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Paulo Santos
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I am a Portuguese independent trader, analyst and algorithmic trading expert, having worked for both sell side (brokerage) and buy side (fund management) institutions. I've been trading professionally for about 16 years and also launched in 2004. Thinkfn (Think Finance) carries... More
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  • Portugal Might See Its Government Quit Over The Weekend 19 comments
    Apr 5, 2013 2:42 PM | about stocks: FXE

    This might constitute some kind of insight for those not in Portugal. In a few hours, Portugal's Constitutional Court will announce its decision regarding Portugal's 2013 Budget. In this decision, it's likely that the Court will find several measures as being against the Constitution.

    This decision by Portugal's Constitutional Court might lead Portugal's Government to call it quits. The Court's decision will mean that the Government would have to drop several measures affecting the country's best-paid pensioners. This in turn would mean that other cost-cutting measures or tax increases would have to be found.

    This development has had little media exposure outside Portugal. Tomorrow, the Government will convene after the decision is known today. So it's possible that the government could fall during the weekend, possibly prompting elections.

    This, in turn, could have a negative impact on the Euro (FXE) and maybe on the equity markets as well. I must say, however, that I'm broadly positive on the Euro, and regarding the equity markets after a session like today's -- which opened with a gap down - the odds are 2/3rds favorable for a gap up on Monday.


    In a little-known development for those outside Portugal, Portugal's Constitutional Court will announce its decision regarding the constitutionality of Portugal's 2013 Budget in a few hours' time. This might lead to Portugal's Government calling it quits over the weekend.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: forex Stocks: FXE
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Comments (19)
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  • Author’s reply » The decision will be out in about 20 minutes. And this is not very speculative at all - the odds are strong that the decision will be negative.
    5 Apr 2013, 02:45 PM Reply Like
  • And the saga of financial smoke and mirrors continues...
    5 Apr 2013, 02:51 PM Reply Like
  • interesting Paulo make sure to update us!
    5 Apr 2013, 03:02 PM Reply Like
  • Author’s reply » It's late, like everything else here ... eheh
    5 Apr 2013, 03:33 PM Reply Like
  • Many mondays have been negative this year. Not sure for the gap up.


    Monday is down on average YTD by something like 0.3%/monday from some article I read.
    5 Apr 2013, 03:27 PM Reply Like
  • Author’s reply » The day could end up being negative (especially if the Government falls), but without any news the gap up (open above today's close) has around 66% probability.
    5 Apr 2013, 03:34 PM Reply Like
  • Author’s reply » The decision is out and is negative as I had said. Now the question is whether the government calls it quits tomorrow.
    5 Apr 2013, 04:01 PM Reply Like
  • "The court’s ruling late Friday is binding on the government and will create an estimated €860 million hole in the €5.3 billion budget, according to BNP Paribas calculations. Economists said the gap appeared to be manageable."


    Is it manageable?
    5 Apr 2013, 05:09 PM Reply Like
  • I was wondering about that too. 16% of a budget seems pretty severe.
    5 Apr 2013, 05:19 PM Reply Like
  • Author’s reply » The problem is larger, around 1.25 billion EUR.
    5 Apr 2013, 06:43 PM Reply Like
  • Hi Paulo, would you elaborate why you are positive on the Euro?
    5 Apr 2013, 05:17 PM Reply Like
  • Author’s reply » Basically because it's the last (large) currency on Earth:


    Turning Long-Term Bullish On The Euro
    5 Apr 2013, 06:44 PM Reply Like
  • I am not sure about that. The euro will be trading at 1.20 this year for sure.
    6 Apr 2013, 05:56 PM Reply Like
  • I wish the US government would quit over the weekend.
    5 Apr 2013, 11:43 PM Reply Like
  • Paulo, your writing in english is so good and your depth of knowledge on the US and US stocks so complete I often forget you are not a citizen of the United States.


    However it ends up, I hope the impact to you is not negative. Thanks.


    6 Apr 2013, 10:31 AM Reply Like
  • Nice info there Paulo. Thanks for the heads up.
    6 Apr 2013, 05:55 PM Reply Like
  • Author’s reply » The Gov didn't quit, though the Constitutional Court did remove several austerity measures. The Gov will have to substitute those for others.
    7 Apr 2013, 06:48 PM Reply Like
  • And the Euro goes higher ! Of course, right ?




    Will be interesting to see what happens next w Portugal.
    8 Apr 2013, 07:08 AM Reply Like
  • Author’s reply » The EUR initially went down a bit on Friday near the close, and then again at the open on Sunday. But the Gov didn't quit so impact was very muted. My own worry came from having automated systems trading the EUR long and having quite a bit of profit on Friday which could go away on Sunday (my systems have dynamic stop losses which could be taken out even by a temporary correction).


    Anyway, overall I am still long-term positive on the EUR as I said.
    8 Apr 2013, 07:57 AM Reply Like
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