It is all an illusion; don’t look away for a second

It’s like a magician’s illusion; the audience’s focus is drawn one direction while the magician disappears in the opposite direction. While the investors were watching the continued debt saga of the eurozone and in one giant misdirection the headlines of the papers glared about the huge increase in US retails sales on Black Friday a day to remember shattering all records with retails sales increases over 6%. Consumers were spending, retailers were turning profit and on this quiet peaceful Thanksgiving Holiday little was anyone focused on the week’s woes and problems.

Thanksgiving week is traditionally a very quiet week for investors, many taking  vacations and the markets are closed on Thursday and only have a partial day on Friday. Global markets are also quiet in response to US markets being dark.  Contrary to tradition, this year, many traders and investors were desks or in front of their computers trying to decipher and analyze the data and reports of the previous week. The last minute employment figures out of the US were promising but the increase in bond yields for Italy, Spain and Greece continued to send negative signals. In response to the failed bank agreement between Belgium and France, came an unexpected downgrade on Belgium debt from Standard and Poor’s. Belgium is a very small economy one that goes unnoticed, but also one that was never calculated in the European debt equation.

This was the tipping point, after the failed German bund sale last week and the increase on German long term bunds to 2%, all the markets were worried. The final straw seemed to be the downgrade of Belgium. Investors fled European markets as fast as they could. For a while, it was thought that Europe would be leaders in the economic turnaround. With Germany and France leading the world back from the economic abyss. But no longer, quiet whispers have been heard about France’s economy and debt and reduced GDP. . European banks are afraid to lend money to each other. The Libor spread, reflecting the gap between rates the banks charge each other and market expectations, rose to 0.41%, its highest level in two years. Combine this with nearly a 5% drop in the Dow Jones and the euro in free fall investors have spent the weekend fleeing Europe. Pulling out all the stops. No one has any doubts that the crisis in the eurozone will be the pace setter for worldwide slowdown. Investments are being funneled into a handful of assets thought right now to be a bit safer, like bonds from the United States and countries without debt, and traditional safe-haven currencies like the dollar and there is always the safety of Gold.

What do the markets have in store for us when they open Monday?

2 thoughts on “It is all an illusion; don’t look away for a second”

  1. I suggested many months ago that Canada should, as the only player who seems or at least is creating the illusion of being the only country that is responsible and knowledgeable about the workings of a calculator start moving interest rates up one quarter every quarter until the markets stabilize. The supply and demand of everything would fall into a ‘slot’ if you will. We in the west say “In God We Trust” and the USA even writes it on their currency. Somebody has to be the first to say, “Enough Lies”. We in Canada have had so much for so long and do not share nearly as much as we could. We could do this.
    (feel free to publish my email. I do not tweet and nobody wants to see my face in a book or anywhere.)

    1. Hey Brian..Thanks for commenting. The world should be more aware of Canada. They know how to manage the economy, as well as their politicians. The economic data isn’t skewed. And they know how to reduce debt.

      Perhaps the US and Europe could learn by watching our northern brothers.

      Read my others posts today.
      and keep in touch

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