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So, Italian elections have the world in jitters again. Money pulled from the world markets sharply. Quick concern is two bad choices for Italy will sink whatever progress they've made.
We were all waiting for a spark. What do you guys think, is this the straw on the back?
I think people freak out too much. $CGC took a hit. Why? $CGC has nothing to do with Italy. Not the first time I saw this and not the first time I've asked this question. $TVIX was up 26% yesterday. Sheesh.
Banks took a large hit (4 percent) due to their holdings of Italian debt. That is what drove the indices down. The large cap techs comprising a large weighting in the SPX were basically untouched. You're talking about leveraged products which may be crowded trades and subject to much larger moves.
There were threats by EU politicians that the debt markets would be used to scare Italy from its turn to populism. Expect to see a lot of the same as happened in Greece. The difference is that the populists don't control the government in Italy.
Seriously why do people even care? How does Italy affect anyone?
For the same reason that subprime mortgages were worth caring about. If Italy doesn't repay the banks, the banks become too impaired to make loans to the productive parts of the economy.
Also, Italy's woes drag down the Euro which allows Germany to remain hyper-competitive for exports. The normal currency/export economy feedback loop is broken when you have two wildly deviating economies using a common currency.
Seriously why do people even care? How does Italy affect anyone?
It all has to do with dominoes and the unravelling of a system that has kept the peace for nearly 80 years.
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