Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 26th Apr 18
A New Lithium War Is About To Begin, Modern Gold Rush! - 26th Apr 18
Silver, silver, and silver! There’s More Than Silver, People! - 26th Apr 18
How to be Financially Prepared When Purchasing Your First Home - 26th Apr 18
Is a Stock Market Crash Imminent or Does this Stock Market Bull Still Have Legs - 25th Apr 18
Gold Price Focusing on May Cycle Bottom - 25th Apr 18
Cash “Vanishes” From Bank Accounts In Ireland - 25th Apr 18
Is the Malaysian Economy a Potemkin Village - 25th Apr 18
Land Rover Discovery Sport Rattling / Knocking Sounds From Car Pillars - 25th Apr 18
China Takes the Long View on Gold-Silver... and So Should You - 25th Apr 18
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Stock Market and the Ongoing Death of the Euro

Stock-Markets / Financial Markets 2013 Apr 02, 2013 - 01:13 PM GMT

By: Christopher_Quigley

Stock-Markets

1929 in slow motion
It is hard I am sure for Americans to fully comprehend the disaster that played out in the recent Cypriot Euro debacle.

To get a feel for the panic that was swirling about in Europe the week before last I include a quote from the Irish Independent of 22nd March 2013:


Irish property speculators fear for cash in Cypriot account.
“A group of up to 30 Irish property speculators have been left sweating on their investments due to the Cypriot bailout crisis.

The group, mainly Irish nationals living in the Middle East, all invested in a fund to take advantage of the collapse in property prices back home in Ireland.

Under the scheme, each invested €20,000 or more with a property consultancy, which has been seeking to snap up cut-price Irish properties whose value is likely to increase in the coming years.

A further 20 British nationals are also thought to be involved in the scheme.

Investor funds were placed in a Cypriot client account.

However, the account cannot currently be accessed after banks on the Mediterranean island closed their doors last weekend.

And hundreds of thousands of euros could be wiped off the value of the fund should the Cypriot government cave in to pressure from the EU and IMF for a levy on bank deposits as part of a bailout deal.

Richard Jones (37), a project finance consultant from Ballyhaunis, Co Mayo, who is involved in the scheme, flew in to Cyprus earlier this week in an attempt to withdraw the cash before any proposed levy on the account.

"I came over yesterday because the banks were due to reopen, but they didn't," he told the Irish Independent.

"I found it hard to get into a hotel room here. Everything has been booked up by the Russians coming in to withdraw their cash. That just confirmed my decision to come out as there will be an almighty run on the banks once they reopen."

He said the clients' funds were held in a Cyprus bank because the country "has been seen as a gateway for investment from the Middle East into Europe".

"Most of my investors are very small -- around €20,000. But it is a lot of money to them. They are mostly Irish and British expats living in the Middle East and they see value to be had in Irish property now," he said.

Mr. Jones said he believed the current crisis signals the "beginning of the end for the euro".

He added: "I think what the EU has signaled is that bank deposits are no longer safe. At a single stroke they have reduced the European banking system to third-world status."

For businesses and individuals with substantial funds in the banks in Cyprus this crisis has caused ruination. As a result of the deal brokered with the IMF/ECB/European Commission “Troika” large account balances will be cut by 40% - 80% depending on the bank. What’s more the balance of funds remaining after this “cut” will be frozen until the situation has been fully stabilized. Many believe that it could be months, maybe years, before these client funds are returned to their rightful owners.

What a disaster the “bailout” turned out to be for the 50 Irish and British businessmen mentioned above. In total they will lose approximately 400,000 Euros from their investment project overnight. Third-world “Euro” indeed.

Flight of capital:

Now that the dust has settled somewhat we are being told that the “markets” have reacted favorably to the final Cypriot bailout.

However, this crisis is far from over. The “Rubicon” of the sanctity of deposits has been crossed. 

In fact in my opinion it is just starting. No Eurogroup bank will ever be trusted again. Many believe that Italy and Spain have similar crises in the making and anxiety within Europe is again starting to rise. Can you imagine the “fear factor” welling within the citizens of Italy and Spain considering how ordinary Cypriots have been treated?

Rather than wait for protective capital controls to be introduced in Spain and Italy (given that there are 3 trillion Euros in private deposits in banks in these two countries) it is expected that “in-tune” entrepreneurs and “savvy” chief executives will start moving funds out of Eurogroup banks immediately. People no longer have any belief that their financial leaders will be able to deal successfully with a possible full blown Mediterranean banking melt-down. Confidence in the Eurogroup banking system has utterly vaporized such was the degree of mismanagement and incompetence displayed by the ECB board and the IMF on the 18th March last.

Given this collapse of confidence, funds have now started to flee the Eurozone. Case in point, I have just come across a story in a Dublin newspaper today. This piece announces that the head of one of the largest Irish industrial conglomerates, Cement Roadstone Holdings (CRH), has instructed his financial chiefs to move all free bank balances out of the Euro ever Friday and move it back for business every Monday. How it that for a vote of confidence in the Euro zone?

It is my guess that as more and more corporations adopt similar deposit protection measures the “possible” introduction of capital controls throughout all of Euroland will become a self-fulfilling certainty. With capital controls in place Brussels will be free to “tax” (expropriate) all captured deposits, at will, to fund any future banking “recapitalizations”. When the European financial controllers of Google, Apple, Microsoft, McDonalds, Facebook, Microsoft, IBM, Oracle et al wake up and realize that 40% - 80% of their corporate banking deposits could be  “frozen” in any future Italian or Spanish banking crisis the writing surely will be on the wall for the Euro project. Thus in anticipation of the trap shutting I anticipate the current mild flow of funds out of Euroland to soon become a flood. However, do not expect this matter to be fully reported in mainstream media. Already it has been noted that The ECB has not published its full balance sheet data for the month end as normal.

The free movement of capital is a bulwark “right” of the European Union. Introducing capital controls to “save” the Euro is the total antithesis of this Euro free trade right. I believe capital controls cannot remain in place indefinitely in our world of “one-click banking”.  Thus at some stage in the near future it is my guess that a decision will have to be made whether to save the European Union or save the Euro. I think at this point the outcome is obvious. It is just a matter of time and a few more mishandled “crises”.

The US market continues to consolidate:

Despite the banking crisis in Europe the American market continues to show great resilience.

From a fundamental point of view this strength is surprising but is understandable from a technical perspective.

With the onset of the April earnings season, given the remarkable market run-up since the New Year, I would expect some choppy price action over the next three weeks.

This activity should provide excellent buying opportunities to focused traders.

Dow Transports: Daily


Dow Industrials: Daily


Many clients have asked me whether this is a good time to invest in gold or silver. Technically I do not like the look of these commodities and intend to steer well clear of them.

GLD: Gold ETF: Daily

SLV: Silver ETF: Daily

Charts: Courtesy of StockCharts.Com

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2013 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules