RSS Feed
Twitter
Facebook
Email
HomeWhat’s ‘UP’ with the Euro?
Posted by Larry Doyle on July 20th, 2010 9:41 AM |
The Euro has had a significant bounce over the last 6 weeks. After bottoming out slightly below 1.20/U.S. dollar in early June, the Euro has bounced back close to 1.30 versus the greenback. Let’s navigate the circuitous path of this most important currency and assess where it may be headed from here. I am most pleased to highlight commentary on this critically sensitive topic, written specifically for Sense on Cents by Forextraders.com:
The Current State of the Euro: Can It Head Higher Versus The Dollar?
The months of June and July have seen a rapid and extreme appreciation of the Euro against the U.S. Dollar. In order to understand our current state of the Euro and where we may be headed, it is imperative that one have a basic understanding of the Sovereign Debt Crisis in Europe. (more…)
The Euro Is Retreating like Napoleon from Moscow
Posted by Larry Doyle on May 11th, 2010 12:28 PM |
If those involved in the European bailout thought the trillion dollar package would quickly support the Euro and, in turn, the economies of the EU, well guess what? After a quick, short covering rally for the Euro yesterday, the common currency for the EU has turned tail and is retreating faster than Napoleon from Moscow.
The Wall Street Journal addresses the Euro’s retreat in writing, Euro Falls as Aid-Plan Euphoria Fades:
Unnerved by the euro zone’s giant bailout mechanism and the prospect of patchwork politics in the U.K., investors herded back into the safety of the dollar and yen Tuesday, sending the euro and the pound lower. (more…)
Euro Crisis Merely Delayed, Not Averted
Posted by Larry Doyle on May 10th, 2010 8:39 AM |
They blinked.
The European Union and European Central Bank stole a play from the wizards in Washington to avert an immediate currency crisis in the EU and the potential ripple effect around the world. Did they do the right thing? For me, the question of addressing the fiscal crisis within the EU is not one of right or wrong; rather, when the crisis comes, how large will it be and how long will it last?
The trillion dollar package provided by the European Central Bank, the European Union itself, and the IMF is a combination of loan guarantees and quantitative easing. Shock and awe and punish those who would dare sell the Euro short, right? Clearly, the massive injection of capital will squeeze those who have shorted the Euro, but what about the long haul?
The EU is subverting the very tenets upon which the union was founded. Those tenets precluded this type of financial bailout. (more…)
Why Is the Euro Plummeting?
Posted by Larry Doyle on March 25th, 2010 9:38 AM |
The Euro is plummeting in value because of the ongoing fiscal problems in Greece and the recent downgrade of Portugal’s sovereign credit, correct? Well, these are the most recent developments, but the problems go much deeper than that.
Although the very nature of short term mentality in a heavily dominated short term trading environment would point to these problems within Greece and Portugal as the primary reasons for the problems with the Euro, let’s work a little harder and navigate a little deeper.
First off, we need to accept the premise that we are experiencing structural changes in the context of a secular market. Our friends in Washington and on Wall Street (as well as other global financial centers) work very hard to present our current economy and market as possessing merely cyclical risk. Don’t buy it. (more…)
Hedge Fund Collusion to Pound Euro?
Posted by Larry Doyle on March 3rd, 2010 12:35 PM |
Meeting industry friends and colleagues for dinner, drinks, and market talk is standard fare. In fact, I would say it is good business as it is important to develop relationships within the industry.
That said, the development of these professional relationships and the interaction amongst the professionals should never come at the expense of professional ethics and integrity. I did witness more than a handful of times individuals from different shops on both the buy-side and the sell-side of the industry push the envelope very close and sometimes over that ethical line.
Not always, but very often, the ethical shortcomings involved hedge funds. Why? The revenue model for hedge funds (typically 2% asset management fee and 20% of profits derived) serves as a huge incentive for traders at hedge funds to gain an edge and act upon it as much as possible. The fact that the hedge fund traders and managers have a direct stake and an accompanying vested interest in the profits fuels this crowd like nothing else. (more…)
February 13, 2010: Market Week in Review
Posted by Larry Doyle on February 13th, 2010 8:12 AM |
Markets remain volatile and skittish. Why? Our global economy along with our domestic economy remain under the pressure of massive debts and deficits across the sovereign, corporate, and consumer spectrum.
Global governments can not prop economies and markets forever, try as they might. Can 2010 successfully transition from these total government supported and propped markets to a hoped for return to private enterprise with private capital? This week brought us more ups and downs in the markets as the economy overall searches for its footing. We remain a long way from being out of the woods. Pack lightly and lets navigate.
Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic news and month-to-date market returns. (more…)
Europe Sneezes, Asia Gets A Cold
Posted by Larry Doyle on May 18th, 2009 5:00 AM |
The European Union reported a 2.5% decline in 1st quarter GDP the end of last week. Market pundits claim that this report and quarter will represent the trough for the recession in Europe. I personally do not see any meaningful evidence to support that assertion. Europe has been slow to address the massive capital shortfalls in its banking system. The EU has reluctantly adopted measures of quantitative easing and has been slow to drop its overnight lending rate.
What have been the ramifications of the EU’s tardiness on the monetary and fiscal stimulus fronts? RTT News reports, Euro Moves Lower Versus Rivals After GDP Report. 1st quarter output in Europe plummeted and economic growth revisions across individual countries showed greater declines.
I have always viewed eastern Europe as being The Weakest Link in our global economy. The EU’s enormous exposure to eastern Europe is a MAJOR drag on its financial institutions and, in turn, its economy. The 1st quarter GDP report is a clear indication of the impact that the Weakest Link Is Weakening, much as I had written a few months ago.
Can this European weakness be contained? Can stronger economies pull Europe out of the economic ditch? Weren’t these the same questions we posed in regard to the rising delinquencies and resultant foreclosures in sub-prime mortgages?
The immediate reaction to the European weakness in Asian markets is a swift selloff. Japanese equities are down almost 3% overnight (10pm EST) due primarily to the weakness in Europe. As Bloomberg highlights, Japanese Stocks Slump on Panasonic Loss Forecast, Europe GDP. Bloomberg asserts:
“Europe’s spending less on stimulus, so their ability to recover from the recession is weaker than the rest of the world.”
Additionally, Bloomberg provides further European color:
Gross domestic product in the 16-member euro region fell 2.5 percent from the fourth quarter, the biggest decline since the data were first compiled in 1995, the European Union’s statistics office in Luxembourg said on May 15. That exceeded the 2 percent contraction economists expected in a Bloomberg survey and followed a 1.6 percent drop in the prior three months.
“Concerns are building about the health of Europe,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “That’s having an effect on the currency market and creating a headwind for export companies.”
Why isn’t Europe more swift and aggressive in providing fiscal and monetary stimulus? Germany’s hyperinflation during the post World War I era has left an indelible scar upon that country. I found the insights into Germany’s period of hyperinflation provided in an excerpt of Paper Money by ‘Adam Smith’ (George J.W. Goodman) to be highly informative.
In pausing to review the depth and magnitude of these economic issues, it is readily apparent that our global economy is connected not only across borders but also across historical eras.
LD
Let’s Revisit Europe: The Weakest Link
Posted by Larry Doyle on March 17th, 2009 5:15 AM |
I thank our loyal reader in Michigan, Mr. Fiscal Liberal, for sharing with us a piece written by Simon Johnson, the former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management, and a senior fellow at the Peterson Institute for International Economics.
Mr. Johnson writes about the growing problems in Europe. I am hard pressed to see how the European situation, both in the East and West, can not end badly. There are too many economies that are effectively insolvent or on the brink of insolvency. I believe this is the region of the world which will experience increased economic strife leading to social unrest and political change. Can the problems in Europe be contained given the massively interconnected world of global finance?
Thank you again FL for sharing this very enlightening piece from Simon Johnson!!
G-20s Real Agenda Should be Saving Europe from Itself
By Simon Johnson
Last Updated: 10:28AM GMT 16 Mar 2009The media coverage of the G20 finance ministers meeting this weekend was dominated by the apparent battle between those who support more fiscal stimulus and those who want to impose more regulations on the financial system.
This, we are led to believe, is the big debate facing the full G20 heads of government summit early next month: the US is pushing for a bigger global fiscal stimulus (2pc extra government spending from everyone, to be monitored by the IMF), while the continental Europeans are holding out for greater regulation. Gordon Brown is trying hard to cast himself as the broker for any apparent deal. (more…)
