Lost, dazed and confused EU leaders: it's time to start drinking!
Key Markets report for Monday, 19 January 2026
As President Trump turned all serious on Denmark over Greenland, European powers decided to stand firm in the face of American bullying. At the invitation of the Kingdom of Denmark, on 14 and 15 January, a number of these principled EU and NATO member nations decided to send their troops to Greenland for joint exercises code named, “Arctic Endurance.”
The apparent intent of these exercises was reconnaissance-focused, and preparatory for larger, rotating NATO presence and training in the Arctic. The total of the “Arctic Endurance” deployments was as follows:
France: 15 soldiers (mountain infantry specialists, already on the ground in Nuuk, with promises of more land, air, and sea reinforcements).
Germany: 13 personnel (a reconnaissance team).
Sweden: 3 officers (sent to prepare for exercises).
Norway: 2 defense personnel (to map out further cooperation).
Finland: 2 military liaison officers (for a fact-finding mission).
Netherlands: 1 naval officer.
United Kingdom: 1 officer.
Grand total: 37 personnel
We can imagine General Ben Hodges or some other brilliant military mind behind this initiative and whatever objective it was intended to achieve. Over in Washington DC, however, Mr. Trump was not half amused. He fired off a post on TruthSocial delivering some really bad, no good, awful news for the Arctic Endurance contestants:
The Europeans responded with a rushed attempt at damage control. The key excerpts are as follows:
“As members of NATO, we are committed to strengthening Arctic security as a shared transatlantic interest. The pre-coordinated Danish exercise ‘Arctic Endurance’ conducted with Allies … poses no threat to anyone. We stand in full solidarity with the Kingdom of Denmark and the people of Greenland. … we stand ready to engage in a dialogue … Tariff threats undermine transatlantic relations … We will continue to stand united, bla, bla, bla.. our sovereignty.”
In spite of this proud, principled stance and high-minded words, it would appear that the Arctic Endurance of German troops lasted all of three days. Yesterday they were ordered to return to Germany, having accomplished their mission on Greenland. Most probably, once Berlin calculated that the cost of new U.S. tariffs could be as much as 8-15 billion euros per year, they adopted a different set of principles and decided to abandon the proud Kingdom of Denmark and their Greenland.
For the time being, it seems that the Trump Administration is ploughing forward on the basis of their position, as articulated by Secretary Marco Rubio during his confirmation hearings, that the post-World War II global order is today more than obsolete and that it is currently being used as a weapon against the United States. Accordingly, they are demolishing that global order, which is causing massive anxiety to the European powers, who have come to depend on that order and who apparently never bothered to formulate any alternatives to their dependency on the U.S.
Kallas’ drinking as a solution
It’s little wonder that the EU’s Commissioner for Foreign Affairs apparently thought that the state of things is so dire that the only solution is to start drinking.
EU leaders’ confusion and incompetence is already costing European citizens dearly. Trump’s new tariffs will inevitably result in some business failures and jobs lost. Ms. Kallas’ infantile statements will cost more: I can’t imagine that she inspires confidence on the part of the investor class to keep buying European bonds and keep their money in Europe. It truly is a ship of fools sailing straight into a storm that’s far beyond their ability to navigate.
Trade of a lifetime?
For the moment, the markets aren’t registering any of this, but the euro and European bonds are teetering on a cliff’s edge. In fullness of time, they’ll both likely tip into a terminal bear market that will precipitate the bloc’s disintegration. For investors, shorting European bonds (including the British gilt), the euro and the British pound could be among the most promising trades for the next few years. A word of caution, however: markets may take longer to register any of this than we expect.
That “large scale price event” that will probably materialize may not be exactly around the corner, but I believe it’s not far off. Rather than anticipating, I believe it’s best to go with systematic trend following strategies: when the moves start to shape up in earnest, the algorithms will pick up on them and generate the right signals accordingly.
As far as the misbegotten EUSSR goes, its demise won’t be a great loss for humanity. For the people of Europe, it will be liberating, which is the silver lining in Trump’s erratic policies.
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Today’s trading signals
With Friday’s closing prices we have the following changes for the Key Markets portfolio:
