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Fickle Market Friday – Free Money Headlines Aren’t Enough?

Posted on the 17 April 2015 by Phil's Stock World @philstockworld

[image]Oh no

They are pulling out all the guns this morning and firing blanks.  As you can see from the front page of the WSJ, our friendbuddypal Jon Hilsenrath (aka "The Fed Whisperer") has poked his head out like a groundhog and, scared of the economic shadows he sees – has proclaimed 6 more weeks of FREE MONEY for all!  

That gave us a nice little pop early this morning BUT, over in Europe, they are FLEEING into bonds, sending Germany's 10-year notes down to 0.07% – a new all-time low.  This is coming on the heels of Greece's Finance Minister accusing Europe's creditor powers of trying to force his country to its knees by "liquidity asphyxiation".

"Toying with Grexit, or amputating Greece, is profoundly anti-European. Anybody who says they know what will happen if Greece is pushed out of the euro is deluded," he said.  The warnings were echoed by Eric Rosengren, head of the Boston Federal Reserve, who said Europe risks sitting off uncontrollable contagion if it mishandles the Greek crisis, even though Greece may look too small to matter.

"I would say to some European analysts who assume that a Greek exit would not be a problem, people thought that Lehman wouldn't be a problem. If you measured the size of Lehman relative to the size of the US economy it was quite small," he told a group at Chatham House.

Fickle Market Friday – Free Money Headlines Aren’t Enough?Greek bonds, of course, went flying higher.  Up to about 13% this morning.  Watch that 15% line, which is where Europe begin to melt down back in 2011.  The 4-year bonds already jumped 4.5% this morning and are now hovering around 27% and the 2:1 inverted yield curve indicates investors are once again seeing a very high possibility of default.

Even worse, the last time Greek yeilds were flying there were two rounds of bailouts to help stem the tide.  This time, the ECB and the IMF are demanding PAYMENT instead of offering a hand.  Greece simply cannot afford to pay out money and be forced to borrow more short-term money at 27% – even an economoron understands that much, don't they?

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