Sunday, February 15, 2009

Why the Euro might be the place to be

The markets have certainly been in freefall, right now we sit in a lull before the next wave of storms arrive, there is no imminent sign of recovery and the US bailout seems so cretinous there is little chance of it helping the consumer in any way.

Right now I think the strongest trend is to sell Great British Pounds, the country is in a tailspin from which it may not recover;

1) A considerable amount of banking interest in London is no longer UK owned so expect these banks to consolidate back to their core countries taking jobs with them and leaving London as a secondary financial center

2) Expect Germany to pick up a lot of the slack as a financial center based upon the strength of the Euro in the next few years

3) Watch for China and India's emergence as banking hubs

4) The property market has a lot further to fall

5) What little manufacturing there is left is likely to falter due to overregulation and over zealous implementation of regulation making the UK even more uncompetitive

6) No major wars on the horizon to boost government spending, p.s the Americans screwed the UK on a lot of Iraq, Afghan contracts etc so not too much input there (George Bush/ Dick Cheney and their self interest team were pretty thorough there) So once you have divested yourself of GBP think Euro not Dollar.

7) The UK became a tertiary and services based economy with little or no productive output (industry/ agriculture) as such I have always stated they were enroute to becoming the new third world as a continuation of the cycle. How will people in the UK make, create or produce anything to save their economy?

Why not the Dollar:

1) Once Obama fever has passed people are going to realize there is little or nothing he can do to help, he is an ultra "popularist" president with Fort Myers town meetings etc which help for sound bites but the DJ and Henrietta Hughes plight in Florida don't solve anything in the Macro economy. We may even see a repeat of a lot of the Clinton Era's disastrous bills.

2) The stimulus package seems to put a lot of emphasis on tax cuts, which means without sales the government income is reduced, the deficit is increased and the country goes bankrupt. Furthermore this doesn’t actually stimulate the economy like putting cash and sales into the system, which a war and government injection into private businesses does. (We have used that one up)

3) The government has never been able to run anything well especially businesses as the politicians have no idea what they are saying doing or talking about - why Bloomberg wasn’t drafted in to run the distributions to the banks and the bailout is beyond me, he is one of the only self made people in government. When the government starts making cars as they did in England you know it is the beginning of the end, the only salvation for the car companies is to crush the unions once and for all as they are the primary component to be blamed for its current position. Thatcher beat the Unions in the UK to great benefit, I would love to see Obama try and do the same but he doesn’t have the integrity or strength of character to do so as he is so desperate to be popular he wont be willing to make any hard decisions he is already working on this second term campaign and his legacy as to how he will be noted in history aside from being the first black president.

4) Interest rates have to rise, expect to see true underlying inflation of 10-18% within five years Bernanke is compounding on mistakes already in place rather than bottoming out and letting us move forwards.

5) If the government prevents the foreclosures they are artificially propping up the market and supporting financial imprudence, I should have gone out and bought a house twice as expensive as I could of afforded and been rewarded by the government. It makes a mockery of everything. All that does from a banking standpoint is allow banks to keep people who should be fired and policies that need to be changed and the only way to change them is because they are illustrated not to work and maintaining them would be damaging to someone’s bottom line and pocketbook.

So these are a few ideas of why I am not looking at the Dollar either, I would hope to acquire several billion Euro of cash flowing, income producing assets within the next few years, divesting Euro and GBP positions for a Euro resurgence as the first major economic zone to recover.

Visit for investment opportunities in the safest investment other than government treasuries and in my opinion possibly safer than US & UK government treasuries right now which I don’t trust p.s I sure wouldn’t want more than the insurance limit in any banks right now as they haven’t finished collapsing yet there are just several firms with better accountants right now who have hidden more debt off the balance sheet, I find it hard to believe Bank of America or Wells Fargo are solvent, I would have though HSBC and some of the Swiss, Lichtenstein, Monaco, Belize, BVI, Cayman Banks are a better bet.
On a more micro level:

I expect to see Buffett and Gates take full advantage of their cash stock piles and leverage them for incredible returns - Buffett should pass the hundred billion mark within the next few years.

It will be interesting to see how Microsoft’s new store concept works out, seems like an imitation of Apple at the worst time possible so expect to see it bomb.... Their products just don’t work together too well any more and they rely on barriers to entry and buyout assimilation to keep competitors out..... MSFT stock to drop further

I still think Google is the biggest phony of the dot com era out there, whilst I wouldn’t dream of using anyone else for search I still don’t believe their revenue streams. I expect to see a $100 share price within the next couple of years

Copyright Jonathan Rose 2009 - Creative Commons License

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