What Happened To The Euro Deal Euphoria?

BlindReason submits: Here's a very clear and lucid post explaining that Chinese dollar reserves cannot be used to forestall a Chinese domestic economic contraction. Whenever I bring up the possibility of a China bubble, people bring up the large dollar reserves by China. That would be a great point if China's currency was a free floating currency.

A week ago, on December 26, when Whitney Tilson announced he was piggybacking on the Einhorn-Ackman Herbalife trade, we asked if a short squeeze was imminent "as Tilson jumps on the Herbalife bandwagon." The stock was trading in the mid-$20s. This morning it will open just shy of $35, a 30% gain in one week, which more or less answers our rhetorical question.

On Saturday, Spain's prime minister Mariano Rajoy Asked For a Eurozone Fiscal Authority, in effect the "Fiscal Nannyzone" that I have spoke of on numerous occasions.

Overseas markets are bouncing back from what has been a multi-week decline for most foreign indices. The U.S markets have been down for 5 days straight, bringing the McClellan Oscillator to screaming oversold levels (-95). These readings typically coincide with some type of snap back in the markets so covering shorts into yesterday's action made sense. An interesting stat I saw from Bespoke last night, yesterday we had the most oversold stocks in the market since October 4th, 2011, and we know what happened on that day.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.In October the Market Flash Eurozone PMI Composite Output Index fell to its lowest level since July 2009. It fell to 47.2 from 48.8 in September and marked the second consecutive month of contraction in private business activity in the Eurozone. The Flash Eurozone Services PMI Activity Index fell to 47.2 from 48.8 in September, while the Flash Manufacturing PMI dropped to 47.3 from 48.5 in September.

By Simon Johnson Most experienced watchers of the eurozone are expecting another serious crisis to break out in early 2011.  This projected crisis is tied to the rollover funding needs of weaker eurozone governments, i.e., debts falling due in March through May, and therefore seems much more predictable than what happened to Greece or Ireland in 2010.  The investment bankers who fell over themselves to lend to these countries on the way up, now lead the way in talking up the prospects for a serious crisis.