Category — Overseas News

Sometime in the next few weeks we’re going to find out if Greece can afford to stay in the euro. We’re also going to find out if Spain and Italy can afford to leave the euro. Access to credit markets is the key issue. The stigma of default will lock a country out of capital markets. If you don’t have a plan to replace your currency and then devalue it, you’re doomed.

But first, the crisis in Greece didn’t come to a head over night but it can’t be far away. Rival political parties have been unable to form a government. New elections are scheduled for the second week in June. The financial has definitely become political. The people have run out of patience with unsound money and the world built on it.

All that said, the Greeks managed to make a €430 million payment to hold-out creditors last night. Nearly 97% of Greek creditors agreed to the restructuring of the country’s debt in March. That wiped off over €100 billion in Greek debt and resulted in 70% losses for some of the bondholders who accepted the deal. Not all of them did. [Read more →]

Europe, Europe, Europe…

I know, you’re sick of hearing about Europe’s problems.

But the problem with Europe is that it won’t go away. And if it does go away, we’ll have even bigger problems. What a mess.
Of course, I’m talking about the Euro-currency zone and the European Union, not Europe itself.

I love Europe. I love every country in Europe. I love the different cultures. I love the different languages. I love the different societal models. I love the history of Europe.

And no doubt all the Europeans love all the same things about their Europe – except maybe some of their history. But even more than loving Europe, Europeans love their own countries. Why? Because they have different cultures, languages, societal models, and differing views of their history. Vive la différence!

So, whose bright idea was it to gloss over (with shiny promises and, later, a shiny new currency) thousands of years of differences and shove all Europeans into a funnel in the hopes that they’d all come out the other end as one homogeneous mass of humanity?

Oh, that would be the bankers and financiers who wanted a United States of Europe so that the free flow of goods and services payable with a common currency would make everyone better off, and make themselves better, better off, by a lot of betters.

And now, what a surprise! [Read more →]

Greece is looking likely to leave the eurozone

The mood music is turning against Greece.

When the eurozone crisis first kicked off, the idea of letting Greece leave the eurozone (or ejecting it), was unthinkable.

European leaders weren’t allowed to speak of such things, for fear that those nasty speculators in the financial markets would get the wrong idea.
Now the gloves are off. The head of the left-wing party that came second in the weekend’s Greek election is declaring that the austerity programme needs to be ripped up.

In response, the European Central Bank has politely but firmly said: ‘drop dead’ (or words to that effect). [Read more →]

You may think Europe is the last place you should invest.

If you think that, you’re wrong.

The European economy is in a huge hole and there’s only one way to get out of it…

In fact, in the latest Australian Small-Cap Investigator, we argue that some of 2012?s biggest gains could come from Europe. And one industry in particular…

Politics holds the key to the euro’s future.

The euro is a political construct, not an economic one. As it stands, the euro cannot function in the long term, from an economic point of view. The various countries involved are too different.

So the main thing holding the euro together so far is that European voters, by and large, still want it. Voters might be angry at Germany, or angry at their own leaders, or angry at eurocrats in general.

But they don’t yet blame the currency for their woes.

This could be the year that all that changes…

Forget Growth Versus Austerity

Forget all the stuff about austerity versus growth. It’s good column fodder for economists, but it doesn’t get us any closer to understanding what will happen on the ground. [Read more →]

On Friday night we had April’s US employment numbers. They showed that the economy added just 115,000 jobs during the previous month.

That may not sound too bad, but doesn’t go very far across a population of 312 million people recovering from a financial crisis.
The other problem is that this is now the second month in a row that these numbers have been a bit ‘soggy’.

From October of last year to this February, the monthly job numbers seemed to be gathering momentum. After being up and down like the proverbial for the last two years, they finally seemed to be forming a trend.

But these last few months have put the US economic ‘recovery’ into question. [Read more →]

Russia controls the European natural gas market. The map below shows the gas pipelines running from Russia, into Western Europe, and South and East Asia:

Click here to enlarge

For years, Europe has been at the mercy of Russian natural gas suppliers. And in 2006, Europe bore the brunt of a pricing dispute when Russia simply turned the gas off. Nothing flowed through the pipes.
Again, in 2009, Russia switched off the flow of natural gas, but this time, only to the Ukraine over another pricing dispute. Other parts of Europe received limited amounts of natural gas.

And just to prove a point, in February – in the middle of a cold snap during a mild northern winter – the Russian state-owned gas company, Gazprom decided that it would only supply the amount of natural gas it was contractually bound to. [Read more →]

Today, we’re back to giving you some actionable advice…rather than just throwing a few thoughts at you.

Yesterday we explained that China’s economy wasn’t going to be a global economic saviour.  Instead, it’s about to head towards an economic death as it shifts directly from a producing economy to a consumer economy.

But what you need to know is how to make a quid from this shift…or whether you should ignore it.  We’ll show you our idea in a moment.  But first let me fill you in on the background story…

‘I want a new model for France where success will be admired, where talent and merit will be rewarded.  I want a new model for France, where those who’ve worked all their lives can live through their retirement without being a burden on their children’ – French President, Nicolas Sarkozy (as quoted by the Australian Financial Review)

[Read more →]

In China, there is a steel company called Wuhan that has been diversifying into wine production and pig farming. There is also a shipbuilder, Yangzijiang, which is using the cash it gets as down payments on its ships to run a lending business on the side.

These might sound like amusing anecdotes of a faraway land. But they are more than that. Between them, they tell the story of the greatest credit bubble yet. Both the shipbuilder and the steel company alert us to two things.

First, China’s fantastic housing bubble. China has long been printing money to buy dollars and keep its exchange rate pegged. In a normal environment, this would have led to inflation. But, as Eclectica’s Hugh Hendry points out, that’s not what happened.

Why? Because, at the same time, the authorities set the interest rate on deposit accounts at 0.72% and left it there. By 2008, inflation was 7.9%. So the real rate of return on a deposit was -7.2% – which helped to dampen consumption to a record low for any country: 34% of GDP. [Read more →]

Most days we like to give you something actionable, or something useful.

An idea you can take away and – hopefully – use to make yourself a few bucks on the stock market.

But sometimes we get an idea that won’t give you the chance to make a buck. We had such an idea over a year ago.

We didn’t make any money from it. And we don’t think you made any money from it either…well, not yet anyway.

Yet we told you because we thought it was important that you know about it.
And even though you may not have made a buck from it, we’re certain it could have saved you a few bucks. Or at the very least, saved you the stress of investing in a volatile market. [Read more →]