Thursday, December 29, 2011
thoughts on the euro
if you break down the situation in europe it seems like there are only 3 possible resolutions going forward..1)the euro problems prove insurmountable and come to a calamitous end in 2012...2)the problems in europe begin to get better on the back of massive stimulus, accommodation and money printing by the ecb...3)the problems in europe begin to dissipate without the need for any drastic monetary intervention..the first two of those options seems much more likely than the third and in either case the euro trades lower..so i think we are supposed to stay short the euro and add to shorts if futures(ech2) trade up to 1.2995...the obvious question is can the u.s. stock market rally if the euro is tanking? i think the answer is probably yes but i will also be short the euro and long options vol to hedge equity longs...
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Great read Jim...
ReplyDeleteThe EUR/USD has busted the 1.29172 and is now on its way to 1.28578 which it tested this morning @7:05am - it's last area of support before the 1.2479 area
I would like to see it bounce to that 1.2995 then i will g go short once again..Rinse and repeat !!!
More important to me is what will the Euro trade at. Scenario 1 has lots of subplots, not all of which necessarily mean the end of the Euro. Scenario 2 mean massive inflation, but will it be more than the expected inflated dollar (BTW, this is my most likely outcome). Scenario 3 takes magic and Houdini is dead.
ReplyDeletethe subplots might not mean the end of the euro but should mean some nasty euro weakness right??? oh and i dig the "rinse and repeat"
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