Consider US investors with positions in European stocks or funds that hold banks.

Foreign Exchange - Currency Outlook


The US Dollar has plenty of its own bad news - Detroit, the insufficiency of the stimulus and upcoming mortgage plans, and Congressional nastiness - but "it’s worse elswhere." We have been preaching about the impending financial sector crisis in Europe from the beginning, albeit without much hard data. There is just no way that Citibank, BoA and the other powerhouses of finance could have gotten themselves in so much hot water while their European counterparts escaped. Giant hidden losses at European banks were always the only logical deduction. At the moment, Eastern Europe is the subprime of European banking, but at a guess, there are other sinkholes, too. And the ECB is keeping it all under wraps.

At 8 am today, we got the Wal-Mart earnings report, and it was better than expected. The stock market will like that. Later this morning we get the Treasury report on long-term capital flows, likely to get ignored unless there is a shock. Tomorrow we hear Bernanke’s testimony to Congress, although nobody is paying much attention to the Fed these days - althoigh they should, since the Fed is becoming the most powerful player on the planet. On Thursday we get Jan PPI and on Friday, CPI (and stock option expirations).

One of Rocky’s Rules is that institutional news trumps economic news and trumps the technicals. Today the institutional news where there is uncertainty pertains to the ECB and natioanl European governments, esepcially Germany and Austria. We are pretty sure we undestand what is going on in the US, and while there is rancor and an unbridgeable ideological rift, at least we know what the Obama Administration wants to do and how it wants to do it. So far the makret is signalling that it is willing to keep an open mind about Detroit, the final Geithner financial sector plan, and California’s looming bankruptcy, the Big Three of the day. these are undeniably huge issues and normally would be US dollar-negatives, but (not to beat a dead horse), it’s worse eleswhere.



Although the UK has said it won’t nationalize the banks, nationalization looks like a very real possibility in Europe, which means an end to the Stability Pact and potentially the Maastricht Trety, too. Germany or Austria can’t nationalize banks without a lot of consultation with the other European nations and the EC. This may not happen, of course, but Moody’s has stirred up a hornet’s next with its report overnight, and that will continue to dominate the news for a long time to come. The implications are vast.



Consider US investors with positions in European stocks or funds that hold banks.



We don’t need corporate welfare in the form of a tax break for repatriation of overseas earnings - let Europe nationalize banks and US investors will run for the hills of home. This may be an overreaction because "nationalization" is such a dirty word - dirtier as a word than as reality, probably - but scaring folks out of the euro all the same.



Pounds to US Dollars = 1.4400
Pounds to Euros = 1.1174
Euro to Pounds = 0.8947


Bye For Now



Barbara Rockefeller

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