Investing Across the Earth: Italian Bonds and Europe

Markets are riled up this morning thanks to Italian bonds passing beyond the 7% level, presenting considerable concerns about increased funding costs. Beyond that, a great deal of complex discussion can be made regarding the yields moving in a negative direction, but one can largely point towards a lack of confidence. In terms of financial markets, whether it be a stock or a sovereign nation, once investor confidence is lost, it's quite difficult to regain. Making the situation even worse is the potential domino effect that looms in Europe in regards to financial stability of Italy, Greece and the other PIIGS. Beyond that, the other layer continues to be worries about who has exposure to what as financial companies continue to defend, deny or otherwise debate their exposure to Europe (see Jefferies/JEF, which saw a spectacular decline mid-day a couple of days ago of 20%, only to rebound after the company offered a detailed discussion of what exposure it has.)

While the ECB can come up with any number of complex plans (rumors work pretty well, too, including the now-familiar rumor that China will run to Europe's rescue, which is often denied within hours), such as the EFSF http://en.wikipedia.org/wiki/European_Financial_Stability_Facility, the underlying arithmetic can't be argued with and all of the interventions (such as the reported ECB intervention this morning) simply result in a bigger bill when the can can't be kicked down the road further or another crisis if the path of interventions and bailouts continues to be followed. Italy's debt burden is currently an astonishing 1.9T Euros.

Sadly, while Europe is facing a financial downpour, areas are also facing a literal one, as torrential rain is causing flooding in France and Italy.

European Parliament member Nigel Farage offers an excellent discussion of the current situation in an audio interview today at King World News.

Euro now heading lower, as well. Double short Euro ETN chart below.