The End Of The EMU Has Begun, The Gartman Letter Says

According to The Gartman Letter (TGL), the forex world has changed significantly over the past 24 hours. The forex market went from relative stability to high volatility within a few seconds yesterday. This was a result of the ratings agencies downgrading Greek and Portuguese debt and threatening further downgrades in the near term. “We fear we have not seen the end of this violence in the markets, and indeed we fear even more that it shall become worse in the next few days rather than less,” TGL said.

The situation in Europe seems to be worsening faster than was anticipated. The European Monetary Union (EMU) “as we know it today shall end and it will not end prettily. It will end badly.” The strain may last for months… and maybe even years… with the current monetary union splitting into a northern and southern union. Countries like Germany, France, the Netherlands, Belgium, Luxembourg, Sweden, Denmark and Norway could well terminate their association with the current union and create their own. The southern nations may be forced to return to their respective currencies.

While the commodity prices and energy prices have weakened, stocks have nosedived across the globe. The recommendations made by TGL are:

1. Long of Four Units of the C$ and Three of the Aussie$ / Short of Five Units of the EUR and Two Units of the Yen
2. Long of Four Units of Gold with one priced in EUR, one in Swiss francs, One in British Pounds Sterling and One in Yen terms
3. Long of One Unit of Chinese stocks and One Unit of Brazilian stocks
4. Long of One Unit of Gold / Short of One Unit of crude

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