Sector Investing

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Good morning. Happy Monday. Hope you had a nice weekend.

http://leavittbrothers.com/blog/index.php/2013/03/18/before-the-open-mar-18-3/

The Asian/Pacific markets closed down across-the-board. Japan and Hong Kong dropped 2% or more; Australia, China, New Zealand and Taiwan dropped more than 1%. Europe is down across-the-board. Austria, France, Germany, Amsterdam and Stockholm are down more than 1%. Futures here in the States point towards a big gap down open for the cash market.

The dollar is up. Oil and copper are down. Gold and silver are up.

The big news out over the weekend was the proposed bailout of Cyprus – a small island country in the Eastern Mediterranean Sea. But the proposed bailout is not just a handout or loan. Instead, upwards of 10% of depositor’s accounts will be confiscated to help pay for the bailout. Imagine that..you’re a citizen of Cyprus, and you wake up Saturday morning to learn the government is taking 10% of the money you have deposited in your bank account. Shocking.

For the record, the amount of money US depositors have lost over the last 5 years due to interest rates being nearly 0% is much greater than 10%. And many people lost a heck of a lot more in the housing market than 10%. Still, it’s shocking. It’s something that wouldn’t surprise you in a country run by a dictator, but a free country?

If Cyprus rejects the bailout offer and defaults, the first first two questions that need to be answered are: who owns their debt and how much leverage is in the system? The first question should be easy to answer; the second may not even be known by those who hold the debt, and the number could potentially be a very scary.

This news is the reason markets all over the world are down.

News trumps the charts, and although Cyprus is a small island country of only 1 million people and is not a big trading partner with the US, it’s hard to say what the ripple effect will be in Europe. Manage your positions wisely, and let’s see what happens this morning. More after the open.