Wednesday, June 22, 2011


This week has already been very interesting.  We've had the confidence vote for Greece, which means that we'll have more Greek default discussions and posts in the near future.  We also had the FOMC meeting and press conference today where Ben Bernanke seemed much less confident.  I almost feel like the market is whistling past the graveyard in hopes of not disturbing the situation.  Over the last couple of days I've sold many of my shorts and waited for an expected bounce.  Now that we've had some of a relief rally, I'm focused on two specific names that seem to have attributes of weakness.  Specifically, GS has entered a significant period of decline where the 14 day EMA has crossed over the 40 day EMA.  There seems to be some support at $131 for the broker, but it may be worth a shot with the opportunity for a much deeper decline.  FXI also is showing the same qualities although it has not officially crossed over (I expect it to be official at the end of this week).  The "crossover" usually portends nastier things to come.

From a macro perspective we have two issues that will help these trades. We have the Fed removing stimulus (no better said, not stimulating and that should deprive GS of some trading proceeds at our expense) and also China is slowing and confronting inflation while trying desperately to keep from a hard-landing.

Weekly 14/40 EMA Crossover pending.

FXI (3 Yr Weekly)

GS Weekly View
13/40 EMA Crossover

Goldman Sachs (GS) 10 Year Weekly
The 10 Year view of GS is really interesting.  There is an obvious risk that GS could go up to around $165, but with all the uncertainty and misery in global credit markets it may be worth a short shot.  I think a move below $131 could take us to the lower portion of the downward channel which is at $115 which just happens to be the level that Warren Buffett got his shares.  It would be really interesting to see GS back at those same levels wouldn't it?


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The politics of destruction continue somehow as crooked Greek lawmakers voted to keep leaders in positions to destroy their economy.  By allowing the Greek PM to escape through the vote of confidence yesterday, Greek legislators essentially deferred what is going to happen anyway, it only prolongs the pain. 

In the mean time, the mass exodus of money continues as Greeks seek to find places to stash their cash fearing the coming collapse of the Euro they know is coming.  Regular folks are buying gold and silver and even an olive grove to diversify out of the doomed fiat.
ATHENS -- Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.
Pledges by socialist prime minister George Papandreou that his government would "save the country" have been widely discounted by the public. However, parliament gave him a vote of confidence late on Tuesday night. The socialists have a six-seat majority in the 300-member house.
Sales of gold coins have soared as savers seek a safer and fungible source of value.

"When the global financial crisis started, our sales of coins to investors overtook bullion for the first time," said Harry Krinakis, at Sepheriades, a Greek precious metals trader. "Now the sales ratio has reached five to one."

Tomas, a computer technician, has exchanged his euro savings for gold coins: "I keep them at home just like my grandmother did in the Second World War."

Monthly bank withdrawals were running at E1.5 billion-E2 billion in the first quarter. Last year, depositors withdrew E30 billion, equivalent to 12.3 per cent of total savings, according to the central bank. Greek deposits worth an estimated E8 billion were transferred to banks in Cyprus in 2010. But the flow has dried up this year amid fears that Cypriot banks could suffer contagion.

Andreas, a supermarket manager, transferred the family savings to Munich earlier this year. "The Swiss banks aren't interested unless you’ve got several hundred thousand euros," he said.
"We can't trust the politicians to get us out of this mess [and] have to protect our families," said Sakis, a garage owner, at an anti-austerity protest in Athens' Syntagma Square. "A bank collapse has got to be in the cards." He added he had withdrawn his savings and placed them in a bank safe deposit box "for security. Who cares about interest right now?"

Others put their savings into land when prices fell after Greece's first European Union-led rescue last year. Angelos, a software specialist, bought a neighbour's olive grove. "I grabbed the opportunity," he said. "A year ago I wouldn't have considered making such an old-fashioned investment."

As tough as this is for Greeks, the only question I have it why we Amerikans aren't taking their lead and putting our cash in safer places?  Of course this isn't a situation that will unravel here in the US tomorrow or the next day, but it certainly is a picture of our future.  It cannot be avoided.