I want your opinion

We have a bunch of smart traders here and a bunch of people who naturally think out of the box or as you have seen with your own eyes, the market is much different then you probably thought before you joined the Wolf pack and you likely have a new, out of the box perspective.

You all know what I have been reporting, Germany is up to something and that something looks like 1 of 2 things and in fact there may be a plan "A" and a back up.

First plan "A" seems to be to kick out the countries that are causing core contagion, we have seen France on the radar as they have caught the bug and most notably today, we saw a German auction FAIL! If the country with the best of everything in the EU can not sell its debt, we know what the market is thinking, "Any backstop Germany may provide or has in the past committed to provide is now an outright liability to Germany" and the banks don't want to be caught flat footed again like they were when buying Spanish, Italian and French debt, just to see it fall in value putting the very banks at risk of credit downgrades as well as outright failure (examples include ERSTE, Dexia, recently Commerzbank in Germany, and many more). Look at what buying these bonds did to MF Global and look at what Jefferies is going through now, which I maintain is likely a bank that will not exist in present form if at all come Q1 2012 and maybe before.

These banks that hold massive Italian (mostly) and Spanish debt are backing away from Germany and France as they realize they are trapped with the Italian and Spanish debt. They are trying to offload it, but Italian banks hold so much they have decided to roll the dice and hold it because they know if they try to sell it on the secondary market, the value will plunge, yields will sky rocket and they (whether their math is correct or not) figure they would take a bigger loss in trying to sell it then just hold it and HOPE for a miracle. Any investor/trader knows when you are reduced to HOPE rather then an edge, you are likely on the path to destruction.

So banks a) are not buying the strongest debt in Europe, Germany's because Germany is seen as the ultimate back stop. Secondly they most likely don't have the capital to buy anything and as mentioned, don't want to be in the Italian finger trap. Interestingly, after several months of massive selling in US treasuries as European banks sell everything they can to raise capital/money, the last 2 US treasury auctions have been a rather smashing success, which tells us that foreign banks and wealth funds see the US as the safest place to park money right now (which may end up being a big mistake considering our canaries in the coal mine-MFG, JEF, and the Congressional Super Committee's predictable failure to do what they were supposed to do-it's Wednesday, deadline has past, they have admitted defeat).

So what is Germany planning? The ultimate Bazooka that the market's are begging for is, "Let the ECB print', let the ECB lend to the IMF and let the IMF buy up all the debt, Germany, because of their experience with hyper inflation in the Weimar Republic is loathe to do so and if they were to do so, I think they would already have moved in that direction. We know from Wikileaks and US embassy cables that Germany has a plan to exit the Euro. We also know from many sources that Germany wants to consolidate the Euro area to far fewer countries and any that remain will ultimately give up their sovereignty in a bid to look more like the US and Germany/Brussels will be the overlord. This is a bad situation as it leaves a lot of countries hanging out to dry and default.

So we have this today from the second half of "Mer-Kozy", Sarkozy says today, exactly what the German CDU party has been voting for:

• SARKOZY SAYS EURO ZONE MUST FURTHER INTEGRATE (This means fewer EU nations, not more)
• SARKOZY SAYS TROUBLED EURO COUNTRIES DIDN'T UNDERTAKE REFORMS (Translation: It's your own fault, don't cry when you are left hanging out to dry) and even more interestingly, France has been one of the countries (thus the divide between Germany and France recently that has seen some very barbed comments from both sides) that has been screaming for the ECB to PRINT. Now they seem to be abandoning that position-something big is happening between Germany and France on the issue or France is making overtures to Germany as they see their AAa rating in more danger everyday-today was Dexia. The importance of this should not escape you, think hard about this one, it's much bigger then a bullet point headline.
• SARKOZY SAYS EURO ZONE MEMBERSHIP IMPLIES OBLIGATIONS (Taken with the comment above, he's saying the same thing, you had your chance, you blew it, you will be out). Again, a 180 degree turn from PRINT!
• SARKOZY SAYS EUROPE'S FUTURE REQUIRES CONVERGENCE (Here is is simply moving toward the German position).

So, here's what we should be thinking about, what is the end game. The ECB is buying debt for the time, but they lowered the quota for how much they can buy. The ECB has been vocal about not monetizing debt like the US and that is Germany's position. So if they are buying debt which they know is toxic and will cost them eventually, why are they doing it? It seems they are trying to buy time, trying to keep Spain and Italy from imploding which will drag down all the potential members of the new EU.

This is important. If Germany walks and they may just do that after seeing they can't sell their own debt without their yields spiking too, it means a whole lot of recessionary trouble as country after country defaults. If they are moving toward a new , smaller EU, the same result will happen, except maybe some of the core nations will be spared. It's bad or worse.

The timing of Sarkozy's 180 degree about face, coming on the heels of Germany's major wake up call today in a failed bund auction may be Sarkozy trying to get in the good graces of Germany that holds the future of the EU.

Think about what is happening here, it is important and whatever you come up with, I'd love to hear it.