Short-Term Key: Neutral Long-Term Key: -24.9 (Neutral)|
I have a friend who is one of the brightest financial analysts I know. He's made a number of brilliant calls over the years, including anticipating the housing collapse as early as 2006 along with many of the problems that have since plagued the euro. I say this because I want you to know that one of the best and brightest does think that chaos is very close at hand.
Lately, he's been predicting the imminent disintegration of the European Monetary Union, the end of the euro as Europe's common currency, and its devastating impact on U.S. stocks. But as much as I respect my friend's opinion on this matter, I have to disagree with him on the matter of timing. I think we have a few years before the euro disappears.
Today’s action (it's mid afternoon as I write this) makes an interesting comment on the issue. The euro has dropped about 1.5 cents in the past few hours, which is a huge decline compared to its historical volatility. Yet U.S. stock prices are little changed, while most commodities are higher.
That's a pretty good sign that further euro weakness may not lead to a huge economic calamity. It's a change from the past few weeks when stock prices and commodities have generally moved in lock step with the euro, and it suggests that the market may tolerate a devalued euro.
As we said last week, a lower euro may help the European economy by making its exports cheaper, which in turn may postpone the eventual end to the common currency.Read more...
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