The biggest issue with the above ratio is the speed at which the decline happened. If investors were to continue to slam German equity markets at this pace, there could be a real feeling among the German public that it should back away from the Euro and separate itself from the debt burdens of Greece, Spain, Portugal, and Italy.
Of course it seems like an unimaginable scenario, but do not underestimate how feverish the mood of the crowd can get when losses happen so swiftly. [Euroe ETFs Fall as Short-Selling Ban Extended]
And believe it or not, iShares MSCI Italy (NYSEArca: EWI) may now start to outperform Germany! Of course, that is not a directional call on my part. Rather, I’m just suggesting that Italy may outperform the strongest country in the EU which is being asked to lend a helping hand.
Disclosure: The author, Pension Partners, LLC, and/or its clients may hold positions in securities mentioned in this article at time of writing. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.