Right on cue after my post on the US bond auction yesterday comes the news that the German government could not sell their entire allotment of bonds during the auction. In fact 39% of the issuance had to be retained. You can gloss that over but there is no other way to put this news but frightening. German bunds, as they call them, are considered almost as safe as US bonds in the world and not having enough buyers means something is really really wrong. My first take is that investors believe Germany is on the hook for all the accumulating debt in Europe and if so Germany does not have the capital to cover the losses. I do not know what the German government plans to do with the next issuance but if this happens again it is time to look for a place to duck and cover.
Again as I noted yesterday keep an eye on the US 10 year bond, if it begins to trade below 1.90% that signals serious problems ahead in the US and worldwide. The reason being that a rate below that signals a wholesale exodus of cash from Europe into US coffers which is evidence of a possible run on banks in Europe. The fear is that run could expand worldwide. You might feel comfortable in your own assets, but trust me a run in Europe will make the economy plummet here in the US. We are living in troubled times.
The dropoff in commodities such as agricultural products, oil, gold, and others is directly linked to the MF Global situation. Lots of liquidation there as traders are forced to unravel positions. If you are into trading of commodities this would be a good time to do some buying as this downdraft will not last long and you will be rewarded for buying now. Of course JPM just came out with a sell on commodities so I might be wrong, who knows in this market.
I continue to watch the nice movement up of my last week selection of ASPS, now almost $10 up since recommendation to just under $46. This stock still has room to run, but I am holding off since I would prefer to buy cheaper and do not chase stocks. The movement in ASPS is likely a negative market indicator in the fact the market believes things are getting worse and more homes are headed for foreclosure.
In all today's market action could be ugly. If news continues as it is now we could see a significant selloff by end of day as investors and traders just get out of stocks, bonds, and pretty much everything to de risk before the holiday weekend. We very much could be seeing the final act in the implosion of European economies. Even IMF and Obama do not have enough money do keep this socialist experiment from going broke. If you think you are worried consider how the White House is viewing these events and election time. The next country to watch is the UK, which is only two steps from the US imploding.
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