Warren Buffett on Opportunities in Europe

Most of us know Warren Buffett has the uncanny ability to see value where others don't, and over the last year, he recently said in an interview with CNBC, that he has been buying equities in Europe.

Before we get into that, another element that is extremely important in the success of Warren Buffett is the way he successfully recognizes the low range of a good entry point. I'm not talking about market timing here, but his understanding of the season of time companies are at bargain rates. In his view, Europe has been in that season of time, and many stocks there remain cheap.

 

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Greece Won't be Repaying Debt

For those who really understand what's happening in the euro zone, it isn't surprising in light of the visit by German Chancellor Angela Merkel to Greece, that it highlights the fact that Greece won't be repaying its debt anytime soon, which according to the IMF, will climb to an astounding 171 percent of gross domestic product (GDP) in 2012 and 182 percent in 2013. 

The IMF adds that Greece won't be able to pay the five-year debt reduction target that was the foundation behind receiving the $130 billion euro bailout. The original goal of cutting the debt level of the country to 120 percent of GDP by 2020 is now considered an impossibility by the IMF. It says the existing debt will now need to be restructured. Some economists saw this coming even before the bailout was put into effect, and many in Greece continue to demand that the austerity measures required to receive the money be, for the most part, rescinded.

 Talking to CNBC, former deputy minister of economy and finance, Peter Doukas, said, "The Greek debt is not repayable at this point. The economy is too weak to afford a 300 billion euro ($387.9 billion) plus debt." "Perhaps now isn't the best time to talk about it, but very soon we're going to have to talk about rescheduling of Greece's official debt. It simply isn't repayable," Doukas added.

 Doukas concluded, "There's going to be an official debt haircut or restructuring or rescheduling of sorts. My feeling is that it needs to go 15 years further in terms of maturity and a cutting of interest rates by at least 1.5 percent." Personal incomes have plunged by 25 percent in Greece, and unemployment among young people has soared to 55 percent.

 The question now is if Greece can in any way be trusted. The outrageous obsession by some in the euro zone to keep the failing and tenuous region together appears to at this time, be willing to be done at any cost.

But Greece and other economically failing states have exposed the soft underbelly of the agreement, and it's only a matter of time before some of these states are required to take real austerity measures in order to get their loans, or they'll be forced to go back to operating economically using their own currencies.

 At this time the will to save the European Union remains strong, and some leaders will continue to take the misguided and immoral steps to keep it together no matter who it hurts. That can only go on for so long before outrage from the productive workers and markets that are more free than the failing socialists governments weighing on economic Europe, rise up and rebel against those parasitical states that continue to drain the coffers of the region.

 Those wanting to use Europe as the stepping stone for a new world order know this could set them back for many years if it fails now. They are doing everything to ensure it doesn't, but the fallout from those efforts could trigger even more problems than the fall of the EU, euro and euro zone would bring.

At this time is appears it doesn't matter to those attempting to lead this attempt at a global coup.

Citigroup (NYSE:C): Euro Could Plunge 4 Percent

Citigroup (NYSE:C) said if support for the euro weakens, it could drop by 4 percent against the US dollar as a result. That level hasn't been experienced since July if it happens.

Renewed focus on Europe and its dubious stress tests of banks has been the impetus behind the fall in the Euro to its lowest level so far in September, and is sure to continue to fall as support crumbles.

Citi analyst Tom Fitzpatrick, said in a note to clients, “There is still another move down coming on the euro. The euro has come under renewed pressure in the short term as a result of focus again on European banks and sovereign spreads.”

Fitzpatrick added, if the euro falls below the support level of $1.2588, it may fall as low as $1.22.

Nobody should allow themselves to be lulled to sleep by the financial mainstream media coverage of the European sovereign debt crisis, as it's very real, and much worse than being admitted.

Moody's (NYSE:MCO) Downgrades Ireland Government Bonds

Government bond ratings from Ireland were downgraded by Moody's (NYSE:MC), a good reminder that the sovereign debt crisis in the European Union remains a key component of global economic health, and the patient remains in serious condition, possibly ready to move to critical.

The major reasons given be Moody's for the downgrade were these:

- The government's gradual but significant loss of financial strength, as reflected by the substantial increase in the debt-to-GDP ratio and weakening debt affordability.

- Ireland's weakened growth prospects as a result of the severe downturn in the financial services and real estate sectors and an ongoing contraction in private sector credit.

- The crystallization of contingent liabilities from the banking system, as represented by a series of recapitalization measures and the need to create the National Asset Management Agency (NAMA), a government-created special purpose vehicle that is acquiring impaired loans from banks.

It's good that Moody's did this, more, again, from the perspective that investors need to be reminded of the ongoing weakness of the European Union.

A number of media outlets, including financial ones, have been making it look like Europe was out of deep trouble and was doing well. That's far from the truth, and the sovereign debt crisis remains a major challenge for the global economy going forward, as the overall EU is the largest economy in the world.

As far as the actual downgrade of Irish government bonds, it was from Aa1 to Aa2.

Citigroup's (NYSE:C) Pandit: Euro Not Going Away

According to Citigroup (NYSE:C) CEO Vikram Pandit, he and the giant bank believes the "euro is here to stay."

Pandit added, "I think we are going to look at this as another one of these issues that we’ve put behind us."

Pandit also offered praise to how the European Union handled the situation, saying it was a "very good job," on Bloomberg television.

What was the good job? They simply through money at it to the tune of $975 billion. What's so great about that?

But then again we must consider the source, as Pandit was at the helm of Citigroup as it had to get taxpayer dollars in order to survive. So the idea to throwing money at problems is about all big bankers like Pandit can see as a solution to challenges like these.

Many analysts and investors believe the euro can't survive this crisis because Europe refused to defend it by allowing the situation to play out in the countries, showing them they were serious about adhering to the financial rules of the EU.

The euro of course won't immediately fail, but definitely could sometime in the next decade or so.

Euro Continues Freefall - 13 Month Low

The euro continues to disintegrate in the face of the reality the bailout of Greece may only be the beginning of sovereign debt problems in Europe, and questions on whether the EU can handle what they're facing lingers in the back of everyone's minds.

Against the U.S. dollar, the euro plunged to down to $1.2994, the lowest level since April 2009.

The more the EU offers Greece aid, the less seriously the euro is taken, as some like Jim Rogers believe they should let Greece default on their debt in order to show they take the euro seriously. Unfortunately that doesn't look like what's going to happen, and there's sure to be a domino of nations coming begging for money in the near future once Greece gets theirs.

What all this is saying is the markets don't believe the $144 billion being put together to bail out Greece will do much to deal with the extent of the problem, and they're probably right.

Analysts continue to downwardly revise the value of the euro, as they don't see an end in site as to how far it'll drop.

EU Offers Greece €30 Billion in Loans

With continued ambiguity, even after saying they'll help Greece, the EU has offered specific details now, saying they'll provide €30 billion in loans to Greece in 2010 if needed.

The International Monetary Fund reiterated their commitment to the struggling country, offering another €10 billion in loans for 2010 as well.

For the next three years, overall loans could amount to €80 billion or $107 billion to under-gird the faltering nation.

Debt due in 2010 alone for Greece stands at €54 billion, which the Greek government says they can't continue to pay on.

While Greek Finance Minister George Papaconstantinou says the country hasn't asked for the loans to be activated at this time and are looking to borrow from the markets, that seems to be posturing to placate the growing outrage of the ultra-socialist Greece and the distributing of money they don't have to their people with no way of paying back what they have given them.

The people of Greece have become so socialist that they're rioting over not being coddled over, even as the country teeters on defaulting on its debt and losing their liquidity.

All Greece has done is put in place a plan of cutting their budget deficit to 8.7 percent, which is still far beyond the parameters the EU countries were supposed to adhere to, and they plan on doing that by increasing taxes, freezing pensions and cutting some of the wages in the public sector.

You don't hear them planning on doing what is really needed, and that is to limit the size of government and cut back on programs they obviously can't afford to offer. Until they do that, all of this is a band-aid putting off the inevitable.

Greece actually calls this an austerity program.

The Greek government has been overspending for many years, and what led to the crisis was a budget deficit in 2009 of 12.9 percent of overall economic output in the nation.