Before I go on with this week’s briefing, there are some trades we need to get out of the way first…

Sell your 11/2010 Motorola bond (CUSIP: 620076AR0) to lock in a 20% gain and Sell your 10/2011 Citigroup Bond (CUSIP: 173034GV5) to lock in an 18% gain.

The reason we are selling these bonds is because there is a big risk that bond prices will drop further as the market stagnates. Prices have already gone down since early-January.

After the market gets its mojo back, we should be able to find attractive short-term investment-grade bonds trading under par ($1,000 or less).

Now that that’s out of the way…

Greece has been on my mind a lot lately.

It has always been my thought that Greece would eventually get bailed out. And now rumors from the Wall Street Journal point to a potential 30 billion euro bailout package for Greece.

My feeling is that the leaders of Germany and France are betting that if they save Greece, the market might not attack Portugal, Italy and Spain.

But this is a dangerous gamble.

Let’s think back to what happened in the US in 2008. Did the bailout of Bear Stearns help prevent the bailout of any other company?

Not at all. Freddie and Fannie were bailed out. And so was AIG, GM, and even Chrylser. Congress even dedicated $700 billion to the mother of all bailout funds, the TARP.

So it’s clear that a bailout, no matter how punitive it is, will not stop another bailout from happening.

Now here’s the problem in regards the Greeks and the European Union bailing them out.

Spain is three and a half times larger than Greece. And Italy is nearly six times larger.

If the European Union is forced to bail these two countries out, it would have to come up with another 70 billion euro for Spain and 120 billion for Italy. Let’s not forget Portgual, another potential 20 billion hit.

And these amounts are only IF these countries finances are “fixed” by the end of it…

I have to wonder who is going to pay for this 240 billion euro tab. Will it be Germany, or France? Combined, the GDP of these two countries only make up about 4.5 billion euros.

I seriously doubt they can do this.

And, over the long-term, that could easily destroy the euro.

But over the short-term, this bailout symbolizes to the markets that Germany and France will not let the euro… or the European Union… turn into history just that easily.

My prediction is that the euro will soar from here, possibly hitting 1.40 – 1.50 to the dollar. Soon enough, though, the problems of the other PIGS will come to the forefront, and the Euro will be threatened again.

For that reason, I don’t believe the euro will hit new highs. And I also doubt that this rally in the euro will last for too much longer.

It seems the closer we get to Spring, the more snowstorms fall over the Northeast.

This unusually cold weather has certainly helped our Little Ice Age Portfolio substantially. The Market Vectors Coal ETF (KOL) is up 17%, the PowerShares Global Coal Portfolio (PKOL) is up 14%, the Market Vectors Agribusiness (MOO) is up 14%, and the First Trust ISE Nat Gas Fund (FCG) is up 11%.

This cold weather won’t go on forever, though. At least not in the Northern Hemisphere. So there’s reason to believe that expectations will help lead prices south for a few months before picking up as winter hits the Southern Hemisphere later this year.

At this point we should be presented with an opportunity to snatch discounted shares.

While we are up substantially in our Brazilian shares, I am seeing some weakness in the emerging markets lately.

It’s possible that all of this will clear out now that a bailout of Greece is all but assured. But again, more sovereign debt pressures in Europe should surface later this year and keep the emerging markets from easily pushing higher.

Of course, this will give you a few opportunities to snatch up strong Brazilian companies at attractive prices.

In the meantime, let’s hold tight.

It’s going to be a bumpy ride.

Sincerely,

Charles Delvalle
Co-editor
Strategic Investor