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  • Spain & Weak US Economy Dominate Markets

    Stock markets around the world have been pummeled in recent weeks amidst the growing reality that we’re in a global recession, especially in Europe. Fears that the US will also fall into recession have intensified, particularly in light of last week’s very disappointing economic reports.

    At the same time, the European debt crisis has once again raised its ugly head, this time with the spotlight on Spain. Spain’s own Prime Minister has admitted that the country is in a state of emergency, and money is gushing out of Spanish banks. Interest rates have soared once again to levels that led to the European Central Bank’s €1 trillion bailout package late last year and early this year.

    Last week, the yield on Spain’s 10-year bonds spiked to 6.7%, a whopping premium of more than 5.5% above the yield on the 10-year German bund at the time. Meanwhile, short-term rates in Germany fell to zero as new money seeks a safe haven there and in the US where 10-year Treasury-note yields fell to a post-war record low of 1.45% last Friday.

    Spain is facing a full-fledged banking crisis and knows it. Yet Spain's leaders do not want a bailout and the accompanying loss of sovereignty. They see that such bailouts in Ireland and Portugal have not gone well. Still, Spain is running out of money fast, and the country is largely shot out of the credit markets. How this plays out is uncertain, but it won't be pretty.

    Following that discussion, I will address the fact that consumer confidence is dropping like a stone in the US. This has prompted new hopes that the Fed will unleash QE3. We will know soon enough as the next Fed policy meeting is June 19-20.

    We end up today with a suggestion on my part that the current swoon in stocks is a BUYING OPPORTUNITY. No one knows where the bottom is, of course, but consider this. If the Supreme Court renders Obamacare unconstitutional later this month, and I think it will, we could see a MONSTER RALLY in stocks. The High Court's decision is scheduled to be announced on June 25. This is why I think you need to be getting back in the market now, while it's down. And I offer two excellent suggestions on just how to do that at the end.

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  • European Bank Woes & the Super Committee

    A recent study from Credit Suisse revealed some alarming information about Europe's largest banks. We already knew that Europe's largest banks are mired in so-called "sovereign debt," that owed them by the various government's of the Eurozone. The Credit Suisse study found that in addition to sovereign debt, most of Europe's largest banks still have billions in toxic assets that were acquired prior to the credit crisis in 2008. Most of these toxic assets are related to real estate/mortgages, CDOs, etc. that were bought prior to the recession and are now presumably worth far less than face value. In short, European banks have done a lousy job of cleaning up their balance sheets and writing off troubled assets.

    Following that discussion, we will revisit the so-called "Super Committee" that is trying to find at least $1.2 trillion in deficit reduction over the next decade. As you might expect, the committee of six Republicans and six Democrats is deadlocked as this is written, and the real deadline is next Monday, November 21 when the committee needs to present its deal to the CBO for scoring. The bottom line: I don't think the Super Committee is going to agree on $1.2 trillion in spending cuts. Read on and I will tell you why.

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