As Rick Santelli said the market has Bernanke on the ropes and Bernanke does what the market wants. Well, now the USD has strengthened against the EURO people are starting to strong arm the ECB. Quotes are, “The ECB is behind the curve.”
Well traders, investors, hedge funds get ready for a rude awaking. And more importantly if the market believes they can strong arm the market then we have a perfect storm and it will be bad for the financial sector in America. This is why I am not touching the American financial sector with a ten foot pole.
First here is what you need to remember:
- The EU governments don’t care about hedge funds, or the market! This is because, unlike American’s, Europeans are not invested in the market. A drop in the market does not affect them like it does Americans.
- The EU governments ONLY, and I repeat ONLY care about the level of the Euro. They want a cheap Euro.
So if traders are shorting the ECB it will drive down the Euro to the glee of the EU governments. The market will go down, but people will say, “see the market is not a place to put your money. It is better to save.” Any drop in the Euro makes it easier for people in the Euro zone to export more. Thus the ECB is not behind the curve. The ECB is staring down the market. And it seems that the market wants to stare down the ECB.
If this is what people are thinking then Trichet is going to stare down the market even more. Think about it, Trichet needs to manage inflation. If the Euro goes down exporters can export more then this is Trichet’s wet dream because he can increase the interest rates without affecting the Euro.
And the only person who can sees the situation for what it is, is Rick Santelli. Rick is being ignored by many CNBC guests and Steve Liesman is not exactly talking down Rick, but he is not exactly agreeing either. I think Steve sees this as well and prefers to tread lightly.
This is a perfect storm because here is what I see happening.
- Traders strong arming the European equity markets by shorting them.
- Markets dropping, currency dropping.
- At a certain level the Euro and USD will do a vicious pullback leaving the US economy in a major lurch.
If the EUR drops against the USD then there will be a point where a major liquidation of USD’s will happen. And that should worry the Fed more. I doubt I am the only investor thinking about this. Thus I actually want the ECB to be strong armed… So traders and hedge funds do your battle against the ECB… PLEASE PLEASE PLEASE…