Let's start with Greece. It is an ongoing disaster that nobody wants to face, especially the bankers who may have to take a 50% haircut on their loans, that's if they're lucky. I think it was Citibank's former chairman, Walter Wriston, that said, "Countries don't go bankrupt." Welcome to the real world Walter. Greece is going to default or there is going to be a revolution in the country.
That leads us to the Federal Reserve. I'm not sure they fully understand and know what they're doing. I think this grand experiment of quantitative easing has gotten way out of hand. In hindsight, it looks like the Fed got the country into something that we didn't have a plan to get out of. The answer to this conundrum was always down the line and some time in the future. The Fed has had over six years to figure this out and there is still no plan to get out of it. "More data" is another way for the Fed to say, "we don’t know!" Ben Bernanke is gone and now has a new job with a hedge fund and Janet Yellen, the new Fed chairwoman, is another disciple from the same school of thought that Ben came from. So, what do you think? Do you think the Fed has any idea what it's doing? Continue reading "There Is Not Much Difference Between The Fed And Greece"→
After nearly three years of extremely weak economic growth, the European Central Bank is finally delivering on Mario Draghi's pledge to do "whatever it takes" to get the region back on track.
The central bank is set to pump $64 billion into the economy through monthly bond purchases through September 2016. The quantitative easing program, alluded to in September, formally announced in January and started on March 9, may already be having an effect on the economy in terms of sentiment.
Q4 GDP growth of 0.3% beat expectations, and manufacturing data showed signs of life in March. Exports to the United States could get a big boost this year on a massive depreciation in the euro versus the U.S. dollar.
All things considered, I would say it could be a very good year for European stocks, and possibly most of 2016 as well.
There is one fly in the ointment. Greece is back in the headlines as officials were said to have informally approached the IMF to delay repayment on the country's debt but were denied. Thanos Vamvakidis, head of European G10 FX strategy at BofA Merrill Lynch Global Research, said the country may run out of money if a reprieve is not granted at the meeting of eurozone finance ministers on April 24.
OK, so it’s not the most original headline. But it reveals the thinking of some savvy investors, and I think they have a good point.
Baron Rothschild, the 18th century British nobleman and member of the Rothschild banking family, is credited with saying, “The time to buy is when there’s blood in the streets.”
I haven’t heard that there is actual blood running in the streets of Athens or other Greek cities, but it’s pretty close, financially speaking, which means it may be time to be buying Greek bonds.
We all know by now that after taking the most seats in the January 25 parliamentary election, the left-wing Syriza party formed a coalition government with the small right-wing Greek Independence Party. The one thing the two have in common is opposition to anti-austerity measures imposed on Greece by the European Central Bank and European Union as conditions for earlier financial bailouts and more in the future. There is also the fear that the Syriza-led government wants to secede from the EU, although that seems unlikely to happen.
Not surprisingly, investors have fled from Greek assets in droves and pulled their money out of Greek banks.
The Athens Stock Exchange General Index, or ASE, has tanked more than 40% since last March, nearly 13% since the election. Government bond prices have likewise plummeted, sending yields soaring. The yield on the 10-year bond jumped more than 200 basis points after the Syriza win and now yields more than 11% as of Friday. Continue reading "Get me to the Greek"→
Money makes the world go around, but it’s the trends, the big trends in money, that we find interesting and profitable.
This morning ECB president, Mario Draghi, who famously stated a couple of years ago that the ECB would do "whatever it takes" to stimulate the European economy. Well, clearly that little sound bite and some awkward moments (Greece, Spain, Portugal) were not enough as Europe remains mired in a recession.
So what does Europe do? Well, they trot out Mario Draghi again to announce another stimulus package. So far, the ECB has been wrong on its growth forecast as well as its inflation forecast. It doesn't exactly inspire confidence in their forecasting ability. Here is my take and it's simple - they have no idea how to get out of this economic hole. I never bought into the idea that getting out of a hole, meant you had to dig a deeper hole.
How are the markets going to react and translate this latest move by the ECB?
In today's video, I'll be looking at all the major markets. I'll take a look at how they are reacting to the ECB’s announcement of its 60 billion monthly bond buying program slated to continue well into 2016. Continue reading "Europe Is All Out Of Options"→