{"id":37029,"date":"2013-03-22T11:39:20","date_gmt":"2013-03-22T15:39:20","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37029"},"modified":"2013-03-22T11:39:20","modified_gmt":"2013-03-22T15:39:20","slug":"if-silvio-berlusconi-couldnt-blow-up-europe-then-neither-will-cyprus","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/03\/22\/if-silvio-berlusconi-couldnt-blow-up-europe-then-neither-will-cyprus\/","title":{"rendered":"If Silvio Berlusconi Couldn\u2019t Blow Up Europe, Then Neither Will Cyprus"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

\"Berlusconi\"<\/a><\/p>\n

So I hung parliament. Sue me.<\/p>\n<\/div>\n

If Silvio Berlusconi couldn\u2019t set off a Eurozone crisis, then there is little chance that Cyprus will.<\/p>\n

Is this reasoning a little on the simplistic side?\u00a0 Yes.\u00a0 But that doesn\u2019t mean it isn\u2019t completely true.<\/p>\n

For anyone not up to speed on the matter, Cyprus is days away from national bankruptcy and systematic bank failure unless they come to an agreement with the \u201cTroika\u201d of the European Commission, the European Central Bank and the IMF.\u00a0 How did they get into this mess?\u00a0 Essentially, Cyprus\u2019 massive banking sector borrowed heavily and used the proceeds to buy Greek government bonds, among other questionable investments.\u00a0 Cyprus also happens to be a convenient place for wealthy Russians to dodge taxes and launder money; about 25% of the deposits in Cypriot banks belong to Russian nationals.<\/p>\n

Germany and the rest of the EU has a hard time asking their taxpayers to guarantee the deposits of shady Russian billionaires, which is essentially what they would be doing if they bailed out Cyprus.\u00a0 This is why they demanded that Cyprus fund part of the bailout with a levy on uninsured bank deposits (i.e. deposits not covered by Cyprus\u2019 equivalent of the FDIC).<\/p>\n

The Cypriot parliament vetoed the deal\u2026which brings us to today.\u00a0 The ECB gave Cyprus an ultimatum to reach a deal with its lenders by Monday\u2026or the emergency liquidity funds being provided to its banks would be cut off.<\/p>\n

Suffice it to say, it\u2019s going to be a long weekend in the Eastern Mediterranean.<\/p>\n

And this brings me back to the opening lines of this post.\u00a0 The indecisive Italian election last month, in which a resurgent Silvio Berlusconi prevented the market\u2019s preferred center-left coalition from getting a majority, caused a few days of market volatility.\u00a0 But it most certainly did not cause the Eurozone to collapse into crisis again.\u00a0 And likewise, the Cyprus standoff\u2014which may well result in Cyprus ditching the euro\u2014has caused a few days of volatility but little else.<\/p>\n

Call it the \u201cDraghi put\u201d or call it crisis fatigue, but the message is clear.\u00a0 A year ago, this would have caused a massive market crash and fevered speculation that the Eurozone was coming unwound. But today, the market has stopped reacting to bad news.\u00a0 And that is unambiguously bullish.<\/p>\n

I wouldn\u2019t touch Cyprus with a ten-foot pole right now.\u00a0 The country\u2019s banking system will probably be wiped out before all is said and done, and it\u2019s far too early to try your luck at bargain hunting.\u00a0 But I would take the recent volatility as an opportunity to accumulate shares of blue chips in Spain and Italy.<\/p>\n

One stock in particular that I like is Spanish banking giant Banco Santander (NYSE:$<\/span>SAN<\/a>)<\/strong>.\u00a0 Santander is a solid bank with an international deposit and lending base.\u00a0 If you believe, as I do, that the Eurozone is stable for now, then Santander is a steal.<\/p>\n

Action to take: Buy shares of Banco Santander.\u00a0 Plan to hold for 12-18 months or for total returns of 100% or more.\u00a0 Set an initial stop loss near the November lows just below $7.00.<\/p>\n

This article first appeared on TraderPlanet<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/a><\/strong>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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The post If Silvio Berlusconi Couldn’t Blow Up Europe, Then Neither Will Cyprus<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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