Money and Markets

 

Hope floats the markets ... but for how long?

By Mike Larson
Weiss Research

Hope isn’t a viable investment strategy. But it’s so thick on Wall Street right now, you could cut it with a knife!

I’m talking about ...

Hope that when they meet 10 days from now, European leaders will get things right on their 136th bailout attempt (or whatever the count is now) ...

Hope that the U.S. economy isn’t slipping back into recession, despite overwhelming evidence to the contrary, plus ...

Hope that 3rd quarter corporate earnings won’t be as bad as feared ... that the “Occupy Wall Street” crowd won’t upset the apple cart ... and that Congress’ “Super Committee” can somehow figure out how to cut the deficit without starting another budget war.

But in the real world where I live, I see new signs of imminent turmoil — especially from Europe:

Sign #1. Germany is suffering a frightening decline in its true credit rating.

Germany is the country that’s supposed to put up most of the money for any bailout of the PIIGS countries or any rescue of Europe’s giant banks. But now it’s having credit problems of its own, including ...

  • A dismal bond auction: At Germany’s most recent auction of its 30-year bonds, the country only attracted 1.78 euros for every 2 euros of bonds being sold — a dismal failure and a big red flag.
     
  • A doubling in default risk: The major ratings agencies still seem to think Germany merits a triple-A. But the rest of the world disagrees; the institutions buying and selling insurance against a possible German default say the risk of default has DOUBLED!

These two market factors make up a country’s TRUE credit rating. And they’re telling us that Germany has just been DOWNGRADED!

Sign #2. Investor contagion is beginning to strike Belgium.

Belgium’s capital city is, in effect, the capital of the entire European Union. Yet, the country itself is now emerging as the next major victim of the sovereign debt contagion: Its 10-year yields just hit the highest level since late summer.

Why? One big reason is that investors are worried sick that Belgium will now bust its already fragile budget to pay for bank bailouts. Already, Belgium has admitted it will have to raise an extra 4 billion euros of debt this year just to pay for its share of ONE bank bailout, Dexia.

Sign #3. A new, even larger debt crisis is cropping up in Italy.

Italian government bonds have just plunged anew, driving yields to their highest level since late September.

The main trigger: Italy is supposed to push through a major austerity program to satisfy its European Union paymasters and calm the bond vigilantes. But a budget vote in the country’s lower house of Parliament just failed!

This now puts Prime Minister Silvio Berlusconi’s administration in jeopardy. It makes investors wonder if they’ll EVER see the necessary budget cuts enacted. And it raises the spectre of a far larger sovereign debt crisis that could envelop Europe in the days ahead.

Sign #4. Major credit rating agencies are finally responding, announcing a cascade of downgrades.

Moody’s and Fitch have just downgraded Spain and Italy, while putting Belgium on the chopping block.

Plus, they’ve announced a raft of downgrades of banks in the U.S., the U.K. and Portugal, with many more to come.

What’s Europe’s “new” solution?

We won’t find out the details until October 23, when Europe’s leaders are supposed to huddle again to come up with a new plan.

Their “new” idea? Run still ANOTHER round of “stress tests” on the European banks, and then just shovel taxpayer money into the ones who fail the test.

But who are they kidding? These are the same folks who ran tests on banks like Dexia and declared they passed in flying colors — all just three months before the bank went under.

The bigger problem: Injecting money into banks only works when the governments actually have the money and borrowing capacity to pay for it!

But right now, that’s obviously not the case. As I just explained, Europe’s bond markets are already falling ... the cost of insuring against sovereign debt defaults is already surging ... credit ratings are already being slashed ... and the holes in Europe’s megabanks are growing far larger than they dreamed possible.

All this leaves you with just two choices:

You can put your financial future in the hands of the same bureaucrats who have failed to preserve and protect it for the past decade or more, or ...

You can take matters into your own hands, follow the steps we recommend in our new video to protect your money, and even transform this explosive crisis into an explosive profit opportunity.

In our video, we tell you what’s likely to happen next and exactly what to do about it right now. We name the banks we deem most likely to fail. We give you a 6-step survival plan.

And we tell you all about the investments designed to help you profit directly from this crisis, regardless of whether the stock markets sinks now or later.

Just click here, and our video will start playing immediately.


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