‘I want to issue a
major warning to investors: the EU Crisis is going to get worse in the
coming months.
I realize that
most investors and analysts believe that the EU Crisis is over. Then think that
because the S&P 500 is closing in on its all-time highs that things are
fine in the system.
They are wrong.
The only item that
held Europe together in 2012 was the credibility of EU politicians and ECB
President Mario Draghi. Please note that nothing fundamental improved
for the EU’s financial system: EU GDP has since re-entered a recession and EU
unemployment has a hit a new record.
Indeed, the only
reason things even looked better was because various Government
engaged in massive interventions. In the case of Spain, this included raiding
90% of their social security fund to buy Spanish bonds so that yields would
fall.
So… when you
entire financial system is held together by the credibility of the political
class… corruption scandals can implode the system.
MADRID — Spain’s
governing Popular Party was drawn deeper into a web of corruption scandals this
past week, after the Swiss authorities informed the Spanish judiciary that the party’s former treasurer had
amassed as much as 22 million euros, or $29 million, in Swiss bank accounts.
The treasurer,
Luis Bárcenas, resigned from his job in 2009, after being indicted in the early
stages of an investigation, which is still ongoing, into a scheme of kickbacks
and illegal payments allegedly involving other conservative party politicians…
Nonetheless,
the revelations have brought a fast-growing list of corruption investigations,
which have unspooled across Spain, to the doorstep of the conservative
government of Prime Minister Mariano Rajoy, who has so far remained silent. About 300 Spanish politicians
from across the party spectrum have been indicted or charged in corruption
investigations since the start of the financial crisis. Few have been sentenced
so far.
Source:
NY Times
The above story
illustrates some key elements that all investors need to be aware of:
1) EU
politicians are so corrupt they make their US counterparts look clean by
comparison.
2)
Having been put off for years, investigations into corruption are now reaching the
point at which the rich and powerful are actually at risk of serious
consequences.
Note in the above
story that former Spanish Treasurer Luis Bárcenas has been under investigation
since before 2009. The fact that the real smoking gun (his
hidden Swiss bank account containing over $29 million) is only just coming to
light should give you an idea of how corrupt the system in Europe has become
(there is no way on earth it would take four years to find this information).
That this
information is coming out now also tells us that things are getting so bad in
Spain that heads are going to start to role. As we stated earlier, corruption
only works until the consequences outweigh the benefits of being “on the take.”
The above story tells us that we have finally reached that point in Spain. It’s
taken five years for this to happen (the Crisis begin in 2008). But the system
has finally reached the inflection point at which key players will face real
consequences for their corruption.
With that in mind
we can expect more and more such cases to begin to emerge in Europe. The
fallout from this will be major both for the political class and for the
financial markets.
Indeed, later in
the same story we find the following tidbit:
On Wednesday,
amid another property investigation, the president of Madrid’s
regional government, Ignacio González, revealed that he and his wife purchased
a penthouse last month in the holiday resort of Marbella for 770,000 euros, or
more than $1 million. Mr. González, who earns 4,800 euros a month, about $6,380, is denying any wrongdoing, as
well as any link between his acquisition and the property investigation
undertaken by a local judge.
A regional
President, earning less than $80K a year just bought a $1 million penthouse in
a country where youth unemployment is above 50%, workers have gone over six
months without being paid, and pharmacies are running out of medicine due to
having not been paid some €500 million by the government.
The reason this is
so important is because politics, not economics, drives everything in Europe.
Please note that the entire EU banking system was pulled back from the brink of
collapse last summer by Mario Draghi and other EU officials promising to do
whatever it takes to end the crisis.
Since that time,
the economy has actually worsened in Europe. Unemployment has hit a
new record and the vast majority of the EU has re-entered recessionary
territory. Thus, it has been the credibility of various EU officials, not
any fundamental improvement in things that has made the whole system work
Now that major
corruption scandals are breaking out regarding key EU figures, it’s going to be
increasingly difficult for the EU political class to continue to convince the
markets that the “everything is OK.”
Indeed, it’s time
that we get really honest about things and state that Europe is done. Finished.
The powers that be
over there are rapidly losing control of the system. Spain’s banking system is
collapsing at a rate worse than that of the Asian nations during the Asian
Contagion of the late ’90s. Italy’s bonds are imploding. Germany is finding its
economy teetering on the edge of a cliff. And France is seeing auto sales and
apartment deals collapse at a rate just as bad as that of 2008.
And that’s just
the tip of the iceberg.
The debt contagion
has now spread to Spain, Italy, and even France: all three of them are
countries too big to be bailed out.
Which means… it’s
the End Game. No matter what, the defaults are coming and the Euro will implode.
This is the
reality for Europe. The whole system will be going down, it’s only a matter of
time. And when it does collapse, it’s going to make Lehman Brothers look like a
joke.
I know the markets
have yet to fully realize this…the S&P 500 is approaching its all-time
highs. But back in late 2007, the last time the markets were at this level… did
stocks get what was coming then too? Nope. And by the time stocks “got
it” things moved VERY quickly.
So if you have not
already taken steps to prepare for systemic failure, you NEED to do so NOW.
We’re literally at most a few months, and very likely just a few weeks from
Europe’s banks imploding, potentially taking down the financial system with
them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into
EU banks right now trying to stop this from happening.
I’ve already
alerted Private Wealth Advisory subscribers
to 6 trades that will all produce HUGE profits as this mess collapses.
We’ve also taken
steps to prepare our loved ones and personal finances for systemic risk with my
Protect Your Family, Protect Your Savings, and
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With a total of 20
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1) how to prepare
for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it
And more…
I can do the same
for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.
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To take out an
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and start taking steps to insure your loved ones and personal finances move
through the coming storm safely…’
Best Regards,
Graham Summers