Drama unfolds in Europe

We now face a deleveraging spiral of massive proportions. After watching market-based positions on borrowed money unravel, investment houses are cutting their losses.

The early fall last night in Europe was a sign that a new drama is unfolding on global markets – deleveraging by investment houses and brokerage firms. Later the selling stopped after some good news in the US and Wall Street moved into positive territory, but then lunged deeply into the red. This deleveraging process is destined to produce more wild swings in coming days and is the latest twist in the year long downward spiral in global stock markets. Much of the initial deleveraging came from the hedge fund selling of equities and commodities to meet redemptions.


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