(By Rich Bieglmeier) Although computer trading models have been in buy mode for the most part of the last seven of six trading sessions, increasingly, iStock is becoming more alarmed by the headlines coming out of Europe and some Federal Reserve members.
Market watchers couldn't help but notice that Spanish and Italian bond yields jumped despite the EU's $100 billion euro bailout for Spain's deeply troubled banking system - rising rates are a symptom of the spreading problem.
Just yesterday, Austria's finance minister, Maria Fekter said Italy may need to be bailed out as interest rates continue to rise, making it more difficult for Italy to repay its ballooning debt.
Of course, Italian Prime Minister, Mario Monti vehemently, angrily denied Maria's "inappropriate" assessment, but so did officials in Spain, Greece, Ireland, Portugal… denials are rivers of misdirection designed to drown the messengers in the Eurozone before official asking for money.
While Ms. Fekter was, ah hem, politely corrected, no such commendation was spewed upon three US Federal Reserve policymakers, George Soros or the head of the International Monetary Fund (IMF), Christine Lagarde for openly worrying about the Union's fate.
On Monday, Atlanta Federal Reserve Bank President, Dennis Lockhart, San Francisco Federal Reserve President, John Williams, and Chicago Federal Reserve Bank President, Charles Evans, all said Europe's spiraling debt crisis is a major threat to the US economy and warned "much is yet to be done to avoid global spillovers."
A "spillover" might be the best investors can hope for according to George Soros. The billionaire, hedge fund manager says there is a "three-month window" to save the euro. tick, tock, tick, tock…
Soros says by the fall, the German public will tire of bailing out the Greeks, especially as the German economy continues to slow. (I was in Germany recently, the Germans I spoke to are long past tired of the Greek panhandlers).
When asked about Mr. Soros' dire opinion, IMF chief, Lagarde upped the time frame by telling CNN's Christiane Amanpour, there is "less than three months to save the euro." tick, tock, tick, tock…
Less than two months to self-destruction seems to be a popular timeframe. Credit Suisse's William Porter believes within the next 60 days, France might be added to the bomb squad.
In his latest issue of the European Credit Flash titled "The Real Issue" he wrote, "Given the market's adaptive learning behavior, we suspect that this finesse (Spain bank bailout) might last two [months]. The eventual denouement should be flagged by symptoms of the failure of the credit of EFSF/ESM and/or France."
All the Euro mayhem has the World Bank declaring "Developing countries should brace for a long period of financial market volatility and weaker growth as tensions rise over a worsening euro zone debt crisis."
It's our view that a cluster of similar stories packed tight into a small window has an intended purpose. iStock thinks we might know what it is. The dominoes are swaying and ready to tilt over. When they start to fall, like Tony Montana said in Scarface, there has to be the bad guy.
Angela Dorothea Merkel, are you listening?
There is little doubt in iStock's mind that so many influential players, making so many public proclamations while citing Germany as the savior if they would only give up on that austerity stuff, are standing Ms. Merkel up to be the fall guy, or is it gal?
Perhaps Angela can see if the Allstate Mayhem guy has any openings on his calendar.
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