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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
My company:
THE SENSIBLE GUIDE TO FOREX
My blog:
THE SENSIBLE GUIDE TO FOREX
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The Sensible Guide To Forex: Safer, Smarter Ways To Survive & Prosper From The Start
  • IGNORE ALL RALLIES ON EU CRISIS “SOLUTIONS” UNTIL THESE 3 THINGS CHANGE 0 comments
    Jul 7, 2012 11:58 PM | about stocks: FXE, UUP, UDN, EWP, EWI, SPY, DIA

    We won't be fooled again

    Within the past month, we've seen 2 false rallies based on false optimism based on false EU solutions, once after the Spain bank rescue, once after the EU Summit "break-through" last Friday.

    There are more EU meetings scheduled this week, with more potential for upside "surprises" given the already low expectations.

    Enough. Please.

    Don't get fooled by another false rally based on optimism from another alleged EU crisis solution. The EU is in terminal decline unless the following conditions are fixed.

    Last week there was yet another market rally following the EU summit. It has now faded, just like the rally mere weeks before on false euphoria on the Spain bank deal. Last week I wrote that the rally was based on unjustified optimism in depth in PRIOR WEEK: 17 REASONS TO FADE THE EU SUMMIT EUPHORIA RALLY.

    Here's the very summarized version of what's holding back the EU that all investors need to burn into their brains to avoid being fooled by similar Euro-obfuscation.

    HERE ARE THE BASIC PROBLEMS - PIN THESE TO YOUR WALL.

    Unless something happens to change these, the EU crisis is only getting worse.

    1. Germany & other funding nations not going to risk their credit ratings and economies for EU.

    2. EU nations not ready to cede sovereignty needed to give funding nations assurance they'd be repaid and that the crisis won't reoccur.

    This fundamental conflict is the reason the summits and agreements can never reach the level of detail on funding nor on how to achieve comprehensive solution that markets insist on seeing, one that guarantees banking system and prevents markets from moving on to another nation for speculative attack and new default/contagion risk.

    This fundamental conflict between points 1 and 2 is what keeps EU agreements piecemeal, too little, too late, and doomed to failure.

    3. Even if they somehow overcome 1 and 2 really fast (unlikely), they don't have the years needed to organize US of Europe before get hit with sovereign default and contagion risk from Spain or Italy, even if the first default is Greece.

    That's it. All the rest is, in the words of Rabbi Hillel, just commentary.

    At minimum, the EU needs to stabilize the situation for a number of years, possible a decade or more, just to organize the US of Europe. We see no sign of that happening.

    That means our default positions remain the same:

    Short the EURUSD and most other risk assets as rallies based on optimism about the EU crisis lose momentum.

    SPECIAL ALERT- Coming Podcast and Transcript: The Basic What, Why, and How of Attaining Currency Diversification

    I'll be on a live podcast Tuesday July 17 on moneyradio510.com, 12 noon EST. The recording will be available from July 18-24 on the homepage via the archives link, and after that on thesensibleguidetoforex.com, along with a transcript for those preferring to read it.

    Just as prudent investors needs to diversify by sector and asset class, so too they must now make sure they avoid the common mistake of having almost everything they own tied to just one or two currencies.

    With the central banks of the most widely held currencies in full easing mode, they risk debasing the currencies they're responsible for protecting. They may be helping their economies, but not those who are trying to build savings in these currencies - like those based in US dollars, Euros, British Pounds of Japanese Yen..

    One of the biggest lessons of recent years is the need to protect yourself against the risk of crashing markets and currencies dragging you down with them. The best help I can offer you is, THE SENSIBLE GUIDE TO FOREX, SAFER, SMARTER WAYS to SURVIVE and PROSPER from the Start. It's the first forex book ever published to show how both prudent active traders and long term investors with limited time and risk tolerance can tap forex markets to hedge currency risk and improve returns. See my profile page or the above link for details. For a complete description of the book visit: thesensibleguidetoforex.com and go to the About page. For advance reviews, see the Reviews tab.

    DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN'T BE TELLING YOU FOR FREE, NOW WOULD WE?

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

    Stocks: FXE, UUP, UDN, EWP, EWI, SPY, DIA
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