The Germans have been perceived with a cautious eye by the rest of Europe. Today isn't an exception to this rule. Together with the likelihood of France, Italy and Spain joining Greece and Ireland in requiring the help of the European bailout mechanisms, primarily backed with German contributions, the possibilities of a German exit from the distressed currency union is growing. So, just how do you protect assets in the event of this sort of chain of events?
With US 10 year Treasuries vacillating between sub 1.5 - 1.6% yields, foreign investors are likely to continue to seek out that investment as being a probable alternative safe haven to the German 10 Year Bund, which is appreciating significantly since reaching record lows close to 1.2% just a couple weeks ago. Because the Economic headlines continue to worsen, plus the prospect of a sudden convertibility crisis between future former Euro Zone currencies gets to be a specter in the near future, the ideal bet is the US Dollar, even with Ten year yields at already reduced rates.
Even though there may not be tremendous upside to yields, the coupon values of US Treasuries are basically the only asset with a certain upside thanks to the Federal Reserve's statement a week ago that it will continue to sell short term notes in favor of buying long term notes. Compound the recent events of Spain's second request for assistance and rising yields on debt throughout the Euro Zone and the diminishing of alternatives is proving to be the only method investors can protect assets in this unstable environment. Policymakers in both the United States and Europe are confronted with expanding deficits, deteriorating economical conditions, and rising unemployment, consequently they're planning to borrow as much as they can for as long as they are able to.
In the US, the Supreme Court's final decision on the Arizona Immigration law, as well as the landmark case on the Affordable Care and Patient Protection Act have taken some of the emphasis from last week's downgrades by Moody's of 7 of it's biggest financial institutions. Direct impacts on the money market funds that depend on investment grade issuance by the same institutions have not yet been felt, but are lurking down the road. The most effective financial advice for those trying to preserve capital from the prospect of low yields, and overly-risky investments is to keep resources in cash or 10 year notes for the next 3-6 months, or prior to the end of year when sequestration is planned to begin.
Should the Germans determine that the Euro is not worth the excessive cost they have invested in, the likelihood of further appreciation in the dollar relative to other currencies should alarm anyone with commodity or risk based investments. The likelihood of Germany's exit are growing with every day of inaction by troubled states to reign in spending. As the risks weigh on the financial areas and European lenders continue to be reluctant to invest in sovereign debt and private institutions in other European states, there will remain a robust demand for US debt.
With US 10 year Treasuries vacillating between sub 1.5 - 1.6% yields, foreign investors are likely to continue to seek out that investment as being a probable alternative safe haven to the German 10 Year Bund, which is appreciating significantly since reaching record lows close to 1.2% just a couple weeks ago. Because the Economic headlines continue to worsen, plus the prospect of a sudden convertibility crisis between future former Euro Zone currencies gets to be a specter in the near future, the ideal bet is the US Dollar, even with Ten year yields at already reduced rates.
Even though there may not be tremendous upside to yields, the coupon values of US Treasuries are basically the only asset with a certain upside thanks to the Federal Reserve's statement a week ago that it will continue to sell short term notes in favor of buying long term notes. Compound the recent events of Spain's second request for assistance and rising yields on debt throughout the Euro Zone and the diminishing of alternatives is proving to be the only method investors can protect assets in this unstable environment. Policymakers in both the United States and Europe are confronted with expanding deficits, deteriorating economical conditions, and rising unemployment, consequently they're planning to borrow as much as they can for as long as they are able to.
In the US, the Supreme Court's final decision on the Arizona Immigration law, as well as the landmark case on the Affordable Care and Patient Protection Act have taken some of the emphasis from last week's downgrades by Moody's of 7 of it's biggest financial institutions. Direct impacts on the money market funds that depend on investment grade issuance by the same institutions have not yet been felt, but are lurking down the road. The most effective financial advice for those trying to preserve capital from the prospect of low yields, and overly-risky investments is to keep resources in cash or 10 year notes for the next 3-6 months, or prior to the end of year when sequestration is planned to begin.
Should the Germans determine that the Euro is not worth the excessive cost they have invested in, the likelihood of further appreciation in the dollar relative to other currencies should alarm anyone with commodity or risk based investments. The likelihood of Germany's exit are growing with every day of inaction by troubled states to reign in spending. As the risks weigh on the financial areas and European lenders continue to be reluctant to invest in sovereign debt and private institutions in other European states, there will remain a robust demand for US debt.
About the Author:
Learn more about how to Protect Assets. Stop by James Trew's site where you can find out all about financial advice and what it can do for you.
0 comments:
Post a Comment