While markets broke to the upside this week, don’t be fooled by the unwarranted optimism. With Greek and Italian PMs out, the heightened political discord is putting the Eurozone at serious financial risk. Seeing as Italy’s debt burden dwarfs Greece’s debt, a financial meltdown in Italy could create larger negative shockwaves extending not only throughout Europe, but into American and Asian markets as well.
An indication of just how intertwined Eurozone members are with either in terms of debt holdings, take a look at this graphic (click on a country to see its net debt obligations to other European countries). The picture is scary for countries such as France, which has $366 billion in exposure to Italian debt as well as significant holdings of Greek, Spanish, and Italian debt. Let’s just say no one’s quarantined from this debt virus.
I don’t have a direct solution to stoke your fears, but I hope the video below stresses the severity of the situation we’re in and how I’ve geared my investment strategy to avoid potentially large losses if widespread European contagion becomes a reality.