Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Euro Tarp Bailout, Here We Go Again

Stock-Markets / European Stock Markets May 14, 2010 - 02:52 AM GMT

By: Richard_Shaw

Stock-Markets

Best Financial Markets Analysis ArticleThe nearly $1 Trillion bailout by Europe of Greece and whichever countries come next, is like an echo of the US TARP rescue of banks in 2008. It is similar in size, similar in its intention to save the banks from their own bad decisions, similar in making taxpayers eventually pay for the mistakes of the banks, and perhaps similar in other outcomes. One outcome that should be noted is that the US and world stock markets continued to fall for several months after TARP. That pattern may repeat. We need to be prepared for that possibility.


"Euro-TARP" is no more than an agreement to do something, but little has actually yet been done. The terms and conditions of actually doing something are not fully known to most investors. The terms may involve fiscal actions by the Greek and other governments that those governments may or may not implement. The populations, particularly union populations, and perhaps far left political groups, may become disruptive of the economy over their dislike of those fiscal actions that are implemented (certainly burning banks, causing death of innocent bank workers last week proves that sort of thing is possible).

So let's not declare an "all clear" just quite yet. That "all clear" will come eventually, but is is hard to believe that a last minute weekend announcement is the end of the crisis. It needs time to mature as a situation.

Let's also not discount the possibility that Monday's strong market rally was substantially a continuing short covering rally after the gift to short sellers provided by the markets on Thursday.

Here is what Mohamed El-Erian, the chief executive of Pimco said Sunday night:

"... policymakers have shifted to a “whatever it takes” approach to crisis management. ... [questions about the bailout] its immediate impact, its durability, and the potential range of unintended consequences. Many questions will need to be answered. They range from the operational (how will all these interventions be approved, financed and executed), to the conceptual (what does this mean for institutional integrity), to effectiveness (will the liquidity injection be used to support fiscal consolidation or end up deferring it). ... We are now in uncharted waters when it comes to how all this will impact the secular workings and make-up of the euro zone."

This is what David Rosenburg of Gluskin Sheff had to say today:

"In my opinion, Greece is the same canary in the coal mine that Thailand was for emerging Asia in 1997, which ultimately led to the Russian debt default and demise of LTCM; the same canary in the coal mine that New Century Financial in early 2007 proved to be in terms of being a leading indicator for the likes of Bear Stearns and Lehman. So, the most dangerous thing to do now is to view Greece as a one-off crisis that will be contained. Even with this new and aggressive EU-IMF financing arrangement that has managed to trigger a wild short covering rally yesterday, the risks are still high that the contagion spreads to countries like Portugal, Spain, Italy and even the U.K., which has already received some warnings from the major rating agencies and is gripped with political gridlock in the aftermath of last week’s uncertain election results."

Here are charts of the Greek stock market for 3 years and 3 months --- bad:

Here are charts of the European stock markets for 3 years and 3 months -- rolling over:

Our Tactical Decision:

European exposure is part of our long-term asset allocation plan. However, we'd say stay away for now. We've been out for months. VGK and Europe stocks funds similar to it began to roll over last October.

The price is below the 200-day average. The 100-day average is about to make a negative cross of the 200-day average. The simple visual pattern of the price chart is down hard for about a month, and despite the rally yesterday, prices now (mid-day May 11) are essentially flat with the day before the big dive last week -- and back then the chart was unfavorable.

Because our philosophy is to own fundamentally attractive securities that are also in an upward trend, we probably wouldn't own Europe for a good while. Given its behavior since October, we'll wait for 53 as one sign that VGK has surmounted its major obstacles.

Of course, if VGK goes low enough, we will have a new entry price that is below 53, but right now its too close in both time and price to a many months long period of sideways to down movement with a fairly visible ceiling in the general 49-51 range.

On the fundamental side, we want to see how Euro-TARP plays out, before we risk precious assets on this sick puppy.

Holdings Disclosure: As of May 11, 2010, we do not have current positions in any securities discussed in this document in any managed account.

By Richard Shaw  http://www.qvmgroup.com

Richard Shaw leads the QVM team as President of QVM Group. Richard has extensive investment industry experience including serving on the board of directors of two large investment management companies, including Aberdeen Asset Management (listed London Stock Exchange) and as a charter investor and director of Lending Tree ( download short professional profile ). He provides portfolio design and management services to individual and corporate clients. He also edits the QVM investment blog. His writings are generally republished by SeekingAlpha and Reuters and are linked to sites such as Kiplinger and Yahoo Finance and other sites. He is a 1970 graduate of Dartmouth College.

Copyright 2006-2010 by QVM Group LLC All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Richard Shaw Archive

© 2005-2019 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