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.
Showing posts with label Sovereign Default. Show all posts
Showing posts with label Sovereign Default. Show all posts
Wednesday, September 8, 2010
Wednesday, August 25, 2010
Morgan Stanley (NYSE:MS): Some Governments Will Default
As governments around the world refuse to cut back on their size and continue to embrace their socialists policies, the risk increases for governments to default on their debt, and according to Morgan Stanley (NYSE:MS), it's no longer if, it's going to be who and when.
It is amazing to see this unfold and be ignored by governments, as the inability to extract more money from the productive and redistribute it to the unproductive is bringing these countries down, and they fanatically hang onto their failed philosophies and economic voodoo based on socialist schemes which can no longer be supported.
Arnaud Mares, an executive director at Morgan Stanley, said this, “Governments will impose a loss on some of their stakeholders. The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.”
Mares added, the sovereign debt crisis isn't just relegated to Europe, as it's a global phenomenon, “and it is not over.”
We at Commodity Surge have been amazed at the lack of coverage in the mainstream economic media, as after a few overtures and announcements from European leaders that the sovereign debt crisis was over, reporters ran for the doors to the next important financial story.
To even seriously think the crisis was over in Europe, let alone other nations of the world, after a few austerity moves, was naive at best. Even the selling of bonds in the market should have been taken largely with a grain of salt, as if decades of economic practices and mindsets can be changed by throwing money at the problem.
As in the United States and its stimulus spending, all it does is temporarily cover up the mess until the money runs out, and then it picks up again right away revealing the gasping economic patient who survives only because of the misguided attempt to maintain things as they are, even if they can't be afforded.
There is no answer but smaller government and people taking responsibility for their own lives through being productive. The game is up and the attempt to save socialism from complete collapse is nearing an end, as the great experiment is over, and it have totally failed.
How long government stubbornly hold to their promises will determine the depth of the carnage, as some simply can't believe their socialist theories and Keynesian practices are completely wrong.
They better start believing it, as the welfare of their people and survival as a nation are at stake.
It is amazing to see this unfold and be ignored by governments, as the inability to extract more money from the productive and redistribute it to the unproductive is bringing these countries down, and they fanatically hang onto their failed philosophies and economic voodoo based on socialist schemes which can no longer be supported.
Arnaud Mares, an executive director at Morgan Stanley, said this, “Governments will impose a loss on some of their stakeholders. The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.”
Mares added, the sovereign debt crisis isn't just relegated to Europe, as it's a global phenomenon, “and it is not over.”
We at Commodity Surge have been amazed at the lack of coverage in the mainstream economic media, as after a few overtures and announcements from European leaders that the sovereign debt crisis was over, reporters ran for the doors to the next important financial story.
To even seriously think the crisis was over in Europe, let alone other nations of the world, after a few austerity moves, was naive at best. Even the selling of bonds in the market should have been taken largely with a grain of salt, as if decades of economic practices and mindsets can be changed by throwing money at the problem.
As in the United States and its stimulus spending, all it does is temporarily cover up the mess until the money runs out, and then it picks up again right away revealing the gasping economic patient who survives only because of the misguided attempt to maintain things as they are, even if they can't be afforded.
There is no answer but smaller government and people taking responsibility for their own lives through being productive. The game is up and the attempt to save socialism from complete collapse is nearing an end, as the great experiment is over, and it have totally failed.
How long government stubbornly hold to their promises will determine the depth of the carnage, as some simply can't believe their socialist theories and Keynesian practices are completely wrong.
They better start believing it, as the welfare of their people and survival as a nation are at stake.
Friday, May 14, 2010
Jim Rogers: Commodities will Continue Roaring
The combination of increasing demand and decreasing supply has Jim Rogers a perpetual bull on the commodities market, and I think he's right.
Even with the news of China taking measures to battle its inflation, it's not a matter of whether they'll continue to acquire commodities, it's at what level they'll continue to buy them.
That isn't to say there won't be a slowdown in demand for specific commodities, but it won't dampen the bull market, but more than likely will extend it out further, albeit possibly a little smaller of a pace.
The same is true of the EU sovereign debt crisis. That, coupled with China, could definitely hurt individual commodities, and by extension, some raw materials companies, but the overall commodity bull market will continue, just some of the individual commodities within the sector may have prices drop.
Rogers likes to point out that oil demand will continue to grow while known supplies dwindle. That means ultimately oil prices will rise in response to that. It's only a question of when, not if, in Rogers' view.
One thing that Rogers has been warning about for some time and governments and central banks have refused to heed, is the bailing out of nations in Europe.
Rogers said if the European Union was really serious about the euro, they would never take the step of bailing out Greece. Not that they've not only bailed out Greece, but have put close to $1 trillion on the table for the welfare, socialist states to get hold of, he was shocked, and while before he doubted the survival of the euro, now he's adamant that there is no way it can survive in the years ahead, and it could come much quicker than he originally believed. That of course would mean the end of the EU, but that's no loss. Countries in Europe survived for centuries without the EU, they'll survive afterwards as well.
Rogers major thinking on the demise of the euro is, now that the irresponsible countries know they can get away with their over spending, they can continue on with their ways with no consequences.
While there are laws being written by these countries to put so-called austerity measures in place, we all know they'll write down anything and agree to it to get their hands on the trillion dollars.
Worst though, rumblings from the clowns running the Federal Reserve seem to imply there will be much more bailout money coming to the socialists, and they are attempting to spin that as the need to bail out the banks heavily exposed in the region.
While that's actually true, it's the banks enabling the entitlement cultures that have led to this, now those in northern Europe, and now in the United States are being called upon to rescue these deadbeats who continue to spend out money with impunity, while the banks of the world contribute to their drunken spending habit by buying up their bonds. That's why banks are in trouble. That's why we need to stop it.
Anyway, as far as commodities go, there is a finite amount of resources with the technology now at our disposal, and Rogers says that is the reasoning behind the extended bull market that could go on for more than another decade.
As far as currencies, Rogers said this will add to the commodity bull market, as they're all being debased, and investors are getting smarter and smarter as far as understanding that, and will put their money in real assets rather than paper currencies, which only survive as long as people have faith in them. That faith is waning, and that's good news for commodities, and good news for those doing their homework and investing in them.
Even with the news of China taking measures to battle its inflation, it's not a matter of whether they'll continue to acquire commodities, it's at what level they'll continue to buy them.
That isn't to say there won't be a slowdown in demand for specific commodities, but it won't dampen the bull market, but more than likely will extend it out further, albeit possibly a little smaller of a pace.
The same is true of the EU sovereign debt crisis. That, coupled with China, could definitely hurt individual commodities, and by extension, some raw materials companies, but the overall commodity bull market will continue, just some of the individual commodities within the sector may have prices drop.
Rogers likes to point out that oil demand will continue to grow while known supplies dwindle. That means ultimately oil prices will rise in response to that. It's only a question of when, not if, in Rogers' view.
One thing that Rogers has been warning about for some time and governments and central banks have refused to heed, is the bailing out of nations in Europe.
Rogers said if the European Union was really serious about the euro, they would never take the step of bailing out Greece. Not that they've not only bailed out Greece, but have put close to $1 trillion on the table for the welfare, socialist states to get hold of, he was shocked, and while before he doubted the survival of the euro, now he's adamant that there is no way it can survive in the years ahead, and it could come much quicker than he originally believed. That of course would mean the end of the EU, but that's no loss. Countries in Europe survived for centuries without the EU, they'll survive afterwards as well.
Rogers major thinking on the demise of the euro is, now that the irresponsible countries know they can get away with their over spending, they can continue on with their ways with no consequences.
While there are laws being written by these countries to put so-called austerity measures in place, we all know they'll write down anything and agree to it to get their hands on the trillion dollars.
Worst though, rumblings from the clowns running the Federal Reserve seem to imply there will be much more bailout money coming to the socialists, and they are attempting to spin that as the need to bail out the banks heavily exposed in the region.
While that's actually true, it's the banks enabling the entitlement cultures that have led to this, now those in northern Europe, and now in the United States are being called upon to rescue these deadbeats who continue to spend out money with impunity, while the banks of the world contribute to their drunken spending habit by buying up their bonds. That's why banks are in trouble. That's why we need to stop it.
Anyway, as far as commodities go, there is a finite amount of resources with the technology now at our disposal, and Rogers says that is the reasoning behind the extended bull market that could go on for more than another decade.
As far as currencies, Rogers said this will add to the commodity bull market, as they're all being debased, and investors are getting smarter and smarter as far as understanding that, and will put their money in real assets rather than paper currencies, which only survive as long as people have faith in them. That faith is waning, and that's good news for commodities, and good news for those doing their homework and investing in them.
Alcoa (NYSE:AA) Down As Precious Metals Plunge
Alcoa (NYSE:AA) has dropped again, as precious metals are taking a beating today, with copper, zinc and aluminum all falling on the London Metal Exchange.
The realization that the European sovereign debt crisis will crush the euro because of the misguided decision to provide bailout money of almost $1 trillion to the fiscally irresponsible, socialist governments.
Alcoa has been struggling to break out, standing at a share price that has been level since August 2009.
The latest news that several aluminum ETFs will spur the aluminum industry will help Alcoa in the long term, as some of them are scheduled to launch in the latter part of the year.
For now though, the fall of the euro will dominate the economic landscape, along with the inflation concerns in China, all of which could put a damper on demand for aluminum and other precious metals.
The realization that the European sovereign debt crisis will crush the euro because of the misguided decision to provide bailout money of almost $1 trillion to the fiscally irresponsible, socialist governments.
Alcoa has been struggling to break out, standing at a share price that has been level since August 2009.
The latest news that several aluminum ETFs will spur the aluminum industry will help Alcoa in the long term, as some of them are scheduled to launch in the latter part of the year.
For now though, the fall of the euro will dominate the economic landscape, along with the inflation concerns in China, all of which could put a damper on demand for aluminum and other precious metals.
Wednesday, May 12, 2010
Jim Rogers, Roubini on EU Bailout
Jim Rogers said in a recent interview that he was "stunned" when hearing of the size of the bailout the EU was going to provide for irresponsible countries who have refused to rein in their spending.
Rogers said on the sovereign debt crisis bailout that it will be simply "another nail in the coffin" for the euro, as it basically means Europe has forsaken the currency.
Rogers said, "This means that they've given up on the euro, they don't particularly care if they have a sound currency, you have all these countries spending money they don't have and it's now going to continue."
Nouriel Roubini has made similar observations and conclusions, saying the euro as a common currency for the region will probably be dropped sometime in the next several years in order for some of the countries to kick start their economies.
While Roubini thinks the euro has a chance to survive, it will only be used by countries with "stronger fiscal and economic fundamentals," he said. He sees a number of countries going off of the euro and a remaining few continuing on with it. That sounds like the European Union will be made up of only several countries in that case, and will effectively be finished.
Even so, it will be interesting if Roubini's scenario plays itself out like he envisions, as a core group of countries may actually thrive if they are willing to take the steps most of the countries in the EU have been unwilling to take concerning outrageous spending.
For Rogers, he's flabbergasted that Europe is willing to spend that type of money in order to keep these deadbeat countries running like they have been. It defies common sense, but these are politicians, so it's easy to understand why that's the case.
Rogers said on the sovereign debt crisis bailout that it will be simply "another nail in the coffin" for the euro, as it basically means Europe has forsaken the currency.
Rogers said, "This means that they've given up on the euro, they don't particularly care if they have a sound currency, you have all these countries spending money they don't have and it's now going to continue."
Nouriel Roubini has made similar observations and conclusions, saying the euro as a common currency for the region will probably be dropped sometime in the next several years in order for some of the countries to kick start their economies.
While Roubini thinks the euro has a chance to survive, it will only be used by countries with "stronger fiscal and economic fundamentals," he said. He sees a number of countries going off of the euro and a remaining few continuing on with it. That sounds like the European Union will be made up of only several countries in that case, and will effectively be finished.
Even so, it will be interesting if Roubini's scenario plays itself out like he envisions, as a core group of countries may actually thrive if they are willing to take the steps most of the countries in the EU have been unwilling to take concerning outrageous spending.
For Rogers, he's flabbergasted that Europe is willing to spend that type of money in order to keep these deadbeat countries running like they have been. It defies common sense, but these are politicians, so it's easy to understand why that's the case.
Tuesday, May 11, 2010
Euro Drops after Euphoria Wanes Over EU Rescue Commitment
Euro continues on its downward plunge as the temporary euphoria over the almost $1 trillion bailout loan package by the European Union for socialist countries in the region who take and redistribute other people's money (which they have now run out of) at a rate they can't afford, is now over, and the repercussions of the spending is starting to be understood by those stepping back and looking at another misguided attempt to save those who refuse to manage their financial affairs in a responsible manner.
Many are realizing that even $1 trillion isn't near enough to handle the situation, and all it's doing is postponing the inevitable, as it's going to be difficult to force these countries to turn from their outrageous spending and turn to a more market-oriented economy, like Germany generally has.
The problem with Germany is it took them about 15 years to make the transition, making the $1 trillion a tiny amount when taking into account several countries which will probably have to take as long as Germany to implement these changes, and $1 trillion won't be anywhere near enough to extend the time needed to do what needs to be done.
These people in the countries in trouble have been weaned on entitlement programs where they actually think they should be taken care of by the state, which is the underlying cause of the debacle Europe is facing, as they simply can't afford the wages and perks their governments have promised them.
It could even last longer if people rise up and violently protest, destroying a lot of their countries because they're going to throw tantrums over being cut off and having to start taking care of themselves more.
Many are realizing that even $1 trillion isn't near enough to handle the situation, and all it's doing is postponing the inevitable, as it's going to be difficult to force these countries to turn from their outrageous spending and turn to a more market-oriented economy, like Germany generally has.
The problem with Germany is it took them about 15 years to make the transition, making the $1 trillion a tiny amount when taking into account several countries which will probably have to take as long as Germany to implement these changes, and $1 trillion won't be anywhere near enough to extend the time needed to do what needs to be done.
These people in the countries in trouble have been weaned on entitlement programs where they actually think they should be taken care of by the state, which is the underlying cause of the debacle Europe is facing, as they simply can't afford the wages and perks their governments have promised them.
It could even last longer if people rise up and violently protest, destroying a lot of their countries because they're going to throw tantrums over being cut off and having to start taking care of themselves more.
Monday, May 10, 2010
Caterpillar (NYSE:CAT), Citigroup (NYSE:C), Bank of America (NYSE:BAC) Up on Response to EU Sovereign Debt Crisis
Caterpillar (NYSE:CAT) and Citigroup (NYSE:C) and Bank of America (NYSE:BAC), among others, surged today as close to $1 trillion in loans were offered to battle the growing sovereign debt crisis in Europe.
Caterpillar was up over 7 percent as of this writing, Bank of America was up by just under 7 percent, and Citigroup was up by 5.5 percent on the day.
Boeing also enjoyed solid gains, rising by over 6 percent as well, as confidence returned to investors after a long period of uncertainty as to how Europe would respond to the crisis.
Even so, once the smoke clears, it's dubious as to how this will help, as rewarding these socialist countries with close to a $1 trillion for irresponsible financial behavior and their culture of entitlement does nothing to deal with the underlying causes of the problem, which is nothing more than spending more than the countries could afford.
As a growing number of people are saying, you can't solve debt problems by printing more money and throwing it at it. Wait until people in the United States find out the Federal Reserve through a bunch of money at the problem as well.
Caterpillar was up over 7 percent as of this writing, Bank of America was up by just under 7 percent, and Citigroup was up by 5.5 percent on the day.
Boeing also enjoyed solid gains, rising by over 6 percent as well, as confidence returned to investors after a long period of uncertainty as to how Europe would respond to the crisis.
Even so, once the smoke clears, it's dubious as to how this will help, as rewarding these socialist countries with close to a $1 trillion for irresponsible financial behavior and their culture of entitlement does nothing to deal with the underlying causes of the problem, which is nothing more than spending more than the countries could afford.
As a growing number of people are saying, you can't solve debt problems by printing more money and throwing it at it. Wait until people in the United States find out the Federal Reserve through a bunch of money at the problem as well.
AK Steel (NYSE:AKS), US Steel (NYSE:X) Like Sovereign Debt Response
Along with a number of raw materials companies, AK Steel (NYSE:AKS) and US Steel (NYSE:X) responded strongly to the news there will be a huge response by the European Union to the sovereign debt crisis, which threatens to destroy the EU experiment, along with the euro as a legitimate currency.
AK Steel was up over 3 percent earlier today, while US Steel has gains over 5 percent, as investors believe the loan package could at minimum support demand for raw materials, and possibly increase demand.
This will help the steel industry in general, as it was already looking to be a good year for them, although the EU sovereign debt crisis had cast a shadow on the industry.
AK Steel was up over 3 percent earlier today, while US Steel has gains over 5 percent, as investors believe the loan package could at minimum support demand for raw materials, and possibly increase demand.
This will help the steel industry in general, as it was already looking to be a good year for them, although the EU sovereign debt crisis had cast a shadow on the industry.
Saturday, May 8, 2010
Patriot Coal (NYSE:PCX), Massey Energy (NYSE:MEE), Alpha Natural Resources (NYSE:ANR), Peabody Energy (NYSE:BTU), Arch Coal (NYSE:ACI), Consol Energy (NYSE:CNX)- All Down
Coal companies took a big hit, as major coal companies like Patriot Coal (NYSE:PCX), Massey Energy (NYSE:MEE), Alpha Natural Resources (NYSE:ANR), Peabody Energy (NYSE:BTU), Arch Coal (NYSE:ACI), Consol Energy (NYSE:CNX) were all down on concerns over the European sovereign debt crisis.
With the risk of contagion very real, many think the sovereign debt debacle in Europe could bring the economy back into a deep recession, which is debatable as to whether or not it has really ever left.
Coal is a bellwhether of the economy, and so usually how coal goes, so the economy is also going, and the market shows there is a growing concern over whether or not the global economy can take a hit as big as it looks like it will with the countries in Europe.
With the risk of contagion very real, many think the sovereign debt debacle in Europe could bring the economy back into a deep recession, which is debatable as to whether or not it has really ever left.
Coal is a bellwhether of the economy, and so usually how coal goes, so the economy is also going, and the market shows there is a growing concern over whether or not the global economy can take a hit as big as it looks like it will with the countries in Europe.
Friday, May 7, 2010
Jim Rogers, Marc Faber Investment Advice
Jim Rogers and Marc Faber recommend investors cut back on their holdings in equities after the expected market correction happened yesterday which eliminated over $1 trillion in market value in the U.S.
Both Rogers and Faber said the market had been due for a correction, and it not something to be overly worried about, at least not yet.
While the 3 to 4 percent drop was a large number, Rogers said at this time it's no reason to panic. Faber believes this is the beginning of an ongoing decline in market value for some time to come.
Rogers addressed the Greek sovereign debt crisis again, reiterating it will be a good thing for Greece and the euro if they default. Even so, Rogers added fears of contagion could create an unstable market which could go on a wild ride, and that contagion isn't limited to the southern nations in Europe, as it could easily spread to the UK and the United States, said Rogers.
Faber's advice was for investors to decrease their positions whenever the share prices rebound, while Rogers continues to advise investors to invest in raw materials and agriculture.
Both Rogers and Faber said the market had been due for a correction, and it not something to be overly worried about, at least not yet.
While the 3 to 4 percent drop was a large number, Rogers said at this time it's no reason to panic. Faber believes this is the beginning of an ongoing decline in market value for some time to come.
Rogers addressed the Greek sovereign debt crisis again, reiterating it will be a good thing for Greece and the euro if they default. Even so, Rogers added fears of contagion could create an unstable market which could go on a wild ride, and that contagion isn't limited to the southern nations in Europe, as it could easily spread to the UK and the United States, said Rogers.
Faber's advice was for investors to decrease their positions whenever the share prices rebound, while Rogers continues to advise investors to invest in raw materials and agriculture.
Tuesday, May 4, 2010
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.
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.
Friday, April 30, 2010
Marc Faber, Jim Rogers on Greece Bailout
In a Bloomberg interview, Marc Faber reiterated what billionaire Jim Rogers has been saying for some time, and that is that Greece shouldn't be bailed out by the European Union or the IMF, as it's only postponing the inevitable, and rewarding excessive consumption.
By excessive consumption, it means the people of Greece being given handouts from the Greek government which the Greek government couldn't afford to pay.
That is obvious to everyone now, but it was hidden from their fellow European neighbors, who are now foolishly ready to bail out Greece, which will only postpone the crisis temporarily while inviting more countries to the postponement party.
Jim Rogers has stated in the recent past a number of times that if the EU was serious about the euro, they would allow Greece to fail so the rest of the EU countries with similar irresponsible financial practices will start getting their houses in order and implement much strong austerity programs.
In other words they need to cut down on spending and eliminate a lot of the government sponsored and central bank enabled programs and perks that are in no way sustainable. It's also another way of saying governments need to get smaller and central banks hopefully some day eliminated as being a part of the financial network around the world.
Faber adds that Greece, when looking at it in a similar way as you would any corporation, should be allowed to go bust and no loans should be extended to them.
Also banks holding loans should write off the loans from 30-50 percent of the face value of them.
In the end, all this will do is lead to the ultimate bust in the view of Faber, who says the only thing democracies are doing now is postponing everything until it all blows up in their faces. They will never escape this, and eventually they'll all have to pay the price.
Loans simply don't take care of the reason behind the crises in Europe and the other democracies, and the only tool in Faber's outlook they have is the tool of postponement by loans. There is a day coming when postponement will no longer work and the entire system will collapse under the weight of entitlement and political expediency.
By excessive consumption, it means the people of Greece being given handouts from the Greek government which the Greek government couldn't afford to pay.
That is obvious to everyone now, but it was hidden from their fellow European neighbors, who are now foolishly ready to bail out Greece, which will only postpone the crisis temporarily while inviting more countries to the postponement party.
Jim Rogers has stated in the recent past a number of times that if the EU was serious about the euro, they would allow Greece to fail so the rest of the EU countries with similar irresponsible financial practices will start getting their houses in order and implement much strong austerity programs.
In other words they need to cut down on spending and eliminate a lot of the government sponsored and central bank enabled programs and perks that are in no way sustainable. It's also another way of saying governments need to get smaller and central banks hopefully some day eliminated as being a part of the financial network around the world.
Faber adds that Greece, when looking at it in a similar way as you would any corporation, should be allowed to go bust and no loans should be extended to them.
Also banks holding loans should write off the loans from 30-50 percent of the face value of them.
In the end, all this will do is lead to the ultimate bust in the view of Faber, who says the only thing democracies are doing now is postponing everything until it all blows up in their faces. They will never escape this, and eventually they'll all have to pay the price.
Loans simply don't take care of the reason behind the crises in Europe and the other democracies, and the only tool in Faber's outlook they have is the tool of postponement by loans. There is a day coming when postponement will no longer work and the entire system will collapse under the weight of entitlement and political expediency.
Sunday, April 11, 2010
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.
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.
Friday, April 9, 2010
Gold Continues to Ignore Dollar
Gold ignoring U.S. dollar
Maybe more than any other time in recent history, gold has decoupled from its usual inverse relationship to the U.S. dollar and is standing on its own as an alternative form of currency.
While most say that will change when interest rates change in the U.S. and the dollar strengthens, I'm not sure that will be completely true.
I'm not saying it won't happen, but something has changed in the mindset of investors in reference to paper currencies, and it remains to be seen whether that change holds or not when circumstances change to favor the dollar. What remains to be seen is if gold has a floor under which will last for years into the future, no matter what happens to the dollar.
Investors and the general public are gradually learning the weakness of continuing to print money out of thin air, and even when interest rates increase there's the likelihood that inflation will too, adding another element to the overall performance of gold, and that doesn't take into account the potential European fiasco that may unfold in the next year or two, of which Greece is only a small part of it.
There are too many variables because of the economic and banking crisis which are unique to our time, and we really don't know where things will end up, and that makes gold even more attractive going into the cloudy future.
Maybe more than any other time in recent history, gold has decoupled from its usual inverse relationship to the U.S. dollar and is standing on its own as an alternative form of currency.
While most say that will change when interest rates change in the U.S. and the dollar strengthens, I'm not sure that will be completely true.
I'm not saying it won't happen, but something has changed in the mindset of investors in reference to paper currencies, and it remains to be seen whether that change holds or not when circumstances change to favor the dollar. What remains to be seen is if gold has a floor under which will last for years into the future, no matter what happens to the dollar.
Investors and the general public are gradually learning the weakness of continuing to print money out of thin air, and even when interest rates increase there's the likelihood that inflation will too, adding another element to the overall performance of gold, and that doesn't take into account the potential European fiasco that may unfold in the next year or two, of which Greece is only a small part of it.
There are too many variables because of the economic and banking crisis which are unique to our time, and we really don't know where things will end up, and that makes gold even more attractive going into the cloudy future.
Thursday, March 25, 2010
Alcoa (NYSE:AA) Falls on Strong Dollar
Alcoa and Sovereign Debt in Europe
Fundamentals aren't driving commodity-related stocks at this time, as the sovereign debt fiasco in Europe is making the U.S. dollar look good, in spite of its own problems. Alcoa (NYSE:AA), like other commodity companies and commodity stocks are having downward pressure put on their share prices as a consequence.
The euro is under such pressure that people have already forgotten the problems with the U.S. dollar, as at this time they're insignificant in comparison to the euro.
Much of this was precipitated yesterday by Portugal's debt being downgraded by Fitch Rating, which caused havoc in the commodities market.
The U.S. dollar reached a 10-month high against the euro on the growing concerns over sovereign debt in Europe.
Fundamentals aren't driving commodity-related stocks at this time, as the sovereign debt fiasco in Europe is making the U.S. dollar look good, in spite of its own problems. Alcoa (NYSE:AA), like other commodity companies and commodity stocks are having downward pressure put on their share prices as a consequence.
The euro is under such pressure that people have already forgotten the problems with the U.S. dollar, as at this time they're insignificant in comparison to the euro.
Much of this was precipitated yesterday by Portugal's debt being downgraded by Fitch Rating, which caused havoc in the commodities market.
The U.S. dollar reached a 10-month high against the euro on the growing concerns over sovereign debt in Europe.
Wednesday, March 24, 2010
Portugal Credit Downgraded by Fitch Ratings
Portugal Sovereign Debt
Fitch Ratings downgraded the long-term credit of Portugal from AA to AA-, reinforcing the depth of the crisis Europe and the euro continue to face.
Pierre-Oliver Beffy, chief economist at Exane, said sovereign risk will continue to be an issue in the region for another 5-10 years. Beffy added, "We think that the Fitch comment is very lagged and reflects the adjustment of rating to lower growth outlook in countries where austerity plans are implemented."
Almost everywhere I read this has attempted to be made to look like an irrelevant event, but in fact it's extremely important, not simply as a reminder of the problems facing Europe and the euro, but as a mirror of the reality of the depth of those problems.
We probably haven't even began to see the consequences of the problems in Europe yet, and that's not only in reference to Portugal, Italy, Ireland, Greece and Spain. Other countries are struggling as well, although that's not as easy to discern on the surface as the more obvious PIIGS are.
Portugal Sovereign Debt
Fitch Ratings downgraded the long-term credit of Portugal from AA to AA-, reinforcing the depth of the crisis Europe and the euro continue to face.
Pierre-Oliver Beffy, chief economist at Exane, said sovereign risk will continue to be an issue in the region for another 5-10 years. Beffy added, "We think that the Fitch comment is very lagged and reflects the adjustment of rating to lower growth outlook in countries where austerity plans are implemented."
Almost everywhere I read this has attempted to be made to look like an irrelevant event, but in fact it's extremely important, not simply as a reminder of the problems facing Europe and the euro, but as a mirror of the reality of the depth of those problems.
We probably haven't even began to see the consequences of the problems in Europe yet, and that's not only in reference to Portugal, Italy, Ireland, Greece and Spain. Other countries are struggling as well, although that's not as easy to discern on the surface as the more obvious PIIGS are.
Portugal Sovereign Debt
Dollar Up, Commodities Down
Sovereign Debt Putting Downward Pressure on Commodities
The continuing sovereign debt fiasco in Europe has caused investors to look to the U.S. dollar and gold as their choice of currency for safety. And yes, gold is increasingly being thought of a form of currency again by people, as they begin to learn the inherent weakness in paper currencies.
An interesting part of all of this is as the crisis in Europe continues to unfold, it forces investors to decide whether to invest in gold or the U.S. dollar for a place of safety, and many times that has resulted in both going up in price on the same day, telling us people are thinking of both of the commodities as a place to be.
As far as commodities in general, they won't behave in a similar matter because of being denominated in U.S. dollars. When the dollar goes up, foreign investors tend to flee commodities for that reason.
It's not that the U.S. dollar is on a rebound or considered healthy in any way, it's that when you compare it to the euro especially, it makes it look robust in comparison. That's what's largely driving this reaction to commodities, and it will continue on in what should be some wild swings unrelated to supply and demand.
Portugal today was downgraded for its debt by Fitch Ratings, adding another element to the sovereign debt crisis in Europe, which seems to only be getting started as to the revelation on how deep it really is.
The continuing sovereign debt fiasco in Europe has caused investors to look to the U.S. dollar and gold as their choice of currency for safety. And yes, gold is increasingly being thought of a form of currency again by people, as they begin to learn the inherent weakness in paper currencies.
An interesting part of all of this is as the crisis in Europe continues to unfold, it forces investors to decide whether to invest in gold or the U.S. dollar for a place of safety, and many times that has resulted in both going up in price on the same day, telling us people are thinking of both of the commodities as a place to be.
As far as commodities in general, they won't behave in a similar matter because of being denominated in U.S. dollars. When the dollar goes up, foreign investors tend to flee commodities for that reason.
It's not that the U.S. dollar is on a rebound or considered healthy in any way, it's that when you compare it to the euro especially, it makes it look robust in comparison. That's what's largely driving this reaction to commodities, and it will continue on in what should be some wild swings unrelated to supply and demand.
Portugal today was downgraded for its debt by Fitch Ratings, adding another element to the sovereign debt crisis in Europe, which seems to only be getting started as to the revelation on how deep it really is.
Tuesday, March 23, 2010
Morgan Stanley (NYSE:MS), US Steel (NYSE:X), European Sovereign Debt Crisis
US Steel has large exposure to European sovereign debt crisis
There are a number of companies based in the United States which have a strong presence in Europe, making them extremely vulnerable to the emerging sovereign debt crisis which isn't limited to Greece. One of those is US Steel Corporation (NYSE:X) which generates 27 percent of their revenue from the European nations.
It does make me wonder if Morgan Stanley (NYSE:MS) analyst Mark Liinamaa thought of that when he raised his target on US Steel from $58 to $62.
Of course the increased prices this year will help the company, and there is no way of knowing how quickly or deeply a sovereign default would affect a company, as it would depend on the country and the ability and will of other European nations to respond.
Looking at the fiasco of Greece, not just with their fiscal irresponsibility, but the wary response of the rest of Europe toward helping them out, you have to wonder what would happen if it was Spain or a much larger country like them about to default on their debt.
While there is no reason to panic, it should cause everyone to check their stock portfolio to see if the companies in them are highly exposed to Europe. You may be surprised at what you find.
There are a number of companies based in the United States which have a strong presence in Europe, making them extremely vulnerable to the emerging sovereign debt crisis which isn't limited to Greece. One of those is US Steel Corporation (NYSE:X) which generates 27 percent of their revenue from the European nations.
It does make me wonder if Morgan Stanley (NYSE:MS) analyst Mark Liinamaa thought of that when he raised his target on US Steel from $58 to $62.
Of course the increased prices this year will help the company, and there is no way of knowing how quickly or deeply a sovereign default would affect a company, as it would depend on the country and the ability and will of other European nations to respond.
Looking at the fiasco of Greece, not just with their fiscal irresponsibility, but the wary response of the rest of Europe toward helping them out, you have to wonder what would happen if it was Spain or a much larger country like them about to default on their debt.
While there is no reason to panic, it should cause everyone to check their stock portfolio to see if the companies in them are highly exposed to Europe. You may be surprised at what you find.
Monday, March 15, 2010
Gold Prices Surge on Sovereign Debt Worries
Gold and Sovereign Debt
A warning from Moody's today on the sovereign debt risk rating to four major economies, which include the U.S., Britain, Germany and France, caused gold prices to rise as safety was on the minds of investors today.
But before investors leave the gold sector, they need to look closely at the potential consequences of the risk associated with losing their AAA-rating status and why it's a reality.
Look at the plunge in value of the euro in relationship to little Greece to see what could happen if any of these nations were in the same position, which in reality they aren't that far off.
Moody's also said Spain is probably the closest among countries at this time to be at risk of losing their status, and some observers have said if Spain fell the European Union couldn't support them, and the euro experiment, and the Union itself could be over.
As far as the performance of gold prices, this is why even though the U.S. dollar had some strength today gold prices went up with it, as the usual parameters and moving in opposite directions doesn't apply when you start getting into sovereign debt issues.
This is why the idea we're in a gold bubble is ludicrous. The underlying fundamentals for gold, which are as an inflation protection and safety hedge are strong in force, and they are not going to go away any time soon. Consequently, gold prices will continue to rise.
Gold and Sovereign Debt
A warning from Moody's today on the sovereign debt risk rating to four major economies, which include the U.S., Britain, Germany and France, caused gold prices to rise as safety was on the minds of investors today.
But before investors leave the gold sector, they need to look closely at the potential consequences of the risk associated with losing their AAA-rating status and why it's a reality.
Look at the plunge in value of the euro in relationship to little Greece to see what could happen if any of these nations were in the same position, which in reality they aren't that far off.
Moody's also said Spain is probably the closest among countries at this time to be at risk of losing their status, and some observers have said if Spain fell the European Union couldn't support them, and the euro experiment, and the Union itself could be over.
As far as the performance of gold prices, this is why even though the U.S. dollar had some strength today gold prices went up with it, as the usual parameters and moving in opposite directions doesn't apply when you start getting into sovereign debt issues.
This is why the idea we're in a gold bubble is ludicrous. The underlying fundamentals for gold, which are as an inflation protection and safety hedge are strong in force, and they are not going to go away any time soon. Consequently, gold prices will continue to rise.
Gold and Sovereign Debt
Tuesday, March 9, 2010
Australian, New Zealand Dollars Strengthen
Australian, New Zealand Dollars Up
As concerns over the sovereign default of Greece dissipate or at least are discounted into the market, the Australian and New Zealand Dollars have responded by increasing in value.
The lack of concern isn't because the situation in Greece has actually improved, but rather that the European Union is sending stronger signals that it's ready to bailout the country if it comes down to that.
Australian, New Zealand Dollars Up
As concerns over the sovereign default of Greece dissipate or at least are discounted into the market, the Australian and New Zealand Dollars have responded by increasing in value.
The lack of concern isn't because the situation in Greece has actually improved, but rather that the European Union is sending stronger signals that it's ready to bailout the country if it comes down to that.
Australian, New Zealand Dollars Up
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