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Showing posts from July, 2015

Greece -- what now

Will they or wont they?

One thing is clear the process is far from being over, aside from that absence of debt forgiveness -- only extension of maturity they ECB seems to be kicking the ball down the lane even further.  However, Greece has just discovered the limits to its sovereignty, when the President announced the re-opening of the country's stock market to be told by the ECB, that non, Monday was not a good day after all!  The limits of sovereignty explored by the people (and government) of Greece.

So what now, well barter is back in a big way!  People no longer having access to the government's payment system (e.g. Euros) are resorting to plain and simple barter.  That usually increases transaction costs, removes the power of taxation -- no "stinkin" 20% VAT, and inefficiency.  On the other hand it allows people to eat, so that's something right.

The breakdown of government has to be near, clearly the efforts to get all the ECB inspired legislation is hitti…

Canada and Australia

Two resource rich countries nearly identical stories -- I wrote about this risk years ago; Canada and Australia are second derivative countries, largely open what happens to these economies is largely driven by what happens elsewhere.  In the case of Canada and Australia that elsewhere is China -- Australia more directly than Canada but the end results are the same.

Case and point, both currencies flirted with US dollar parity (CAD even reached 0.95 at one point), now both are trading in the 1.30/1.35 range.  Usually, for manufacturing companies in country this would be very helpful, but the reality is that both countries manufacturers have sought over the years to insulate themselves from currency fluctuation (trust me its possible), although a 37% drop from its peak is hard to plan for...

Bottom line both economies are now suffering because their customer (China) is having a bit of a hard time.  The question then becomes how long will this situation persist?  The question then becom…

Greece -- an deal has been stuck, but will it stick?

One clause of the Greek/EU/ECB/IMF agreement felt wrong; Sunday trading -- this was considered an essential change that Greece has to enact.  Greece had to allow, even promote Sunday trading, this was an essential demand from Germany.  And yet if you ever travel to Germany (or France) you will notice that everything is shut! If this was so essential to the economic health of Greece, well then you would expect other European nations to enact/have similar laws, but this is not the case.  
The Greeks have just bought themselves a lot of money (necessary) to repay their lenders (German/British and American financial institutions -- and the providers of credit protection (CDS) must be breathing in relief).  Greece just got $90 billion that should keep them going until early 2016 -- their repayment/refinancing obligations run at around Euro 10 billion a month.  I've not seen/heard about any debt forgiveness or loan extension. 
There is no doubt that massive changes are about to occur i…

Did you know how many people are running for the president of the United States!

First off, I knew there were a few Republicans in the run, but I didn't know that the total was 14 with two more probables.  On the democrats there are five declared -- but realistically that race is done, Ms Clinton is well ahead in all the polls -- Sanders/Chaffe and Webb are all there to make sure that the left is well represented.

On the Republican side you've got the Christians:  Huckabee/Santorum.  On the far right you've got Cruz/Paul/Walker/Jindal and the crazies:  Trump/Carson  the funnies you've got Trump,Trump and I forget the third one (e.g Perry).  Then the corporatists:  Bush/Christie/Fiorina/Pataki/Graham probably forgetting someone.

On thing for sure, while the GOP was hoping for a more serious primary than last time -- they didn't get their wish.  Trump is certain to be a nightmare as is Cruz he is trying to prove that he's to the right of Gengis Kan!

Why are so many people running this time, why has the GOP been unable to get things under con…

The real action is where?

So while the world has been focusing on Greece, a small country that accounts for less than 1% of Europe GDP (Yes I know they are people too), the real "global" risk issue is taking place the other side of the world (rather literally!).  The Chinese markets have been having a terrible time, you see over the past 12 months the the CSI 300 [China's equivalent to the FTSE100] has been on a tear -- its up more than 100%, the index has doubled.  Just so that we are clear, profitability has not changed, what has changed is the p/e -- its gone from an expensive 15x to a eye watering 31x.  That's more expensive than anything in the world.  This is a prime example of irrational exuberance (and just a bit of greed too).  What China's investment public has realised is that what's important is not what the intrinsic value of a company is a generator of wealth, but rather what other shmuck is ready to pay for it.  The Chinese stock market became the equivalent of a "…