The ratings agency S&P's downgrade of Greek and Portuguese debt rang out like a fire alarm in a supermarket, sending market participants scurring for the exits. The mood was that of sell first and ask questions later. Safe havens were the U.S. Dollar, U.S. Treasuries and gold.

Portugal is now being looked upon as the next shoe to drop, all the while the Greek Tragedy grows in amplitude with talk of a further 10 billion Euro top-up by the IMF. At the start of April, Greece's 2 Year Bonds were trading at 5% and are now sporting a 16.81% rate.

Confidence is the thread that intertwines all markets. The fear of contagion and a repeat of the 1931 Currency Crisis due to World War I debts is straining that very bond. We all recall that war broke out 8 years later in Europe. 2018 threatens to bring about the same result and coincides with the 26 year War Cycle.

"Stock markets around the world plunged today after Standard & Poor's cut Greece's credit rating to junk status and downgraded its view of Portugal in the clearest evidence yet that the European sovereign debt crisis is spreading. Italy and Spain are also viewed as vulnerable.

In London, the FTSE 100 index closed down more than 150 at 5603, a fall of 2.6%, and there were big falls in share prices in Athens, New York, Paris and Frankfurt.

Analysts blamed politicians in Germany for dragging their feet over a Greek rescue package worth €45bn. German chancellor Angela Merkel has demanded that Greece come up with a tougher and longer austerity package before the EU ploughs in €30bn and the International Monetary Fund comes up with €15bn. But investors fear the government will be unable to deliver amid opposition from trade unions who have already taken to the streets...."

Read more:

http://www.guardian.co.u...redit-rating-downgraded

@kk


Can you explain this more. I don't understand.

Like we didn't see this coming. Greece bans short selling. It's like Lehman and Bear Stearns all over again. But will the outcome be different this time? Read more:

http://www.marketwatch.c...28?reflink=MW_news_stmp

http://www.businessweek....om-today-to-june-28.html

@Scubidu

Time magazine reported in its September 28, 1931 edition on the shock of the British default. Their comments were as follows:

"Last Monday, all businessmen were shocked to read in their morning papers that the British pound sterling was no longer based on gold. The Tokyo Stock Exchange had announced that it would not open. Tokyo was followed by Bombay, Calcutta, Johannesburg, London, Berlin, Amsterdam, Copenhagen, Vienna, Oslo, Stockholm, Brussels and Athens. The Paris Bourse opened, but limited all trades to 5% of all holdings and no dealing in foreign exchange. Montreal’s Exchange opened similarly restricted. The New York Stock Exchange remained open, but as in dark November 1929, short selling was forbidden. In the artificial market thus created, stocks gyrated unsteadily, closed higher; bonds closed at lows for the year."

In another article, Time reported:

"In few nations nowadays is there a ‘free and open market.’ The Berlin Bourse closed from July 13 to September 3, opened with shortselling banned, then closed again. In Great Britain all trades were put on a cash basis which practically eliminated shortselling as did restrictions imposed on the French and Athenian Bourses. On the Paris Bourse a seller must deposit 40% margin, also 25% on the amount of the stock sold which makes bear activities a rich man’s privilege. One of the most dramatic events of the present crisis occurred in Amsterdam on September 21 when after a terrific slump in prices, all transactions were cancelled, the Exchange closed in status quo. Montreal and Toronto met the British crisis by banning shortsales and establishing ’minimum prices’ for securities, but both last week were open with no restrictions. The Tokyo Exchange has been closing and opening repeatedly during recent weeks. Tokyo stocks broke badly when the shares owned by interests who operate the Exchange collapsed.*

These efforts were a waste of time, the stock markets continued to fall until mid 1932. Similar efforts during the financial crisis of 2008-2009 did not stop the market from declining. Regulators seem to disregard the fact that the short seller is the only participant who is obligated to buy in a falling market inorder to cover his short position. Markets can decline by the mere virtue of sell orders overwhelming buy orders.

*Source: The Greatest Bull Market in History

Thanks to all the contributors....a good read.

The commodity bull markets of the past century were (and will be):

1907 to 1919
1968 to 1980
1999 to 2016

Of note is the fact that the greatest intensity of price increases is felt during the last 4 years to the top of the bull market. At that point in time, the markets are in parabolic or blowoff mode. Consumers and industrials are well advised to prepare for the years 2012 to 2016.

"A sharp rally in commodity prices with the ongoing global economic recovery could increase the exposure of frontier economies such as Kenya to imported inflation and exchange rate instability, the International Monetary Fund (IMF) has warned.

The IMF says such instability could slow down growth in the near term, leaving many countries behind their medium term targets with serious consequences on the economic environment..."

Read more:

http://www.businessdaily...0/-/vgr6l4/-/index.html

@kinuthia,
Thanks,I find your posts very informative.

Another dude that has really educated me is Adam Hamilton of Zeallc.

http://www.zealllc.com/essays.htm

Ive just read one of his articles now on inflation. Dude has some interesting views. So much to read, so little time. Thank you sheep.

http://www.zealllc.com/2008/moninf.htm
http://www.zealllc.com/2009/biginf.htm
http://www.zealllc.com/2009/biginf2.htm

Please review the chart du jour:

http://ftalphaville.ft.c...igns-you-had-it-coming/

Where can i get supply vs demand stats on stocks?

@ Young. Please review the chart below:

http://www.facebook.com/kinuthiakaranja?v=info#!/photo.php?pid=3334669&op=2&o=global&view=global&subj=44489575924&id=649361247

My forecast is a technical price objective based on chart analysis. It does not factor six sigma events or fat tails such as a sovereign debt default.

In that regard, the key to gold's glitter here and now is the intensity of the Debt Crisis. Gold is the canary in the coalmine, warning of deadly gas.