Monday, September 5, 2011

Why Germany should leave the eurozone (in pictures)

Everyone knows that Italian yield spreads against Bunds have been blowing out:

10-Year Italian bond yields vs. 10-year Bunds.

I thought that I would look at the long-term performance of the other major eurozone stock markets against the DAX. Here is Italy, which is a bellwether for stress within the eurozone. It's been in a relative downtrend since 2005 and there are no indications that there is any bottom. The downtrend has been steady, well-defined and not oversold on RSI.

What about the other major partner, France? Oh, never mind...

How about other "hard" currency countries, like the Netherlands?

The one "silver lining" in this analysis has been the performance of Spain's IBEX 35 against the DAX, which has appeared to have rallied out of its relative downtrend.

How much longer can Germany carry the rest of the eurozone?

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

1 comment:

Sion said...

The Dax is not carrying the Eurozone. The "Dax", due to it's containment within the euro zone is destroying the other markets.

The same thing happens between the US and China. China fixes the Yuan relative to the dollar and then proceeds to manufacture a competitive advantage by means of low interest rates etc and the US suffers.

Effectively the Euro PIIGS and others are chained to a voracious animal. They should run but they cannot so they get eaten.