Thur. 11/17/11 4:07 PM – Europe is too Much for US to Overcome

Today was a repeat of yesterday – good economic news on unemployment claims in the US, more bad news on European interest rates. Right now, European news wins, hands down.

The major averages dropped about 1.5% give or take a little and it was not worse because of a last minute rally into the close of trading. Aside from the dollar, government bonds and a few stocks, everything was red today, including gold, which is dropping with stocks instead of moving opposite them as it did earlier in the year. Gold is apparently a source of funds right now since so many have profits in it. When the risk-off trade is the thing, gold is included in the selling. That will change before too long.

Spain had a horrible auction of new debt, having to pay 6.9% for 10-year yields. Italy auctioned paper recently at 6.3% but secondary issues are trading closer to 7%. As you have read many times, 7% is the rate at which countries are considered to be in real trouble. Even French yields are moving up significantly, though not at those levels yet. If it’s European but not German, it’s probably being sold off. The buying by the ECB is not enough to offset the selling, hence the rise in yields. This is not good. More in the newsletter.