Editor's Note: Special Contributor Michael Lewitt publishes the highly regarded The Credit Strategist and was recognized by the Financial Times for forecasting both the financial crisis of 2008, and also the credit crisis of 2001-2002. His 2010 book, The Death of Capital: How Creative Policy Can Restore Stability (John Wiley & Sons) was included in the curriculum at the University of Michigan and Brandeis University.
The European financial crisis is often pushed out of the headlines by crises of a more incendiary variety. That might suggest the problem has diminished. It hasn't.
The saga of Portugal's Banco Espirito Santo is a sure sign to investors that the European financial crisis is anything but over.
Mario Draghi and the European Central Bank (ECB) may keep its finger in the dike, but the dike is only going to spring more holes.
European banks are still highly leveraged. Their investors are likely to run for the hills at the first sign of trouble, and governments are going to be reluctant to bail them out unless they feel that their collapse poses a systemic risk.
Global investors are, for the most part, shrugging off the problems at Banco Espirito Santo, but European investors are not taking things so lightly. Here's why you shouldn't, either...