Courtesy of John Nyaradi.
Major US Markets including (NYSEARCA:DIA), (NYSEARCA:SPY), (NASDAQ:QQQ), and (NYSEARCA:IWM) dropped over 3% each on Italian bond fears and an increased worry that Europe will not be able to bail out its 4th largest economy.
Furthermore, the iShares MCSI Italy Fund (NYSEARCA:EWI) wiped out over 9% today, further illustrating the dire situation in Italy and the European Union: Europe is falling apart and there might not be a way to fix it.
It seems that the hope and euphoria surrounding Berlusconi’s resignation wore off today, as perhaps investors realized that “Prime Minister musical chairs” will likely not fix the country’s 7% bond yields, let alone the European Union’s tremendous sovereign debt crisis. The iShares MCSI Italy Fund (NYSEARCA:EWI) 9% drop today likely reflects the notion that if Italy goes, then so does the next Italian PM, along with the rest of the world.
Meanwhile, Greece is now in the back burner, still without a new government and still with a new 50% haircut. Can the world economy handle a 50% haircut for Italy? What about Spain?
Europe is falling apart, and US markets currently hate Italy.
In other very mundane news, the Congressional “Super Committee” has yet to reach an agreement by November 23rd, or else. We are still playing this game, and the 11th hour has not even been reached yet. However, in a slight sense of irony, the iShares Barclay’s 20+ Year Treasury Bond Fund (NYSEARCA:TLT) registered a 2.07% increase today; it still seems that an AA+ credit rating is better than gold, at least for now.
Speaking of gold, the SPDR Gold Trust Fund (NYSEARCA:GLD) registered an 0.84% drop today, and might soon become the investors’ currency of choice if things get really bad.
Bottom Line: US Markets hate Italy and Europe as evidenced by today’s 9% wipe-out of (NYSEARCA:EWI). Furthermore, both Europe and the United States are continually grappling with too much debt, sputtering economies, and lack of water to put out the fire. If we thought a 50% haircut for Greece was bad, what lies ahead?
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