Ovannis Capital: Sovereign Default Is A Real Possibility...
"Ovannis Capital" on the very real prospect of sovereign default by a developed nation and its implications for its people.
Online, January 6, 2010 (Newswire.com) - Sources close to "Ovannis Capital" suggest that the possibility of a developed nation defaulting on its sovereign debt is not as far-fetched as some might believe and point to the UK as one such country where such an event could conceivably occur.
The firm has made no secret of its bearish outlook for the UK economy and its client e-mails regularly advised clients to sell their sterling denominated assets including stocks and real estate.
"Ovannis Capital" analysts are thought to believe that the unprecedented level of quantitative easing by the Bank of England which instantly created over £200bn is likely to return to haunt Europe's second-biggest economy in the months ahead. Standard & Poor's recently warned that the UK ran the risk of losing its AAA credit rating if it did not reign in public spending and increase taxes. Such an event would almost certainly result in investors demanding higher yields in return for holding UK sovereign debt. This in turn would result in higher interest rates elsewhere in the market including mortgages.
The UK's interest rates are being held at record lows in an effort to boost liquidity in the economy but widespread rate hikes would severely damage the prospects of recovery from what has been the most debilitating recession since the end of the second world war.
The UK's real estate market has fallen significantly since the onset of the credit crunch in 2007 and, although it enjoyed a mild resurgence in 2009, it is expected to resume its downward trajectory in 2010 and higher interest rates will only serve to accelerate the descent.
"Ovannis Capital" recommend that clients holding sterling should convert it into commodity-based currencies including the Canadian dollar, the Australian dollar or acquire precious metals including gold and silver.