Saturday, March 24, 2012

Weekend Trading Thoughts on Mar 24

It has been a while since I discussed European affairs here. After all, LTRO gave PIIGS much needed reprieve. But Mr. Monti (Italian Technocrat-in-charge) put the focus back on Eurozone peripheral debt sinners over the weekend. I wonder why? His comments about Spain are flying all over the wires:
"Spain certainly made profound reform of the labour market but it did not pay the same attention to public finances. This is causing us big concern because their yields are rising and it wouldn't take much to recreate trends that could spread to us through contagion, and take us back months."
We share your concern, sir. Yields have risen indeed. Granted, they are well below the pre-LTRO levels, but further rise could damage the "fake stability" really quick.

Spanish 10-Yr Bond Yield

Italian 10-Yr Bond Yield

As SPX has taken out last year's high, we are led to believe that individual investors are finally getting on board of the runaway train. Furthermore, we are led to believe that they are gobbling up "decoupled" U.S. equities, since those are the safest bet among all asset classes, as the treasuries are now in the beginning of the bear market, and foreign equities are going to suffer from global economic slowdown.
And did you also know that pigs can fly?!! Look at the funds flows, provided by ICI on March 21, 2012. Does this look like individual investors are buying U.S. equities?

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