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Wednesday, April 28, 2010

Sovereign Debt Crisis Starting

I find it unsettling I am no longer in the camp of financial market crisis is imminent, and flipping just recently. My view is the private investment banks and large bank crisis has been successfully transfered to government solvency around the world.

Mission complete for the Federal Reserve Bank, US Treasury, world banks, and the world governments following these institutions.

Now the the focus has been shifted to countries, I don't have a reason to believe that countries unable to pay their debt will fall in succession quickly. However we are starting to see is the government confidence deterioration starting in the worst debt ratio countries.

Greece's debt was cut to junk, putting pressure on Italy and Portugal.

What the result was a stock market decline, with the Vix (volatility index) spiking huge, and Gold prices going higher with almost all other asset classes declining.

So I am sticking to my decision, although poorly timed, to keep my short positions lower, and keep my Gold miners, looking for an opportunity to buy more. What would change my mind is S&P 500 blowing through on a closing basis below 1,100. Also to see gold start resuming a hard swan dive lower.

I have chased these market declines for faaar to long. Fool me once, shame on you market, fool me 10 times, shame on me, and I am going to wait before I try to be the fool the 11th time.

Make no mistake, the world western government currencies and government solvency, including eventually the USA, is where this is headed. Nothing is certain, but without key leadership, I expect to be a multi-year unfolding event.

In the near term, as countries are under financial stress, this is "good news" for American US bonds for now. Hence, my spin that the US market isn't near a collapse as focus is shifted on smaller countries.

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