Saturday, April 4, 2026 
Sovereign Risk Ignites
Meanwhile, as the world turns, so does the Factory and it’s cast of characters. X is monitoring world events; The Consigliere continues to build his law firm specializing in the law of attraction; Pinky Megiston is beautiful; and Anything Anywhere! seeks more avenues through which he can add value.
Apart from all that, sovereign risk spreads are igniting. The dollar is catching a flight to safety bid and stocks are crushing lower–the S&P 500 is off about 2.5% as I write. Gold and silver have been pummeled most severely, off 4% and 5.5% respectively.
Sovereign risk spreads have risen dramatically this week, led by the European majors. Holders of sovereign debt—in particular Portugal, Italy, Ireland, Greece, and Spain—are running for cover. Not surprisingly, politicians will blame these events on speculators. However, a closer look at the money flows reveals true fear: real money is fleeing sovereign debt (selling government bonds) as opposed to speculators driving risk higher by buying credit default swaps (insurance). Nations with the largest deficits and the most in need of short term financing are being sold the hardest.
Dubai has continued to see risk premiums rise, as it scrambles unsuccessfully to sell off some of it’s holdings. Like a skydiver free-falling through the air, Dubai is reaching for it’s reserve chute. The velocity is building to the perilous downside. Hope is not a viable strategy here and now; but other than bluff, it may be all they have.
The crash of 2009 was not foiled—it was postponed.
We are sitting on the precipice of something special. An event where fortunes will be made and lost. Great art will be inspired, and an ageless tale will be re-told.
And the beat goes on.
MR V.,
Do you think the momentum has now shifted to the downside? If so where do you want to be?
Comment by Greg — February 4, 2010 @ 8:24 pm
Gold getting killed as Dollar is up. how to trade this market?
Comment by A — February 4, 2010 @ 11:08 pm
Have a look at EDZ and FXP for a way to play the upside of the downside in the emerging markets as they melt.
Comment by Craig — February 6, 2010 @ 5:42 pm
[...] the public markets of late, we are approaching an important juncture. A turn is at hand. Given my data points, I need determine the best allocation of my capital to the assets that will gain in value most [...]
Pingback by Update–Gold Will Go Higher | Volatility News — February 10, 2010 @ 9:20 am
[...] my prior post, I outlined the sovereign default risk that we face—somewhere, sometime soon. Several geographies [...]
Pingback by Sovereign Outlier Triangulation | Volatility News — February 16, 2010 @ 9:45 pm
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