You're Breaking Up

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". . .all eyes remained focused on the dominoes falling over in Europe."

Wednesday's Fed announcement that it would not yet move on interest rates was about as much of a surprise as Sandra Bullock's divorce filing. The afternoon markets greeted the decision with nary a twitch as all eyes remained focused on the dominoes that are apparently falling over in Europe. The USD headed lower this morning, but it was said to be down mainly on account of the euro climbing back above 1.325 following soothing words of the IMF.

With Greece going viral and ratings agencies falling all over themselves to rearrange the rating alphabet soup for other countries (Spain was yesterday's victim), investors are bailing out of the European common currency at a fast and furious pace.

No surprise then that all eyes remain on the Greek situation for yet another day and another week. Gold fund managers at Phoenix boldly proclaim (also no surprise) that gold's moon-shot to 'over $1,500' is just around the corner. Unless, of course, a collapse of this type once again ignites an asset liquidation frenzy that could make the 2008 garage sale turn into an estate sale. This radar remains in the 'on' position for such frequent pronouncements by fund managers and mining firm executives.

Nouriel Roubini goes one step further on the topic of Greece and feels that the potential snowballing of the Greek situation into a full-blown sovereign debt crisis has the possible making of a complete derailment of the nascent global economic recovery. The professor opines that Greece was simply not ready to join the EU (a view that certainly brings into question the exposure to Greece and eventual fate of some other 'PIIGlets,' such as Romania, Bulgaria, and Hungary) and that—at this juncture—it may only reflect the tip of an iceberg of potential defaults.

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