Action in Portugal’s credit-default swaps might be a telling bear signal, economic expert and author Larry McDonald said Wednesday.
While Greece has “backup” private-sector involvement that could buoy its economy, the Portugal CDS 5-Year was at record levels, McDonald said on “Fast Money.”
“It’s decoupling from the rest of the group,” he said.
The PTCD5 was $1,453.03 in evening trading.
McDonald likened the situation with Portugal and Greece to a financial event horizon in 2008.
“The political will to save Lehman Brothers — and I talk about this in my book — was really taken away from Bear Stearns,” he said.
McDonald called it a bearish signal in the intermediate term.
“It doesn’t necessarily mean the world’s going to blow up tomorrow,” he said.
However, the bull-bear ratio being at the highest levels since February didn’t mean a euro currency trade was the answer for the next couple of weeks.
“The euro was so oversold toward the end of the year. It’s in a nice run here,” McDonald said. “For the next week, the euro looks fine — for the next two weeks.”
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