The only way to hold Euro-denominated Bonds

Whatever you make of the latest measures taken by the ECB to 'boost the economies' of the Euro-zone do keep in mind one key rule for your financial survival: Do not hold any bonds denominated in Euros unless they are backed by the full-faith and credit of Germany. As the interest rate on many of those bonds is now turning negative it probably is advisable to give them a miss as well and stick to cash. At some stage some members of the Euro-zone may default or leave the Euro-zone and the value of their obligations will nose-dive. So buying Italian or French bonds just because they return a measly 1.5 percent is akin to picking up pennies in front of a steamroller. Index-hugging fund managers playing with other people's money in the big investment institutions will continue to play this game of Russian Roulette and you should make sure that you avoid them if they play this dangerous game.

European Bond Markets have come full Circle

A few years ago (2005) we warned that anyone continuing to hold Italian government bonds yielding a measly 15 basis points more then German Bunds would be reckless. Now it is time to put out the warning again. While conditions may not yet be as extreme as in those days it is only prudent to consider an exit and take what is effectively a free option. Unless you believe in full political and fiscal union in the Eurozone this prepares you for the next (inevitable?) economic and financial storm.

Eurozone banking - prepare for the Big One!

In 2005 I warned in another blog that to keep one's money in Italian government bonds that yielded a paltry 10 basis points more than German Bunds was not sensible. Now that a certain sense of normality has returned to financial markets in the Eurozone it is easy to forget the major risk that still exists when the next Euro-Quake hits the headlines. Investors have a short memory - only two months ago depositors in Cypriot banks were unilaterally stripped of (part) of their wealth. So I would urge any reader to consider transferring his bank deposits into Eurozone countries that can be considered 'safe' (hopefully there are some that deserve that description). Interest paid on deposits is ludicrously low in all countries so there is very little loss if money is moved out of vulnerable countries and their banks. But the upside is substantial as any break-up of the Eurozone would lead to major losses in the currencies of the countries that are forced out. So depositors are basically getting a free option.

EU Banking 'Union' threatens your Savings

The proposed EU Banking 'Union' which would centralise the regulation and supervision of banks in the EU (or at the very least in the member states of the Euro zone) would be a threat to the savers in the countries with more stable financial systems. The guarantee of banking deposits would also be administered on a centralised basis. This could lead to the situation were the savings of citizens in, say, Germany or Austria, are used to bail out savers in banks in Spain or Italy.