The Debt Crisis in Europe That Can’t Wait

BUNDFG-W 5-5-2015

There is little doubt that people are now calling for a debt crisis in European sovereign debt. When we began warning that this crisis would arrive by 2015 before the 2016 Presidential elections, it appeared strange, but now seems to be old hat. The key is that this has been the forecast of our computer, not the clairvoyant visions of just me. Opinion is not consistent, so the only way to move forward is to reply upon quantitative analysis without human interpretation.

The IMF has at last come out and stated the obvious, that the taxpayers of the Eurozone area must finally accept losses with respect to Greece. European taxpayers will eat the ECB loans, which is now the largest creditor of Greece. For the next installment, Greece expects 7.2 billion euros, half of it to pay taxpayers from the Eurozone, the other half comes from the IMF.

We are plagued by lawyers who think they can simply write a law and dictate the outcome. We need people who are qualified to run government to make these decisions. This crisis in the Eurozone is a structural defect from birth. The debts should have been consolidated. Southern Europe joined the Euro and their debts were left intact, but redenominated to Euro. That meant when the Euro rose from $0.80 to $1.60, the bondholder profited hugely. The countries could not pay, similar to those who mortgaged their home in Swiss francs to save interest but lost 30% on the currency shock. The Euro never stood a chance because it was designed to get votes, not to function economically.

BUNFOR-M 5-5-2015

The computer has been targeting May all year. We see a move into July, and then a trend into October. Volatility should start to rise come July into September.

BUNFOR-W 5-5-2015

The key support in the Bunds lies at 15620. A weekly close below that level will be a serious break. However, holding that level warns that the reversal in trend is not yet ready for prime time.