Europe To Launch Massive Two Trillion Euro Bailout Package

With tremendous volatility in global markets, today King World News interviewed one of the savviest guys in the business, Jeffrey Saut, Chief Investment Strategist for Raymond James.  Saut surprised KWN by saying that Europe is about to launch “a two trillion euro bailout package.”  He also stated that this “puts our Federal Reserve into a box whereby they will have to provide some kind of liquidity event in order to keep the US dollar from spiking higher.”  Saut also discussed gold, but first, here is what he had to say about the crisis in Europe:  “Having worked inside the Washington DC beltway, I have a pretty good working knowledge of politicians, bureaucrats and bankers.  They are the same in Europe as they are in this country.  They do not want to lose their power, and if the EU busts apart, they all lose their power.”

“So I have been saying they are going to paper over this thing in order to try to buy time, just like we did with our financial fiasco.  That said, I could see a scenario whereby they let Greece and Portugal opt out, and it actually improves the strength of the EU.  If it’s good for the EU, it’s good for the rest of the world too.

In my 42 years in this business, when everybody was asking the same question, it was typically not the right question or as my dad would say, ‘It’s not the snake you see that bites you....’

“So if we are going to get a flush, I don’t think it’s going to come from ‘Euro Quake,’ at least in the short-to-intermediate-term.

If you read the tape today, you can see that Monty and Hollande are pushing for a more unified front, whereas Merkel is avoiding the topic for right now.  She did endorse a more pro-growth package.  But as we speak, the details are still not out there on how it will be structured or how it will be financed.

What I am hearing is they are readying a two trillion euro bailout package.  If that happens, I think it almost puts our Federal Reserve into a box whereby they will have to provide some kind of liquidity event in order to keep the US dollar from spiking higher because the powers that be don’t want a stronger dollar.

In this environment the markets had remained resilient, until yesterday where we had that 251 point Dow dive.  That was a pile on effect.  We started on the downside because of some of the softening statistics out of China and Germany.  Then we got our Philly Fed Report that inked at a minus 16.8, which was a pretty big acceleration to the downside.

That started the ball rolling and then when Moody’s came out and said they were going to downgrade 15 or 20 banks, it was the pile-on effect right into the close.  I have told people ever since the buying stampede ended on January 26th that we need to raise some cash.  We raised cash in February, March and April in anticipation of this kind of decline.”

Saut also had this to say regarding gold: “I think gold had a real big run, and I have been bullish on gold since November of 2001.  I told people at this firm that I was putting in the intermediate-term peak on the gold market.  My son was graduating from the University of Michigan and wanted to go to Europe for a couple of months.

My friend’s father had been giving my son a one ounce gold coin at Christmas ever since he was 13.  So he wanted to sell seven or eight of the gold coins to pay for his trip to Europe.  He was going to sell them to a dealer and I said, ‘No, sell them to me and I will put them in the lockbox and you’ll eventually get them back.’

At that time, I told people on the verbal strategy comments, on CNBC and in my written stuff that I was putting in the near-to-intermediate-term peak on gold coins.  I paid $1,925 for those gold coins, amid my son asking me, ‘Dad, are you going to pay me the bid or the ask?’  That’s a true story.  

Now I think we are in a consolidation in gold and it has more time to run.  Anytime you have a huge, secular bull market like we’ve had since 2001, you go sideways in these corrective wide-swinging trading ranges just like we’ve been doing.  We will go sideways here for a while, but eventually gold goes higher.”