Tuesday, June 21, 2011

A Race to the Bottom?

As many of my friends know, I've been shorting the Euro for about three weeks now.  The trouble is, whenever the U.S. debt ceiling talks (or unemployment numbers or foreclosure numbers or any number of other U.S. economic indicators) are discussed, that economy and currency become suspect too.  The result?  My investment has gone sideways.  ("Just be happy it hasn't gone down", the love of my life observes.)  Now, I have no doubt that the Euro will plunge in the coming months, that Greece will default, and that Spain and Ireland are on the precipice.  I have no doubt that Portugal and Italy will fall off the cliff too, eventually.  (The only credible austerity program in Europe so far is the U.K's.)  A much diminished Euro will survive somehow, I believe, but just barely - and the Euro Club will be a lot smaller, with much stricter entrance examinations.  The problem with my Big Short is that the U.S. is in deep doo-doo itself.  A few misjudgements south of the 49th parallel, a little too much intransigence in Congress, or even a Japanese tsunami-like economic shock out of the blue could have dire consequences.  A sign of the times in the U.S.:  yesterday RBC sold its money-losing U.S. branches to PNC Financial just to get the hell out, and incurred a major loss in doing so.  RBC's stock then rallied.  Will TD be next?