How Bad Is Europe?

[Myth465]

Kyle Bass isn't very bullish...

http://www.cnbc.com/id/44518427/

 

I have never seen a bullish Kyle Bass, with that said I tend to agree with him.

[Parsad]

However, despite all the gloom, if I see a cheap stock I'm buying. Also, we are entering the stage now of trading existing holdings for better value or similar value, but higher quality. I find that very tough to do, but it has always been very rewarding.

 

Yup.  I agree.

 

Finally, we have to ask ourselves what it felt like for a Japanese portfolio manager, investing in domestic stocks, over the last decade. Maybe something like this? For more than 10 years? Phew, that will wear me out.

 

Frankly, I'm loving this.  I'm completely at home in an environment when people are panicking...as long as I'm not the one panicking!  ;D  But the first five years of my fund has been an extraordinary learning experience.  Not one year was similar to another...even 2011 is completely different than 2008.  And the volatile years were incredibly volatile, which was something to watch in awe actually.  Very interesting times indeed!  Cheers!

 

[MrB]

Dalio interview. Good comments on Europe

 

 

http://www.bloomberg.com/video/75534426/

Transcript

http://www.scribd.com/doc/65310046/Ray-Dalio-Bloomberg-50-Sept-15-2011-Transcript

 

[Grenville]

Dalio interview. Good comments on Europe

 

 

http://www.bloomberg.com/video/75534426/

Transcript

http://www.scribd.com/doc/65310046/Ray-Dalio-Bloomberg-50-Sept-15-2011-Transcript

 

Thanks for the transcript link!

[vinvestor2010]

Hi

does anyone think that a collapse in the sovereign bond market of any one country could also spread to the general economy

the query is based on the following logic

-sovereign bonds are considered traditionally the safest investments

-a large part of bank deposits, insurance premia, compulsary savings of people are invested in these bonds

-when the value of these bonds falls - the savings of people in banks and their life savings through fixed deposits, government mandated savings programs also falls

-as a result, if people watch their life savings decline in value, they cut back on current consumption and try to build their savings anew and this time by keeping stuff under the pillow

-the cut back in consumption to build savings causes a general slowdown in the economy spiralling over the long term into lower investment, lesser jobs etc.

-lower investment and lower earnings ultimately means a lower stock market

 

Am I on the wrong track , is there a fault in my logic??

 

Please let me know??

[biaggio]

Hi

does anyone think that a collapse in the sovereign bond market of any one country could also spread to the general economy

the query is based on the following logic

-sovereign bonds are considered traditionally the safest investments

-a large part of bank deposits, insurance premia, compulsary savings of people are invested in these bonds

-when the value of these bonds falls - the savings of people in banks and their life savings through fixed deposits, government mandated savings programs also falls

-as a result, if people watch their life savings decline in value, they cut back on current consumption and try to build their savings anew and this time by keeping stuff under the pillow

-the cut back in consumption to build savings causes a general slowdown in the economy spiralling over the long term into lower investment, lesser jobs etc.

-lower investment and lower earnings ultimately means a lower stock market

 

Am I on the wrong track , is there a fault in my logic??

 

Please let me know??

 

The consequences you outline makes sense, but I don think the other governments will let it happen if it has a chance to spread to their own economies. Some how they will print money, "extend + pretend" to these sovereigns

 

I think what Kyle Bass said may occur. Sovereigns will promise to cut expenses and pay back what they owe, but will come up short and process starts over.

[Guest misterstockwell]

All I see is bad news all day every day on every station.

 

My wife and I had dinner with a very wealthy couple in Toronto on Friday. The wife couldn't stop talking about the demise of the dollar and the US and how we are so lucky to be Canadian, the husband an heir to a media fortune, said they sold all their equities and are only invested in gold bullion and Canadian gics. These people have no equity exposure since mid August. The market moves so quickly, I can see with our investors the same trend.

 

Equity markets have lost almost 10 Trillion in wealth since mid August. I bet you all that equity market exposure has declined substantially for the avg. joe investor. The market can literally shoot back up on any dose of good news. Nobody likes to earn 0.25% interest, that only looks good when equities are declining and there appears to be headline risk. The market has declined for 19 of 25 days, things will turn here soon.

 

I think people are tired of seeing their accounts claw their way up with a decent return over months and months only to see it smashed back down(and then some) in a matter of days. It is not conducive to long term investing. Frankly, as I have thought for some time, the markets are broken. Too many HFT firms and leveraged ETfs. Trades now must include huge slippage for paying HAL9000. It's a ripoff for every investor. If there is a whiff of sovereign default trouble around the globe, our market will crater. HAL9000 will shut off and  go home. Bids gone. Joe Sixpack won't come back. Until some stability comes back to the world, and some regulations come into effect to kill the HFTs, I don't blame that Toronto couple or any other investor for avoiding the markets.

[Josh4580]

The Topix has declined about 16 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system, damping demand in two of Japan’s biggest export markets. The decline has cut the price of shares on the index to 0.91 times estimated book value, near the lowest since March 2009. -Bloomberg

 

Wow the Japanese market is priced at .91X book value.  Thats pretty sad.  Anyone buying japanese stocks yet? What signs would one have to see to start feeling confidant in looking at these companies?

 

 

[Myth465]

I tend to dislike Forbes greatly, but he is right on Europe. I agree with him regarding the benefits that Germany receives from the Euro.

 

http://finance.yahoo.com/blogs/daily-ticker/forget-greece-europe-suffers-banking-crisis-lack-political-151554054.html;_ylt=Aklu3MGgGc5KZULcXVYKK4gp2YdG;_ylu=X3oDMTE1NzRyZGk3BG1pdANEVCBJbmRleARwb3MDMQRzZWMDTWVkaWFCbG9nSW5kZXg-;_ylg=X3oDMTFvcGs0cnBnBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3

[alertmeipp]

It's our Congress. No one willing to back off until the shxt hits. I think the time will come soon.

[rijk]

who is going to rescue the rescuer(s)?

 

regards

rijk

 

http://www.reuters.com/article/2011/10/08/us-eurozone-idUSTRE7953D520111008?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29

[MrB]

You!

http://thenewamerican.com/economy/sectors-mainmenu-46/9011-federal-reserve-to-bail-out-european-banks-again

[SharperDingaan]

 

It would appear that story per the financial press, & that of the average greek, are very far apart http://www.thestar.com/news/world/article/1066783--dimanno-will-greek-crisis-end-in-ruin

 

Try as we all might - why is it NOT in the average Greek, Italian, or Spanish interest to simply do a Icelandic default? & move on. World wide, the IMF experience has been that they can only push the recalcitrant so far. Were Greece, Italy, & Spain to act together - they would be the ones COLLECTIVELY dictating the terms, not the other way around.

 

We do not live in dictatorships. Austerity measures have to be voted in, they are widely seen as benefiting only the banks, & it is a small step for ambitious men to adversely sway a populace. The Wall Street 'sit-ins' are not going away -  they are growing, & they are being co-opted. Not that long ago, the Greece of the time was Germany, & the crises gave the world Hitler. Record unemployment amongst the < 25 was ultimately solved by war. Guess who dies first. 

 

We have forgotten that it is in all our interests to periodically have widespread bank failures. Break the power of the banking lobby, let the governments make depositors whole, & let new state/private banks rise out of the ashes to take over the function.

 

The banker is your servant, NOT your master.   

 

SD

[Hawk4value]

Sharper, I wholeheartedly concur.  Another group which should be included in addition to the banks are the Unions, be they private of public.  Unions pervert the free market mechanism and cause higher prices, misallocation of capital, and disfunction of the political process. Case in point are the auto workers unions. They used their political glout with the gov't to sidestep a long overdue restructuring to right size the cost structure of these bloated corporations: GM, Chrysler.  Instead Union equity positions were put ahead of bondholders thereby perverting the bankruptcy process and now putting the taxpayers money at risk of ever being paid back.  The phrase Government Motors (GM) is so true.  Personally, I will never buy a GM product.

[dcollon]

I thought these morning comments from Rich Farr at Boenning & Scattergood were funny:

 

 

 

 

Click For Today's Report

GERMANY WANTS A HAIRCUT

October 11, 2011

 

KEY POINTS:

 

GERMANS PUSH FOR BIGGER GREEK HAIRCUT:

The Telegraph reported today that Germany is pushing for a “hard” default in Greece with losses of 60% for investors of Greek debt, much higher than the previously agreed amount of a 21% haircut.  When you are talking about 60% losses, the term “haircut” no longer applies.  This is more of a back waxing.

 

German Finance minister, Wolfgang Schauble, recently stated that the original haircuts were too low and that banks will need sufficient capital to cover greater losses.  Yah Think?  There are fears that if Germany pushes for greater losses on Greek holdings, that there could be a spillover affects for the other peripheral sovereign debt and the crisis could “snowball” out of control.  It seems to us that the problem has already snowballed out of control, given that Greece wasn’t kicked out of the European Union over a year ago.  The banking crisis has now manifested itself in more than just the BIG SIP countries.  The banking crisis has now found its way to France and Austria and will only gain momentum from here.

 

Over the past weekend, Germany Chancellor Angela Merkel and French President Nicolas Sarkozy pledged to do “all that is necessary to guarantee bank recapitalization”, but provided no further details.  We call this the plan to have a plan.  But the bottom line is that you cannot solve a debt crisis with more debt.  Sooner or later, debt needs to be eliminated, either voluntarily or involuntarily.  We continue to believe the only option to end this crisis is for Greece to default.  To continue throwing good money at bad investments just obscures the line between good and bad credits.  Until we know exactly who the losers are going to be in Europe, we can’t possibly know who the winners will be as well.