Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Monday, the 18th of March.
Et Tu, Cyprus?
"Et tu, Cyprus?", meaning "Even you, Cyprus?" (or 'You too, Cyprus?') is Latin, often used poetically as "Et tu, Brute?" to represent the last words of Roman dictator Julius Caesar to his friend Marcus Brutus at the moment of his assassination.
Once again, the problems in Europe resurface not with Greece this time, but with Cyprus, the largest inhabited island in the Mediterranean. Is Cyprus the tip of the iceberg? Cyprus is a very small part of the EU economy, representing only about .5% of total EU output. What is really going on here is not so much what percentage Cyprus represents, but rather the seizure of bank funds and breaking the law to get them. According to law, every bank account in Cyprus is guaranteed or insured for €100,000. Here is the risk as I see it in the Euro equation, it is "PERCEPTION". Europeans must be saying to themselves, if they can do this in Cyprus, why not Greece, why not Spain and why not Italy!! Perception in the marketplace is incredibly important, and if the perception in Europe turns an already shaky alliance negative, things could get very ugly, very quickly.
Last week I wrote an article on "perception", which I recommend that you take a few minutes to read. Perception really is the underlying power that moves the market. If the negative perception of Cyprus is not contained, countries like Greece, Spain and Italy will see unprecedented runs on their banks. In addition to bank runs, we suspect there will be chaos in the streets that no one will be able to stop. Negative events in Europe will not make the US immune to feeling the pain.
Gold on the Move? Or a Knee Jerk Reaction to Today's Headlines?
Gold moved over the psychological $1600 an ounce level this morning on continued concerns about the problems in the banking system in Europe and particularly what's going on in Cyprus. There is probably a good chance that we are putting in a significant bottom in the gold market, yet it is way too early to make that call. For the past year or so, gold has been moving sideways trading between $1,550 on the low side and $1,800 on the upside. We would like to see more confirmation before becoming super bullish on the yellow metal.
Three Stocks on the Move Today Based on Our Trade Triangle Technology:
ROYAL CARIBBEAN CRUISES (RCL)
3D SYSTEMS (DDD)
iShares FTSE CHINA 25 INDEX FU (FXI)
IT'S GETTING CLOSER - CHAOS AHEAD
March 27th - Budget Resolution Expires
May 19th - Debt Ceiling Suspension Expires
Have a great trading day,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Here is another example of socializing the downside. Why didn't they also socialize the profits?
At the end of the day - billions are laundered through their banks. The ones opposing it with great might are the Ruskies and of course the crooked banksters of the country!
They are smarter than we think:
If a "tax" on citizens' savings succeeds in Cyprus you can expect many of the other countries in the Euro
to do the same. If it fails it really doesn't matter, Cyprus is such a small economy anyway.
It appears that the unelected leaders of Europe are on to a winner either way.
This is a good experiment - however, a number of politicians bowed to the Russian Mafia and squashed the proposal.
What they do in Cyprus is nothing else than an extraordinary tax to be paid by cyprus account holders. The only difference is, that this "kind of tax" is charged at once, without a prior warning, but it was somehow expected. A bank run will not occur, that's old tales and fear making. They have various other mechanism to restrict a total bank crash after a so called run, e.g. a limited pay out per day and person. Although the banks will loose the customers' confidence, it is more a matter of confidence in policy. If they stick to these plans, IMO, they will make some alterations, so that people with very low savings should be spared from that tax or at a more less rate than those with higher savings.
EUROPE IS GOING DOWN FOR THE COUNT.