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PIIGS Back on the Upward March

It seems amusing that a contagion that has been known since the end of 2009 has just recently been embraced by the markets.  Nothing in this story is new, yet equities act as if the end of the world has just been revealed.  Long ago, I said that we can “Expect the Unexpected” and bouts of higher volatility will continue to persist for many months and even years to come.  Private debt has been swallowed by public obligations and now we get to experience the many jitters associated with sovereign defaults…

If someone were to ask me where the next “crisis” will emerge, I would say that it would most likely be the municipal debt overload in the United States.  Spreads on the new and beloved Build America Bonds (BABS) are in the low 100’s, but I expect that we will see a spike in that credit risk by the end of the year.  What do you think the outcome will be?  Do you think states and municipalities will actually cut costs associated with pension obligations and public “servant” salaries?  The salaries and benefits of those doing the public good?  The salaries of those who make up a large voting population for those seeking re-election?

One thing that I will make a bet on is that the dollar will not hold its lofty ground.  Once the European crisis is settled, I expect that the dollar will lose favor rapidly.

The dollar is within spitting distance of financial crisis highs

Look for those countries with low debt ratios and sound fiscal policy.  You can spot them easily by looking at current credit spreads on the sovereign nations.

The Australian Dollar and the Norwegian Krone Still look enticing to me

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  1. Vibram Sprint Mens says

    Thanks for sharing your ideas on this blog. Likewise, a misconception regarding the financial institutions intentions when talking about foreclosures is that the financial institution will not getreceive my repayments. There is a certain quantity of time the bank requires payments every now and then. If you are also deep inside hole, they’re going to commonly call that you pay the actual payment in full. However, i am not saying that they will not take any sort of payments at all. In the event you and the loan company can have the ability to work one thing out, your foreclosure procedure may stop. However, in the event you continue to skip payments underneath the new approach, the property foreclosure process can just pick up where it was left off.

Continuing the Discussion

  1. Wednesday links: Buffett bubble Abnormal Returns linked to this post on May 5, 2010

    […] A handy look at sovereign CDS rates.  (Bespoke also Risk, SurlyTrader) […]

  2. Wednesday links: Buffett bubble | Discount Online Brokerage linked to this post on May 7, 2010

    […] A handy look at sovereign CDS rates.  (Bespoke also Risk, SurlyTrader) […]

  3. The Bursting of the “Bond Bubble” | SurlyTrader linked to this post on April 22, 2014

    […] last point, I think it is worth looking at some fear that we have talked about with regards to the Eurozone countries in 2010-2012 (the P.I.I.G.S).  Spain was definitely in the spotlight of potential default with a banking crisis as the tipping […]

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