. They are seen as a safe haven but their fundamentals point clearly to a very probable spike in its yields coming as soon as the markets realize that Germany is not doing all that well and that it is taking on Eurozone-related obligations and liabilities that are clearly unsustainable. Actually, opposition in Germany has been escalating against the ECB's monetary lose policies, and this last announcement by Mario Draghi will only make these tensions hotter - and will certainly put Germany one more step closer to dropping the Euro.

    Now let us look at the other side of the equation.

    The ECB President announced measures that, if put into practice, will only add debt to more debt. The ECB President said it will buy unlimited short-term bonds of Eurozone members which are under financial assistance, and we all know that this is mainly aimed at bailing out Spain and trying to prevent Italy from needing a similar program (but, mark my words, Italy will need one). The ECB said it will launch such a program but only under the compliance of certain austerity measures, so it will only bailout Eurozone member states which need financial assistance but which comply with a set of conditions. Up until now, there isn't really something new here. Of course it was not said if this will affect Greece, which has not really been complying with the Troika's demands. But let's forget about Greece for a while and let us focus on Spain.

    Like Portugal, Greece and Ireland, Spain (and Italy, always remember Italy) also has a tremendous public debt-to-GDP ratio which has been growing tremendously, and which the bailout to the Spanish banks via the Spanish Government will only increase. Spain cannot control its budget deficit, as it spends more than it makes in taxes. And, with its economy aggressively shrinking, together with its massive unemployment (25%, the largest and scariest in the EU, not just in the Eurozone), Spain is broke. Plain and simple. Plus, it has a real estate bubble that has not fully burst yet and its autonomic regions not only have their spending out of control - they are openly saying they are insolvent. Spain's problem is not a liquidity problem - just as Portugal's, Greece's or Italy's problems isn't. They are insolvent. And you cannot treat an insolvency problem as a liquidity problem - the ECB has tried it before and it did not help. It made things worse, as it will this time again. And you should certainly not lend more money to someone or something which is already broke - if you do, chances are that you will get seriously burned.

    We can see what is happening in Spain and how things will evolve there by looking at Greece and also at Portugal. The so-called 'austerity' measures, imposed by the ECB, IMF and EU through the Troika, have done nothing but deepen the recession in Portugal. As the Government started to increase the taxes on people and companies, the less money became available for people to buy products and services. So the less money was made by companies (and by the Government, which had fewer taxes to collect). So less workers were needed by companies. So the unemployment grew. So the Government had to increase its spending with social support programs, such as subsidies for the unemployed. And, with more taxes to pay and less clients to buy their products, more and more companies started to fail and go broke. So the Government was able to collect even less taxes, so its revenue decreased and its spending increased. Plus, the size of the true giant state that Portugal had and still has did not shrink all that much. The austerity measures were more based on collecting more taxes to support a big government and actually asphyxiating more the economy, than on shrinking the real size of the government. So, while Portugal has been cited as a good example of a Eurozone member state under financial assistance which has implemented even more austerity measures than those which were requested by the Troika, the truth is that the public debt-to-GDP ratio of Portugal has been growing and the budget deficit is out of control. The unemployment rises incessantly and the economy is shrinking brutally. This is a cycle that clearly is not going to stop while the same course of action is followed. Portugal was an insolvent country before the 'bailout' and now it is even more insolvent.

    That is what will happen to Spain. Even before seriously considering asking for a bailout to its banking sector, since he has been in office, Spanish Prime Minister Mariano Rajoy also went through the 'austerity' path and has tried to put into practice several measures that Portugal, Ireland and Greece had already been asked to implement by the Troika. The Spanish Government, even before any bailout, started to use the Troika cure for the Eurozone weaker states illnesses - although at first it seemed that Rajoy would resist going too extreme on this. Did this help Spain? Not at all. Spain has been heavily contracting and its public debt-to-GDP has been growing. Unemployment in Spain is just a terrifying reality and nothing seems to stop it. Also, the country's budget deficit is far from the Eurozone's targets. Spain was insolvent before Mr Rajoy took office, it continued to be insolvent after he became Prime Minister, it is even more insolvent today and it will be so, even more, after this announced ECB program.

    My point is not that 'austerity' is wrong. My point is that one needs to acknowledge the facts before, then make a realistic plan to try to get out of the dark hole, and then execute it. And it is just getting more and more obvious that all these bailouts and complicated intervention schemes by the Eurozone central bank, bailout mechanisms and governments are only making it all become more and more rotten. It is like a potentially deadly cancer which, instead of being acknowledged and removed as soon as possible, is just managed and treated to try to keep it under control, while it clearly just keeps growing and severely endangering the patient's life.

    It is very important to acknowledge that these countries are insolvent and that they must default on their debt in some way - or even in a great way. It is important to acknowledge that the Euro is unsustainable. It is important to start over, to do a reset, to be reasonable and honest, to establish a plan that will involve a lot of pain at first but that will ultimately send these countries to a path by which they can grow again and rebuild their economies. However, I do not think that this will happen. At least, not just yet. I believe things will keep on going like this for as long as people and institutions such as Mr Draghi and the ECB can hold them, and that things will get a lot worse before they can get any better.

    With this in consideration, I maintain that the EUR can only go down, even if it is now trading at 1.28. I maintain it even if this hysteria sends it to 1.30 or even 1.35. That is unsustainable and is not grounded on the currency's fundamentals. So, short the EUR. If it goes up a bit more, add more to your short position, as that will only give you a better opportunity to make more money from the fall of the Euro.

    At the same time, go long the USD. I believe that the Fed will ultimately go for QE3, QE4 and endless QE, but not just now. The markets are too high - the hope that QE3 is coming in about a week is too priced in and has been making the stock market looking like it is not that bad. Plus, the US economy is still officially not in a full-fledged depression, and going for QE3 before the US election would not help Barack Obama to get reelected, as the Fed's monetary easing policies have become quite unpopular. So, go long the USD, which I believe will go up after the FOMC meeting and with the inevitable correction that the EUR will suffer.

    Also, short Spanish and Italian bonds, as their yields will come back up in full force, and short German bonds, as they are in a bubble which makes shorting them a perfect trade.

    Finally, I do not trust the recent price action in Gold and Silver as definitive - I believe they will go up a whole lot more, but not just yet, because, as I have stressed out, I do not believe that the Fed will go for QE3 in September, and Gold and Silver have been rising because QE3 is being widely anticipated by the markets.

    If I am right and QE3 does not come in September, Gold and Silver will continue its correction, so you will have yet another great opportunity to buy more physical gold and silver bullion at discount prices. Also, if I am right, after the US election, in which I believe Obama will be the winner, more than QE3, we will have endless QE, as it is my view that not only the US economy will keep on suffering, and QE after the elections will be inevitable, but also because that there will be an American - Israeli conflict with Iran. And, when that happens, you need to have Gold and Silver, as much as Oil. This means that, while I believe that going long on the USD is a good very short-term trade, I would be prepared to short the USD once Obama gets re-elected (or Romney elected, as I do not believe that they would behave in a substantially different way when it comes to the conflict with Iran, with the US debt and with monetary easing).

    So, go long Oil, and keep stockpiling as much physical Gold and Silver bullion as you can. The days of the US Dollar as the world's reserve currency, the Petrodollar and the American economic supremacy are quickly coming to an end. So, while the USD can be a good very short-term long trade, it is definitely not a good investment.

    If you would like to discuss any details about these thoughts and recommendations or to get in touch with me to find out how you can better develop your trading strategy and build a true fortress-portfolio for the turbulent times that are heading our way, please write to tangiblewealth@hotmail.com.

    Miguel Mayor

    CEO Tangible Wealth Investments
    http://tangiblewealthinvestments.blogspot.com

    Sep 10 6:42 AM | Link | Comment!
  • Trading For A Dark September And A Darker Fourth Quarter

    September has come and, with it, many important events are expected to happen. Many traders, investors and analysts are, more than expecting, actually praying for the Fed to launch QE3, while the ECB is also expected by many to engage in some more quantitative easing, be it LTRO3, a bond buying program for Spain and Italy, or undertaking some other form of monetary stimulus to avert the Eurozone crisis.

    This political and financial soap opera will certainly, once again, come back in full force, after the August vacation break that left Europe a bit more calmer. The second Greek default - and definitive - will probably unfold in September, and Spain and Italy will probably again see their bond yields spike.

    The situation in Syria will keep on pressuring an already unstable Middle East, with Egypt in a very undefined situation, and, last but not least, with a possible Israeli / American conflict with Iran, which will certainly continue over the table.

    The drought in the US will probably begin to generate its economic and financial effects more strongly from September onwards. The US elections will be very close to taking place - and with the US fiscal cliff right around the corner. Oh, and China will probably be showing more signs of its 'landing'.

    In this scenario, it is my view that investors should continue to hold an investment outlook that focuses on the trends and on the fundamentals, basing their views primarily on what is likely to happen in the medium to long-term. I usually believe that the short-term events are less relevant in the overall picture. However, the next weeks / months can bring such dramatic events, that I consider it is certainly important to keep a close eye on the short-term happenings as well.

    The fact is that, in the short-term as in the long run, we are looking at pretty horrific times. The world economy is quickly sinking and becoming closer to staging the Second Great Depression. Plus, the debt overload of Europe, the US and Japan, along with the diversified inflationary ticking time bombs out there, which only tick more and more loudly, will do anything but help.

    This messy situation does not come, however, without great opportunities. And, for those investors who are looking for yield in the financial markets and who understand the world of trading, I would recommend the following short-term investment outlook and strategy, which I believe can bring excellent chances of expanding your wealth - if you understand, accept and manage the risks.

    When will the Fed and the ECB print and why this matters

    This is a decisive issue that needs to be properly understood and interpreted, in order to establish a successful investment and trading strategy.

    First of all, I should start by saying that it is true that, through several ways, the world's central banks - especially the Fed, the ECB, the Bank of England, the Bank of Japan and the Swiss National Bank - have already been pretty much undertaking permanent monetary easing policies. However, when it comes to larger and open actual quantitative easing programs, such as the Fed's QE1 or QE2, or the ECB's LTRO1 and LTRO2, it is also true that both the Fed and the ECB have been refraining from putting into practice their third hugely expected large programs, which have yet not followed their two first programs of this kind.

    Now, while almost everyone is expecting these big monetary easing programs to come soon, I believe that they will indeed come, but not just yet. My estimate is that the world's main central banks will ultimately resort to more or less endless quantitative easing to try to deal with the brutal crisis that will come (what we have seen so far is actually soft, if one considers the true depression shock that I believe is coming). However, if I am correct, they will wait until they see serious pain in the markets before they actually engage in these large easing programs.

    Firstly, because they cannot just print more currency into existence without facing its consequences - and inflation is already being a serious problem. The price of oil and commodities in general, and especially food prices, are already far too high, which means that, if central banks print more currency in such large programs, they would send prices even higher. This would have very bitter social, economic and political costs - and would hardly help Obama or Merkel to get re-elected. However, if the depression shock indeed comes before their election, they will get their printing presses working on full speed, to try to make things look like they're under control.

    Secondly, the initial large programs of the Fed (QE1 and QE2) and of the ECB (LTRO1 and LTRO2) have generated no economic growth, have not helped the economy to get funding (the banks have kept the cash and they have only bought short-term government bonds with the money), and have also gotten European banks using the ECB funding in trouble, as they got the stigma of resorting to the emergency liquidity that the Eurozone central bank has provided. So, the usefulness of these measures has disappointed many, to say the least.

    Thirdly, while the first and second programs by the Fed and the ECB have stayed in the hundreds of billions to one trillion area, it is now widely believed that further easing from both banks, in order to have some sort of effect, would have to be in the area of several trillions. And, again, the consequences of it would certainly be worse than better for the economy - and central banks know that, so they will not do it lightly.

    Finally, central bankers have been talking up the markets again and again, always speaking about what they may do and about the several tools that they have at their disposal, but the truth is that they have not actually done more than talking about it. Still, the fact is that, so far, they have not needed to do more than talking about what they may do, as the markets have been reacting very strongly and positively to these vague statements, pricing in both Fed and ECB interventions (which, I repeat, have not yet occurred and will not occur while a serious crash does not take place or is not dramatically imminent). These market reactions have been so strong that stock markets have been near their highs and bond markets have been relatively cooled down - just based on expectations and on the spoken words of central bankers. This, I should say, only makes everything even more dangerous, as, once people realize that the American or the European QE3 are not coming so quickly and that easily, we will probably see the markets selling off in a desperate and aggressive way that will make, retrospectively, the Lehman moment look soft.

    To conclude, it is my view that the Fed and the ECB will indeed print Dollars and Euros, and by the trillions, but not until things get seriously ugly, so that they have a very strong excuse to do so. Having this outlook in consideration, I believe there is a way to make money in the financial markets in the short-term, which is based on reading the messages that central bankers have been sending to us, and by trying to anticipate what they will do in the next few months - as much as when and how they will do it.

    Precautionary Steps

    Firstly, you should have in consideration that, whenever I speak of trading ETFs, I avoid leveraged or too leveraged ETFs, and I only think it is a good plan to use ETFs for short-term trading - never for actual investments. ETFs, as all other financial investment vehicles, are nothing but paper assets and offer no safety at all in case a financial, banking and or monetary crisis does occur. So, trade ETFs - or stocks or futures - but please do not base your investments primarily on these financial instruments. They can fail you and leave with you nothing.

    Secondly, in my view, if you are at all going to trade, you should only use a not too big part of your investable assets in trading. You should also not use leverage. Still, even if you do choose to use leverage because you understand it and you know how to manage it and use it, you should limit it as much as possible, so to not compromise your other assets of your true crisis-proof portfolio. This, I repeat, is an investment portfolio that, aside from your trading budget and operations, should be set up outside of the financial markets and should not be in any way endangered by your trading activity.

    Finally, while it is my belief that it is obviously important to have a strategy to trade having the best technical entry points in mind, the fact is that, as I see it, fundamentals are what really matter when it comes to investing. That is why all my recommendations are almost entirely based on fundamentals - and extremely solid fundamentals, I should stress -, so, if you do consider my suggestions, do make these trades based firstly on fundamentals and only secondly looking at them from a technical point of view.

    Trading Strategies

    1. Short the Euro

    In order to try control and solve the Eurozone crisis, the ECB may engage in new forms of monetary easing as it has done so far. If that happens, the Euro will eventually go down a lot more. If no extraordinary measures are taken to control the Euro-crisis, the Euro will just keep on losing the confidence of investors. So, it will go down even more. If one or more of its members leaves the Eurozone - Greece, Germany, Spain or Finland -, the Euro will fall sharply. And, if this happens, it will probably end as a currency due to a breakup of the Eurozone, in which case no one knows how low it can get before it officially ceases to exist. My point is that there is no realistic way for the Euro to go significantly up, on the medium to long-run. Even if only the wealthy Eurozone members would stay in this league, the shocks that would occur before this would be established would probably make this an impossible project. Also, these wealthy countries are not that wealthy anymore, especially if you think about how deeply exposed they are to their peripheral partners. Anyway, in this context, again, the Euro would stay low or go very low. I must say, however, that, as the markets have been behaving so irrationally, it is actually possible that something completely abnormal happens, such as the Euro going a little bit up, until 1.30 - 1.35, perhaps, if the ECB announces a massive bond-buying program or an actual money printing program, which would be an irrational relief rally (we have already seen reactions in the markets such as this, which pumped the Euro higher instead of sending it lower). Such a rally would not be supported by the fundamentals, so the Euro could move up but only to come down possibly in a more dramatic way. That means that, if such a rally would happen, it would make an even better opportunity to open a short position on the Euro or to add up to an already open short on the Euro. My view is that, as it is today, with the EUR/USD at the 1.25 level, this is already an excellent position to short the Eurozone currency. However, I would short it as it is and would be looking out for ECB announcements - if a strong action by the ECB seems probable, I would close my short position and see what happens. If the ECB does announce any measure that brings the Euro up in another absurd relief rally, as long as the poor fundamentals of the common currency remain as bad as they are (and which do not look like they will improve in any way, at least any time soon), I would just look at it as an even better opportunity to again open a short position on the Euro. That rally would not last long and, the more the Euro would go up, the best it would be for those who would short it. You can of course short the Euro in many ways, but one of the simplest is to go long on the EUO, which is an ETF that acts as a short on the Euro.

    2. Go Long the US Dollar

    While I do not like the US Dollar (NYSEARCA:USD) and while I certainly believe it has many fundamental problems and continues to be under serious threat due to the tremendous debt load that the US Government keeps piling up and to the Fed's expansionist monetary policies, the fact is that, with Europe being as it is, and with the Euro being under a far more serious threat than the American Dollar, the latter is still seen as a safe haven - and, in the short-term, although in a very unsafe way, I accept that it is. As I see it and have already explained, the Euro does not have the grounds to go up substantially - and to stay up, even if another absurd relief rally happens for nothing, like many have, since the Eurozone crisis started. The USD, however, in the short-term, will stay strong and will get as stronger as the Euro gets weaker. There may even be a panic reaction by the markets to jump into the USD, fearing a Eurozone breakup, which I do not think it is unlikely or far from happening. So, I believe it is a good move to - again, only in the short-term and being prepared to dump the Dollar once it benefits from the panic caused by the Euro - go long the US Dollar. One of the ways to do that is to buy the UUP ETF, which is an ETF that keeps track of a futures contract betting that the USD will strengthen against the Canadian Dollar (NYSEARCA:CAD), the Yen (JPY), the Swedish Krona (SEK), the British Pound (GBP), Swiss Franc (CHF) and the Euro (EUR). I would stay vigilant, though, and prepared to short the USD as soon as the bullish sentiment on the USD and the panic about the Euro would get too high. Remember, the Fed does not want a strong USD and it would not stand there and let the USD stay too strong while the largest financial and economic crisis of ever would take place. Also, America has many problems of its own and it has a tremendous exposure to Europe and the toxic Eurozone assets (public debt and bank related assets), so the American Dollar is almost as unhealthy as the Euro. So, I would go long on the UUP in the short-term and, as soon as I would see that it would be time to move along, I would short the USD by buying the UDN, which is an ETF which is bearish on the American Dollar, performing inversely to the UUP. One final important point: if Israel and or the US attack Iran, short the USD as quickly as you can, as it will go down a lot and fast.

    3. Go Long Oil

    With China landing more hardly than softly and with the European and American economies experiencing true agony, it is true that Oil can come down to absurdly low levels, more because of a depression scare than due to an actual decrease in demand for this commodity. I believe we can see Oil trading for $70 or even $40. I am not saying that it will happen, but it is possible. However, due to the weakening of the US Dollar resulting from the Fed's easing policies, to the tensions in the Middle East, which I believe will only get worse, especially with Iran, and also due to Peak Oil and the fact that demand for Oil is just not going to go away, I would go long Oil. Right now. Furthermore, with Iran selling Oil to China in exchange for Gold, and with Saudi Arabia, the world's largest Oil producer, partnering directly with China and other countries, the days of the Petrodollar seem just closer and closer to ending. That is also very bullish for Oil traded in USD, as, if the Petrodollar does come to an end, there is no telling how expensive Oil can get in USD - so, each contract of Oil that you now purchase at $90, for example, can come to turn into a $180 contract, so you can double your money, preserving your wealth and protecting yourself from the increase of the Oil price.

    In practical terms, I would prefer to own Oil with futures contracts, but, for those who prefer to trade in the stock market, I would recommend buying the USO, USL and or BNO - ETFs which keep track of the Oil market. It is my view that, with Oil (NYSE:WTI) now trading at around $96, it is still very cheap, taking in consideration the spikes in its price we may come to see in the near future. So, I would go long Oil and, if in the meanwhile it went down, I would just buy more, as it would very likely come up again. Remember, if there is a very strong deflationary shock, the prices of commodities, along with the stock markets, will go down, possibly in a dramatic way. And I believe that the central banks are not going to just stand there and do nothing about it - they will print money to again try to make it all look like it is under control, to raise asset prices and to try to maintain the illusions they have been so dedicatedly building. And, even if central banks do not print trillions in the face of a huge deflationary shock - which is highly unlikely, to say the least - , what else would you want to own but hard assets such as Oil? Financial stocks? Apple? Facebook?

    4. Go Long Wheat, Soy, Rice and Corn

    As the world population just keeps growing and putting pressure on the demand for food, and with Wheat, Soy, Rice and Corn being extremely important ingredients of so much of the food that people eat (along with other uses they have, namely for Energy), these make strategic investments that can be a hedge against the food crisis, as much as an outstanding opportunity to make the most of your investable Dollars, Euros, Pounds or whatever fiat currency you have. Remember: the inflationary pressure has also its effects on food and helps to bring the prices of these commodities up, along with the increase in demand for these goods and the foreseeable food crisis that is nearer and nearer, and that the very UN is loudly speaking of. Moreover, with the abrupt climate changes which have been putting, and will certainly continue to put, even more pressure on the prices of these commodities, as was the case with the drought in the US and how it affected the corn crops, all indicators point to higher agricultural commodities prices. So, I would go long Wheat, Soy, Rice and Corn through the futures market ideally. I would nevertheless certainly see it as a good option to buy ETFs that keep track of these commodities, such as JJG, CORN and SOYB, for those who do not want to trade futures.

    5. Short German Bonds

    With the Debt to GDP ratio of Germany quickly getting to the worrying 90% level, and with the extreme exposure that Germany has to its insolvent Eurozone partners, such as Greece, Spain, Portugal and Italy, namely due to the consecutive and heavy bailouts - a very expensive bill that Germany has had, and still has, to pay - and to the exposure it has to the ECB's toxic balance sheet (again, toxic due to the PIIGS and to the way the ECB has been expanding its exposure to these countries' worthless debt), Germany is one the most perfect shorts that one can find out there. Its bond market is in a clear bubble, with absurdly low rates (Germany 10-Year currently at 1.35) which will, in my view, soon be corrected. Also, while the German economy is doing better than the other Eurozone economies, the truth is that it is not doing all that well. It is certainly not growing as much as it would need to in order to be able to foot the bailout bill, and also to face the current economic and financial risks that are hanging over the country due to its dangerous exposure. Also, when the markets start to realize that Germany is not after all in such a good shape and that its debt and financial obligations are already far from sustainable, the yields of the German Bunds will go a lot higher, and the weak German economic growth will not be proportional to how much it will have to pay to its creditors. Also, Germany's economy greatly relies on its exports - and the markets to which these exports are sent are shrinking into depression by the day. So, I believe that we will be seeing bad days for Germany soon, just as we are now seeing bad days for Spain which were unthinkable two or three years ago. Although I believe that it is as likely for Germany to leave the Euro as it is for Greece to drop its Eurozone membership, as a short-term trade I firmly believe it is one of the most tempting shorts, presently. I would short the BUNL, which is an ETF that keeps track of the German bond market.

    Final recommendation

    While you trade, please do not overlook your need to build your true fortress-portfolio out of the financial markets. Keep hoarding physical gold and silver, secure your own piece of fertile farmland with plenty of water and develop its agricultural potential, preserve some liquidity and diversify your exposure to different currencies and to different countries, economies and political factors, and do make sure you have a good Plan B for you and your family that you can use if things start to fall apart. Sadly, it is very likely that they will, with the world as it is today and headed where it is going.

    If you would like to discuss any details about these thoughts and recommendations or to get in touch with me to find out how you can better develop your trading strategy and build a true fortress-portfolio for the turbulent times that are heading our way, please write to tangiblewealth@hotmail.com.

    Miguel Mayor

    CEO Tangible Wealth Investments

    http://TangibleWealthInvestments.blogspot.com

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EUO, USL, USO, BUNL, WEAT, CORN, SOYB, UUP, UDN over the next 72 hours.

    Sep 03 10:32 AM | Link | Comment!
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