 The euro is like a patient who has stabilized, but who goes back into decline whenever the doctors try to remove life support.
 The euro did strengthen immediately after Euro Zone politicians announced their $1 trillion rescue plan and central banks in the 16 euro economies stepped into the market to support the currency.
 But it turns out the rally in the euro had less to do with confidence that the rescue plan would end the debt crisis than with central bank buying.
As central banks have stopped buying euros—perhaps figuring their job was done—the currency has resumed its decline.
 As of 10:15 a.m. ET the euro had fallen to $1.2551 against the dollar. That’s near to the $1.2510 14-month low set by the currency last week.
 With traders seeing central banks step back from the market, worries that budget cuts (of the size needed to bring national accounts in Greece, Spain, France, Italy, and Germany back into line with the European monetary union’s 3% limit on budget deficit) will crush already tepid economic growth. The Euro Zone wide deficit for all its members is above 6% so traders know that the spending reductions can’t be cosmetic. Euro Zone GDP growth already lags that in the United States with first quarter year-to-year GDP growth coming in at 0.5% versus 3.2% in the United States.
Out of the gate this morning worries about the euro and European economies stall the continuation of yesterday’s rally in U.S. stocks. Whenever worries rise, the first impulse is to take profits.
 Watch to see how worries about the euro balance out with good earnings and economic news from the U.S. economy.
I think the Euro’s gonna get stomped like a narc at a biker rally………buy DRR
Run26.2,
I agree gold is entering the “mania” stage. So why don’t I sell GLD? Actually, I do have a stop loss order on it.
The basic problem with gold is the fundamentals are also there for a strong run.
IMHO, the EU should either start booting out countries that are on the euro that don’t meet their criteria (Spain, Greece, Portugal, etc.) or they need a stronger central government. The current bastard system they are trying to make work is fraying. I think the reality is that they are too concerned about hurting a member country’s feelings to really do anything substantial (like boot out a member) and will start dragging us all down.
Off topic… Gold Enters “Mania” Stage:
http://seekingalpha.com/article/204919-gold-enters-the-mania-stage
Not that I necessarily believe this, but for all you gold bugs out there… A few good points and some good comments on the article.
Well, it looks like the $1T euphoria is wearing out.
Jim:
What did you mean “the US market has one more good day”? Is it going down after that? Was your original predictions bumped up?
To those who concerns about EU (or mad about my comments):
Yesterday Bloomburg reported Jim Rogers and NYU professor Dr. Doom Ruibini’s comments on EU and Euro. (I am sure you know that whenever these two open their mouths, the financial media reports it.) These two called those EU countries in question “laggards” (this is not my words!). They were saying that if EU keeps taking in “laggards”, Euro will be either devalued by the market or dissolved by its members. Euro has to be a currency of countries with compatible economic level! Rogers called Euro a political currency.
Awhile back, Jim remarked (based on another article) that the next bubble would be “sovreign debt.” The latest round of bailouts – i.e. the $1 trillion dollar defence fund – only strengthen this possibility with that much more govt money printing.
My question is this, knowing about this bubble ahead of time, how can we most exploit that in our investments. We saw John Paulson successfully employ a strategy of buying credit default swaps and shorting stocks with his bet against real estate. So how can we too take advantage of what we know is coming?
Ideas?
Let the Spanish strikes begin!
http://www.cnbc.com/id/37129049
But there’s nothing wrong with the euro…
Jim,
Undoubtedly the lack of central bank buying is having an impact, but I have to wonder if there isn’t more to the euro’s fall than just the central banks?
I heard one rumor (take it for what it’s worth) that Germans had increased their purchasing of gold, obviously impacting the gold prices lately. But could that also be impacting the euro’s relative value? What if other Europeans are also following the German’s lead and buying gold? Basically, since most of the gold purchased in Europe would have to come from other countries, that would lead to an excess of euros flowing out of the EU, and a decline in the value of the euro. Granted, it would have to happen on a huge scale. But I can assure you if I was in living in Europe, I’d definitely have a good portion of my portfolio in gold.
Another possibility is that companies that import from the EU all over the world may be anticipating a cheaper euro, and possibly keeping their inventories of European goods at minimal levels so they can take advantage of the falling euro later? Again, I will grant that is speculation on my part, but it is a reasonable guess, and an action I would take if I were importing from the EU.
I would add one more aspect. The one part of “Le Tarp” that stood out to me was the currency swap set up with the Federal Reserve. Why would a currency that is worth approximately 25-30% more than the dollar need to swap for dollars UNLESS it was overvalued by 25-30%? Again, that is a HUGE generalization on my part, but it is logical.
Let us not forget the big investors out there (hello George Soros!) who have big euro shorts on the line. Could this be having an impact also?
Isn’t the depreciating Euro good news for EU’s economic growth prospects? Isn’t that what all countries resort to do (as one of the last measures) akin to devaluing the currency – to grow out of debt and increase competitiveness?
Granted, it comes with it’s own consequences. Standard of living is going to drop, better countries are penalized for other countries misadventures. But they all signed up for this when creating this union, didn’t they?