Stock Markets to Eurozone: Darn it, You're Ruining Everything

EurozoneThat giant sucking sound you hear is money -- lots of it -- fleeing stock markets around the globe for the safe havens of the U.S., German, and U.K. sovereign bond markets. It's fear talking -- fear of intensifying crisis in the eurozone.

How bad is it? For the month of May, Japan's Nikkei stock index was down 8.6%. Germany's DAX lost a massive 13.5%. Britain's FTSE plummeted 17.8%. Here in the U.S., the S&P 500 was down a relatively mild 6.7%, but that's not much to cheer about.

This response to the eurozone's latest crisis point is driving bond yields to record or near-record lows:
  • 10-year U.K. Gilts are paying just 1.48%, down from 2.1% a month ago.
  • The yield on 10-year U.S. Treasuries is just 1.47%, down from 1.95% a month ago.
  • 10-year German Bunds are yielding just 1.21%, down from 1.67% a month ago.
The yield on two-year German debt actually went negative briefly earlier this week, meaning investors were so desperate for safety they were willing to forgo any return at all.

Greece + Exit = "Grexit"

After all the eurozone crises we've endured over the past few years, why the rush to the exits now? In short, with what's currently going on in Greece and Spain, it's arguable we might really be approaching the make-or-break point for the eurozone this time.

Last month, Greeks voted overwhelmingly for two parties that campaigned on rejecting the terms of the country's bailout package. Unable to form a coalition, the country will be going back to the polls to try again this month.

It's unclear, however, who will be elected this time and what they will decide to do. If the bailout terms are rejected, it's very likely the other eurozone countries will cut off monetary assistance, Greece will default, and it will be forced out of the eurozone.

Spain + Panic = "Spanic"

In Spain, the government recently had to bail out out one of its biggest banks -- Bankia -- to the tune of $23 billion. That's not a lot of money for the U.S. government, but it's a lot for Spain.

The Bankia bailout is engendering fears that Spain itself will soon need a bailout, and that Europe won't be able to afford it. (Remember, Spain is the eurozone's fourth-largest economy.) And all this is only further driving up the cost of Spanish debt, increasing the possibility the country might need a Greek-style bailout.

No country has ever left the eurozone, so no one knows what sort of economic chaos might ensue -- on either side of the Atlantic -- if one does. In the meantime, investors should prepare for further devaluation of their stock portfolios. It's not over yet.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

11 Comments

Filter by:
vlady1000

If it isn't Greece, it is Spain, or Italy, or could be China or Korea next month, you name it. Now that it is a "world Economy" everyone has to be running smooth for market to feel good. Like trying to herd cats, it ain't ever going to happen...... There will always be one (or more) getting away and scaring the rest.

June 03 2012 at 11:43 PM Report abuse rate up rate down Reply
tradestockmarket

Global Financial Market Panic in Progress

http://www.thebullbear.com/profiles/blogs/stock-financial-market-crash

June 03 2012 at 9:22 PM Report abuse rate up rate down Reply
ANONUJKAss

OMG!!!! im reading these comments and you people have no clue what is going on!!!!!!!!
but i dont blame you we have this kind of propaganda in the media wrighting this junk PROPING UP A CRIMINAL CABAL THAT HIJACKED THE WESTERN WORLD AND PUT US ON A DEBT BASED MONETARY SYSTEM!!!!!!!!!!!!!! THATS WHY THIS IS HAPPENING THE SYSTEM HAS MATHEMATICALLY MALFUNCTIONED AT THE HIGHEST LEVELS AND ITS FRAUDDDDDDDDDDDD!!!!!!!!! SO YES ALLLLLLLL THE EUO COUNTRYS NEED TO GET OFF THE ROTHSCHILD CENTRAL BANK DEBT SYSTEM LET IT COLAPSE AND REBUILD THEIR INDIVIDUAL CURRENCY'S, THIS REPORTER " No country has ever left the eurozone" AS IF ITS BEEN AROULD ALL THAT LONG ANYWAYS, PLUS EVERY COUNTRY WAS PROTESTING THE NWO CURRENCY!!!!!!!!!!!!!! AND THE UNFED UN RESERVE CRIMINAL FRAUD CABAL NEEDS TO COLLAPSE SO WE CAN GET OFFFFFFFF THE DEBT FIAT DOLLAR HAS HAS DECLINE EVER SINCE THE FED HIJACKED THE GOV. FOR CONTROL OF THE DOLLAR. SO LONG STORY SHORT THE STOCK MARKET IS RIGGED AND THEY HAVE ALLLLLL YOU PEOPLE THINKING ITS INVESTING ITSSSSS GAMBLING!!!!!!!!!!!!!!!!!!! COME ON PEOPLE IF YOU EVER WANT TO STOP BEING SLAVES TO THESE CROOK CONTROLLING THE FINANCIAL SYSTEM YOU NEED TO DO YOUR RESEARCH ABOUT MONEYYYYYYYYYYYYYYYYYYYYYYY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ANT THEN YOU WILL FIND BOTH ROMNEY AND OBAMA ARE WORKING FOR THE SAME CROOKS SO YA NOTHINGS GOING TO CHANGE IF YOU PICK EITHER ONE!!!!!!!!!!!!!!!!!!!!!!!! RON PAUL REVOLUTION 2012

June 02 2012 at 3:42 AM Report abuse rate up rate down Reply
William

Just socialism at work. This is what happens when you have more social programs than a sound economy and try to spend your way out.

June 01 2012 at 9:24 PM Report abuse +4 rate up rate down Reply
1 reply to William's comment
itacurubi

Two of the biggest problem countries -- Spain and Ireland -- were the result of too much private, not government borrowing. When the Spanish public debt was only some 69% of its GDP. It's debt only increased when it had to bail out private banks whose almost-failures also severely contracted lending, resulting in recession, decreased tax revenues, etc.. Much the same happened in Ireland. Both of these countries had real estates bubbles that burst. You don't know what you're talking about.

June 04 2012 at 8:51 AM Report abuse rate up rate down Reply
jcduyal

And Obama thinks he'd save our economy by applying the Europe's socialist, nanny state methods?

June 01 2012 at 8:13 PM Report abuse +2 rate up rate down Reply
gatorhans

funny, but it takes 3 years for any new changes to get through our government, which means all BUSHs crap is finally on the way out, but I wonder if the damage is more than just Obamas run in the whitehouse, thanks, Bush!!

June 01 2012 at 8:04 PM Report abuse -2 rate up rate down Reply
1 reply to gatorhans's comment
ccm989

It took a lot of politicians to screw things up this badly. Frankly I blame the TEA PARTY controlled Congress. They are a lot of grandstanding ******** -- "My way or the highway." That's not how things get done and it explains Congress' historically low approval rating.

June 04 2012 at 4:48 PM Report abuse -3 rate up rate down Reply
1 reply to ccm989's comment
democracks0

it's Obama who grandstands with his my way or the highway attitude. Harry Reid rides on that same highway too.

Obamas a fiasco.

June 04 2012 at 4:58 PM Report abuse +2 rate up rate down
time1865

Our financial advisor if with Wells Fargo and so far I have been on the money predicting what is going to happen. Maybe I need to take his job because he believes the bull crap the Dems are pumping out about the economy. It never was getting better and is going to get worse.

June 01 2012 at 7:10 PM Report abuse rate up rate down Reply
jdykbpl45

Time for an Obama exit.

June 01 2012 at 5:32 PM Report abuse +4 rate up rate down Reply