Richard Bailey's  Instablog

June 3, 2012 - Damn. I spent the last few days working on a piece about how the endgame for the Euro is fast approaching and then first thing this morning I read that billionaire currency investor George Soros offered a similar analysis yesterday. I don't often agree with Mr Soros but I do here. What he is essentially saying is as the crises progresses the future of the Euro is less and less in the hands of policy makers and more and more in the hands of the markets. There is not much time left and policy makers ability to solve the problems dim as each day passes. That makes this a very, very dangerous period. European fiscal and monetary policy makers are now confronting the fact that an artificial construct like a monetary union is no match for the brutal reality of cultural proclivities and market forces. So now that the credit markets - or the lack of them - are threatening to crumble the foundation of the Euro before our eyes, the worlds political and economic leaders are coming to grips with the realization that past policy initiatives have bought them time and brought them here. That is all. Since time is rapidly dwindling political leaders are now staring at the abyss before them in anger and incredulity as they realize that natural market forces are making them play the only card they have left in their hand. True European Union. But in a bout of circular logic - or cruel irony - there is a collective realization that problems in the EuroZone can not be fixed absent the surrender of national sovereignty by member nations to the artificial construct that brought them here in the first place - The European Union. Which begs the next question. Can it be done? There is scant evidence in history of nations with unique - even tribal - cultures and national identities voluntarily surrendering their right to self determination. This wouldn't't be a treaty or alliance. Treaties and alliances are meant to be broken and ignored by sovereigns when it is in their best interest. This would have to be a United States of Europe. But that is what is required to avoid the Thelma and Louise moment in front of them. A drive off that cliff will kill them for the next few years and perhaps mortally wound the rest of the worlds economy at the same time. As I have been saying for months - you cannot have monetary union without political union. You just can't. RDBwww.politinomics.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

May was a horrific month for the markets. But The Phantom Fund was in the black. Here are the summary results;

May 2012

DJIA - down 6.21%

S&P 500 - down 6.23%

NASDAQ- down 7.13%

Phantom Fund - UP 0.37% net of fees.

Learn more at politinomics.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

If anyone is interested… we have and continue to construct a model portfolio the foundations of which are trends we believe will affect the markets and each of us individually for the next 10 years. These trends are:

1. The US will eventually get its fiscal house in order, and

2. The Chinese economy will mature and transform, and

3. The Euro breaks apart.

For the month of May (as of Friday May 25, 2012) this model portfolio is positive - net of commissions - while the broader markets are down 5%-6% or more.

Please visit us to learn more at:

www.politinomics.com

Thank you.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.