With no real good news on the domestic economic horizon –bad home sales numbers, paltry job growth, mounting debt levels – the best thing we have going on for us here in the US of A is...we’re not Europe!
How bad is the European situation? According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans... the real leverage levels are much, much higher.) Yes, these are at Lehman Brothers like leverage levels and we all know how that ended.
Plus, the European Central Bank's balance sheet is now nearly $4 trillion in size (larger than Germany's economy and roughly 1/3 the size of the ENTIRE EU's GDP). Oh yes, a good chunk of the ECB’s balance sheet is PIIGS (Portugal, Ireland, Italy, Greece and Spain) debt.
So we're talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.
Unfortunately Ben Bernanke is committed to a global centrally planned economy and the US is inexorably tied to the ECB through Credit Default Swaps. So if they go under, we are on the hook.
Trade well and follow the trend, not the so-called “experts.”
President & Founder - TradingAdvanage