It can't get any worse for the euro...

It can't get any worse for the euro... The latest on the 'Grexit'... Italy's in great shape, just ask Twitter... An update on the euro situation from Warsaw... Steve Sjuggerud is bullish on the euro...
 

 Things can't get any worse for the euro...

As we've written numerous times, Europe's economy is in the dumps... Growth is slowing, unemployment is sky high... And the European Central Bank started buying 60 billion euros of government bonds a month in the latest round of quantitative easing. Interest rates for the bonds of many European nations have turned negative.
 

 In addition, Russia is on the brink of war with Ukraine and Greece is threatening to leave the euro (essentially holding the other nations hostage).

It's a bleak situation. And the euro has been rightly punished...
 

 

 The euro stands at $1.13 against the dollar today. Investment bank Morgan Stanley says a "Grexit" – Greece leaving the euro – could push the currency down to $0.90 against the dollar – an all-time low.

And with the latest from Greece, a Grexit seems more and more likely...

We outlined the situation in Greece in the February 5 Digest. In short, the European Central Bank (ECB) wants Greece to impose austerity measures under the terms of its bailout deal.

Greece, under the leadership of Prime Minister Alexis Tsipras and the left-wing Syriza party, says the country's $367 billion of debt is unsustainable. (We agree.) And the ECB will have to take a haircut on the loan.

In a speech to parliament in Athens yesterday, Tsipras reiterated Greece would not honor the terms of its bailout. Instead, he will seek a bridge loan to keep Greece afloat while attempting to renegotiate the terms.
 

 On a side note, we have zero confidence in Wall Street analysts' estimates... They are guesses made to feign knowledge for clients. We only report on them because they do influence markets.

Still, we found the following prediction about the possibility of a Grexit too funny not to share. Following Tsipras' speech, Reuters quoted Gary Jenkins, chief credit strategist at LNG Capital...
 

The possibility of Greece leaving the euro zone has increased with this speech from 35 percent to 50 percent.

There you have it... There's now a 50% chance Greece will leave the euro.
 

 Former Federal Reserve Chairman Alan Greenspan is even more certain. He told BBC Radio it's only a "matter of time" before Greece leaves the euro...
 

I don't see that it helps them to be in the euro, and I certainly don't see that it helps the rest of the eurozone, and I think it is just a matter of time before everyone recognizes that parting is the best strategy.

 Greek Finance Minister Yanis Varoufakis also stepped up his language in an interview with Italian state television network RAI yesterday. He called the euro a "castle of cards." And he said a Grexit would be catastrophic. From Reuters...
 

I would warn anyone who is considering strategically amputating Greece from Europe because this is very dangerous. Who will be next after us? Portugal? What will happen when Italy discovers it is impossible to remain inside the straitjacket of austerity?

 To summarize, Varoufakis says that other indebted European nations will also leave the euro should Greece lead the way. He went further, saying...
 

Italian officials, I can't tell you from which big institution, approached me to tell me they backed us but they can't tell the truth because Italy also risks bankruptcy and they are afraid of the reaction from Germany.

Varoufakis also said that "Italy's debt situation is unsustainable," to which Italian Economy Minister Pier Carlo Padoan wrote on social-media website Twitter that Italy's debt was "solid and sustainable" in response. The medium for government fallacies has apparently been downgraded from TV press conferences to 144-character notes on social media.
 

 The point is... we're in an unprecedented situation with the euro today. Greece could leave. Other nations could follow.
 

Or... Greece could renegotiate the terms of its bailout. Other highly indebted countries could follow suit, which would make the ECB responsible for the financial wellbeing of several financially wounded countries.

For further color on the situation, we turn to Stansberry International co-editor E.B. Tucker, who sent us the below note from the ground in Warsaw, Poland...
 

 I (E.B.) have spent the last few days in Belarus and this week will be in Poland and Germany working on the February issue of Stansberry International. I can tell you firsthand that following Western news is not going to give you an accurate picture of what's happening here.

It's a chess match. The problem is, two boards are in play at once... one in Greece and the other in Ukraine. They're totally different, but Russia has the right setup in both games. President Vladimir Putin's pieces are best-positioned and he has been three moves ahead of the other players.

Greece is a no-win situation for the European Union (EU) and a no-lose situation for Russia. If Greece stays in the euro, it's a welfare state, hobbling along with bills paid by the other members. If it leaves the EU, Russia promises to reopen trade, which would immediately give Greece a powerful financial ally.
 

 Don't forget that the No. 1 job of politicians is to stay in power. That's why French President Francois Hollande and Germany Chancellor Angela Merkel rushed to Minsk, Moscow, and Kiev this weekend. It's also why they both came out with bold statements over the weekend favoring Putin's desired outcome in Ukraine. He wants a broken state without EU membership, which he will be able to control. The wealthy (and historically Russian) eastern portion of Ukraine would be separated and called "Novorossiya."
 

We're watching this closely. It's hard to say which situation is tenser. Greece's fate will affect the entire EU. Remember, in the early 20th century, Germany tried to control Europe by force. Now, it's using the EU. If it loses Greece, it will lose Spain, Portugal, and Ireland, too.
 

 The U.S. is supporting the Ukrainian resistance. It's decision time on that front, because Russia has the upper hand on Germany and France. Russian sanctions are hurting those two as much as (or more than) they were designed to hurt Putin. Sanctions and capital controls always act like a boomerang, hurting the creator more that the target.
 

If the U.S. decides to press its Ukrainian agenda harder now, it will begin to lose western European support and eventually endanger weaker NATO allies bordering Russia. Latvia would be the logical pressure point to test the U.S.
 

That's not all... Switzerland is scrambling, too. Its central bank hinted at capital controls because it knows either way this breaks, the franc is headed much higher.
 

 We're waiting to see what happens this week in order to make our next investment decision. We don't own any Greek stocks at the moment in Stansberry International. If the EU bails Greece out again and restructures its debt favorably, the country's stocks will appreciate dramatically. So will Spanish, Portuguese, and Irish stocks, which would (rightfully) expect the same treatment. But we don't think that's likely.
 

Syriza already has a Spanish ally in Podemos, a party with the same agenda. It's not having trouble finding supporters. Merkel and Hollande must see that another Greek compromise is only the first domino in a chain that will eventually topple them.
 

More to come as events unfold here.

 Sean here... back to the euro. As we said above, things can't get much worse. When that happens, it only takes things getting a little better for you to make big returns. Look at the following charts...

We're nearing all-time bullish levels in the dollar...
   

...and all-time bearish levels in the euro...
 

 

 The problems with Ukraine and Greece are already priced in. In the history of the euro, we've never had more people short the currency than we have today... That means there aren't many sellers left.
 

 I called True Wealth editor Steve Sjuggerud – who wrote his dissertation on currencies – to share his thoughts on the euro.
 

As we noted in the January 19 Digest, Steve thinks the dollar has topped. He recommended buying gold.
 

 But a toppy dollar is also bullish for the euro. And Steve "feels strongly" the euro has bottomed here. On the phone, he told me...
 

You don't need things to get "good." You only need things to get "less bad" to make a lot of money in the euro. There's nothing good at all priced into the euro today. I don't know what good things will happen, but I would definitely go long the euro and set a stop at the recent low of $1.11.

 New 52-week highs (as of 2/6/15): CDK Global (CDK), CME Group (CME), Esperion Therapeutics (ESPR), and Constellation Brands (STZ).
 

 In today's mailbag, two subscribers weigh in on TradeStops. Do you use TradeStops to track your trailing stops? Write us your review at feedback@stansberryresearch.com.
 

 "Great article... would suggest that you mention that both TradeStops (under their position sizing tab, with Smart Trailing Stops) and your formula from Black Book: S-A Trader's Manual, p. 75, using a Smart % Trailing Stop, will calculate a recommended position size, using your individual risk/loss tolerance. I've had the good fortune to be using these dynamic risk calculations, with Smart trailing stops... combined with some patience for entry points and results have been excellent. Thanks again." – Paid-up subscriber Bob
 

 "Ha! The advertisement about Costa Rica came from a 'crowd funded science' source. What a history of failure has plagued those in science who follow the crowd. From Thomas Malthus to Paul Ehrlich, what everybody knew about science has turned out to be wrong. Fifty years ago, virtually all doctors would cut out kids tonsils, because everyone knew they were mere evolutionary vestiges with no purpose; in fact, now we know at least some of the over 40 'vestigial organs and structures' that science used to tout.
 

"I love science; I've taught it for over 30 years. But most of our scientific advancements have come from those who refused to follow the crowd, an interesting fact in view of your article on Dr. Smith, who seems to have (along with you and Steve) some very anti-crowd perspectives!
 

"I had one qualm about the data you show, using the new ideas from Dr. Smith. It looks on the charts you published as if his methods produce significantly superior results in good times, and significantly worse results during times of market collapse! During the collapse of 2008-2009, his trend line drops below yours. I have no solution, but I suspect you or Dr. Smith (or Steve, Doc, Jeff, etc.) could figure out the problem that produces this unfortunate result, and significantly improve on what it will produce.
 

"Incorporating Dr. Sjuggerud's methods with True Wealth Systems (to know when to be in and out of the markets) into the TradeStops approach, for example, might be very helpful. As always, great ideas. I love the mental stimulation every Friday, even on the rare occasion that I disagree with what you are saying." – Paid-up subscriber Timothy

Regards,

Sean Goldsmith

February 9, 2015