Eurozone

Can the U.S Economy "de-couple" from the Eurozone Debt Crisis?

As the Eurozone teeters on the edge of a breakup, it begs the question: Can the U.S economy "de-couple" from the Eurozone debt crisis?

Ultimately, the answer comes down to fate of the euro. It's the linchpin to everything.

From the point of view of one who has travelled fairly frequently in the Eurozone I can tell you I find the euro very convenient indeed.

In my London merchant banking days, when I used to go on marketing trips around continental Europe, I found that while the excellent European train service was a pleasure to use, the proliferation of local currencies made travelling a pain.

There was nothing more annoying than to be on a long-distance train that had just crossed the border from Belgium to Germany at Aachen, only to discover that I could not enjoy the excellent Deutsche Bundesbahn bockwürst and fine local beer because I had only sterling and Belgian francs in my wallet, but no deutschemarks!

The other problem was that after a long trip I ended up with my wallet stuffed with small amounts of ten different currencies, none of which could be changed back into anything useful because the bank charges ate up their value.

In southern Europe, local exchange controls were a pain too.

Walking through Madrid airport with $25,000 of legitimately earned pesetas in bills which could not be transferred to Britain through the banking system was far too exciting for my liking.

From a British merchant banker's point of view, it was thus very convenient when all the local foreigners converted to the same currency, rather than lots of different ones.

After that, you needed only two compartments in your wallet: one for British money and the other for foreign money. Then you could travel all over Europe without worrying about changing currencies.

It was a very 19th century feeling, almost as good as being back on the gold standard!

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Jim Rogers: Market Surge from Eurozone Debt Crisis Deal Won't Last

Stock markets around the world soared Friday in reaction to the morning's Eurozone debt crisis deal, but noted investor Jim Rogers wasn't impressed.

"This is no more than just another temporary stopgap to make the market feel good for a few hours, days or even weeks," Rogers, Chairman of Rogers Holdings, told CNBC. "Then everybody's going to wake up and say, "This doesn't solve the problem.'"

Meeting in Brussels, European leaders announced a plan early Friday that would provide struggling banks with money directly from the bloc's bailout fund.

The leaders also said bailout funds could be used to stabilize European bond markets. But they did not tie such use to additional austerity measures, which have angered citizens in debt-troubled nations like Greece and Spain.

The summit is just the latest in a series of high-level attempts to resolve the 2-year-old Eurozone debt crisis, which has required bailouts of Greece, Portugal, Ireland, and most recently the Spanish banking system.

Markets around the world surged on the announcement, with some European indexes rising as much as 4%. In the United States, the Dow Jones Industrial Average shot up 200 points at the open. The Standard & Poor's 500 Index was up about 25 points, or just under 2%.

Don't get used to it, Rogers said.

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Eurozone Debt Crisis: Why Cyprus Needed the Fifth Bailout

U.S. stocks were rattled Monday as two more countries asked for bailout packages in the ongoing Eurozone debt crisis.

Shortly after word came that Spain had formally requested a bailout package for its ailing banks, Cyprus chimed in and also asked for aid.

The Mediterranean country has become the fifth Eurozone nation to hold out its hand for an international rescue. While the smallest of the bunch to seek relief, Cyprus highlights the European Union's increasingly stressed resources as it wrestles with weakening economic conditions.

The aid request followed Fitch's downgrade Monday of the island's stressed banks to "junk" status. The credit cut means the country has lost it investment status with the trio of the largest and most influential rating agencies.

Fitch said in a statement, "Cypriot banks will require substantial injections of capital in order to secure confidence in their financial viability."

Cyprus, saddled with Greek private sector debt, could need as much as 10 billion euros ($12 billion) in bailout funds.

"Classic contagion, "BBC's chief economics correspondent Hugh Pym said of Cyprus' troubles.

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Spain Bailout Package of $77 Billion Will Not be Enough

The Spain bailout package has a steep price, but still might not be enough to save the country's banking sector.

Spanish economy minister Luis de Guindos formally asked Eurozone partners for up to 62 billion euros ($77.4 billion) to recapitalize his country's ailing domestic banks. The financial institutions are weighed down by bad loans to property and construction companies, and by an ongoing Eurozone debt crisis.

In a letter to the Luxembourg Prime Minister Jean Claude Juncker, who serves as head of the 17-nation Eurozone finance ministers, Guindos explained he wanted to settle on details and conditions of the loan before the next euro group meeting on July 9.

Juncker acknowledged receipt of the letter and said that the ministers expect to give a go-ahead to the European Commission, the European Central Bank and the European Banking Authority to negotiate terms of the bailout.

The request was anticipated after the results of two independent audits were released last week. Financial consultants Oliver Wyman and Roland Berger made the first step in a two-part audit of the Spanish banking system.

Wyman found that worst-case scenario, Spain's banking sector would need a bailout package of between 51 billion euros ($63.6 billion) and 62 billion euros ($77.4 billion). Berger estimated on the lower end with 51.8 billion euros ($64.6 billion).

The formal request for a Spain bailout has made investors more nervous, and is driving the bond yields higher, making it increasingly likely Spain will need more money to try and resolve its debt crisis.

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Stock Market Today: Europe Concerns Ruling the Day

The factors weighing on the stock market today should sound pretty familiar to investors by now. The Eurozone debt crisis - with its carousel of struggling countries thirsting for a bailout - worsens every day.

Today the Spanish government made a formal request for more financial aid for its struggling banking sector. In a letter to Euro group Chairman Jean-Claude Juncker, who is also Luxembourg's prime minister, Spain's Economy Minister Luis de Guindos asked for up to 62 billion euros ($77 billion) in financial assistance for the recapitalization of the Spanish banks that require it.

This move was expected as yields on the Spanish 10-year bonds have been under tight scrutiny as they hover around the alarming 7% line.

Members of Germany, France, Italy and Spain on Friday agreed on a set of growth-enhancing policies equal to about 125 billion euros, or 1% of Eurozone gross domestic product. The European summit takes place later this week and investors are expecting less and less to come from the meeting.

In a bit of good news that doesn't seem to be impacting the sell-ridden market today, new single family home sales grew 7.6% to their highest level in two years. New sales were at a seasonally adjusted 369,000-unit annual rate, almost 20% higher year-over-year, but still a far cry from where sales should be in a healthy economy.

Here are some companies making headlines today.

Chesapeake Energy Corp. (NYSE: CHK) is in the news again and this time for anti-trust violations. Reuters reported today that Chesapeake, led by CEO Aubrey McClendon, conspired with its top competitor Encana Corp. (NYSE: ECA) to suppress land prices. The two companies apparently agreed through numerous emails to avoid bidding against each other at public land auctions to drive land prices for oil and gas fields down.

If these reports are true Chesapeake and Encana violated both federal and state anti-trust laws.

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The Eurozone Crisis is Far From Over

The Greek election last weekend has brought us a brief reprieve. The nation and the Eurozone have stepped back from the brink.

But the larger truth is that little has changed.

Yes, the Eurozone has survived its latest test, yet there is little indication where it will go from here. Considerable continental support for the common currency remains, and EU officials will soon introduce initiatives to consolidate banking and financial policy in the European Union.

Still, the problems keep mounting, and there is very little resolve to fix them.

At this point, a lot of actions (or lack of actions) could still upset the entire apple cart.



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Eurozone Bailout Package: What's Next for Greece

The question regarding whether or not Greece will stick with the Eurozone got at least a short-term answer after the country's elections Sunday, when the conservative, pro-bailout New Democracy party narrowly won the crucial vote.

But Greece's trials and tribulations are far from over, and the relief is temporary. Concerns are increasing over the global cost of a Eurozone bailout package as the mounting woes in Spain and Italy persist.

Citizens of Greece are clamoring for change, but many recognize that the election results are no quick fix. There was no cheering in Greece and global markets reacted cautiously following the vote.

Borrowing costs across Europe rose with Spain taking the lead. The yield on Spain's 10-year bonds spiked to a euro-era high of 7.18%. A reading above 7% raises a red flag that a nation may be approaching the need for a bailout.

Italian bonds also sold off on fears that if Spain is in need of a bailout, an Italy bailout package might not be far off. Italian bonds' 10-year yields are around 6%.

While the Greek election results staved off a calamity, they failed to fix the wider problems facing Greece and its struggling neighbors.

Moody's Analytics' chief economist Mark Zandi told USA Today, "We dodged a bullet, but they've got more bullets coming."

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Eurozone Debt Crisis: The Greek Elections are a Make or Break Moment

What happens this Sunday, June 17 , may be the trigger for a final resolution of the Eurozone debt crisis.

Now I understand that you probably don't follow Greek elections. But this is one you'll want to keep an eye on. At the moment, it dwarfs the contest between Mitt Romney and President Barack Obama.

In fact, come Monday it will be what every banker, politician and trader is talking about.

In the balance is the very fate of the Eurozone.
The
ripple effects could be enough to actually bring the EU down.

That's the first part of the story. Admittedly, it's not a very pleasant one.

The second part concerns your portfolio, since the solutions will involve more money-printing and, in the long run, more inflation.

But you needn't worry. We've already read the central banker's playbook for you.

In this case, the message is clear. Don't buy Europe. But do buy hard assets -- whether gold, oil, or other commodities.

These safe-havens are one of the best ways to hedge yourself against these characters and their money printing schemes.

Now that you know why Sunday is so important, here is how it will likely play out-in both the short term and in the long run.

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Why an Italy Bailout Package is on the Way

With news of the Spain bailout package still fresh, and Greece's crucial elections on Sunday, the next event in the Eurozone debt crisis is already brewing.

An Italy bailout package is likely to be the next costly move in the spiraling contagion.

Italy on Thursday held its first bond auction since European finance ministers came to Spain's rescue, willing to give the ailing country up to 100 billion euro ($126 billion) to shore up its beleaguered banks.

The auction raised a heap of concerns.

Italy's borrowing costs soared following a Treasury sale of 4.5 billion euros of debt, including 3 billion euros of its 3-year benchmark bond that yields a lofty 5.3%. That was the highest yield since December and an increase of nearly 1.4 percentage points from the last sale just a month ago.

In addition, Fitch Ratings reported May 23 that foreign ownership of Italian debt slipped from 50% in 2008 to a current 32%.

"I think Italy could well be a problem, because its current government isn't very good and has no legitimacy, having been imposed by the EU - and it hasn't cut spending as it needs to," said Money Morning Global Investing Strategist Martin Hutchinson. "I'd put it a few weeks away though - market's focused on Greece and Spain at present."

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The 2012 IPO Calendar: How to Spot the Winners

You might find yourself eyeing the 2012 IPO calendar with a bit more scrutiny after the Facebook (Nasdaq: FB) fiasco.

Although Facebook has been nabbing the most attention for disappointing its investors, it's hardly the first IPO to do so. It's all part of the fickle IPO process.

In fact, about 40% of the IPOs to hit the market over the past 12 months have seen their share prices fall below their IPO prices.

Facebook isn't the only factor to blame -- U.S. unemployment is up, the Eurozone debt crisis is sapping bullish spirit, and the upcoming U.S. presidential elections in November are adding to market uncertainty.

But avoiding IPOs altogether could also be a huge mistake.

Just ask those who bought the Google (Nasdsaq: GOOG) initial public offering. The Google IPO priced at $85, started trading at $100, and now trades around $560.

So how can you put yourself in the 60% group and earn a profit in the process?

With the right research and guidance, you can spot winners just like Google.

Do Your IPO Research

Investing in IPOs is like buying and selling any asset: due diligence is required.

An IPO, like a credit-default swap or subprime mortgage, is the ideal financial instrument for a limited set of circumstances. It is up to the individual or the institution to determine if the IPO they are considering is suitable for a long-term investment or a short-term flip.

If it qualifies as just a short-term flips, that is enough to tell you not to buy.

Whatever the investment objective, however, information is readily available for the necessary and needed due diligence.

For example, on March 17, 2011 Michael J. De La Merced wrote an article in The New York Times about the IPO of FriendFinder Networks (NYSE: FFN).

In his Timespiece,"FriendFinder Braves Choppy Market with IPO, Again," De La Merced did an excellent job of detailing his concerns with the stock, ranging from the disposition of the proceeds of the IPO to the accounting at the company to the number of times it had attempted to go public before and had to withdraw the offering.

FriendFinder Network IPO priced at $10 a share last year; it's now selling for around $1.15.

Other times an IPO can be hurt by factors having nothing to do with the financials of the company or the overall economic situation.

Take the Carlyle Group (Nasdaq: CG), a Washington, DC-based private equity group, which went public in May. Until Election Day in November, private equity groups will be vilified by the Obama Administration, unions and others due to Republican presidential candidate Mitt Romney's work with Bain Capital.

There is no way that can aid the share price of Carlyle Group. Now trading around $21 a share, Carlye Group has slipped from its IPO high of $22.45.

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The Three Big Factors Weighing on Oil Prices

Oil prices this week have been pressured by a trio of global factors: OPEC, Iran, and the Eurozone debt crisis.

Crude experienced wide swings on Tuesday, sinking as low as $81 a barrel, a new eight-month low. Prices bounced back later in the day and finished moderately higher at $83.34.

Over the last year, oil prices have fluctuated between $74.95 and $110.55 - with more volatility expected.

Oil's recent wide price swings highlight the market's uncertainty over changes in global supply and demand.

"Oil has given up the ghost, the overriding concern is for global demand to moderate or even come off quite a bit in Europe, the United States and even China and India," David Morrison at GFT Global told Reuters.

Oil Prices and the OPEC Summit

Weighing on crude oil prices this week were words Monday from Saudi Arabia's oil minister as he arrived in Vienna for Thursday's OPEC summit.

The Saudi minister remarked that OPEC production quotas may be too low. The suggestion could move OPEC members such as Iran and Venezuela to shy away from a production cut.

In a research note Tuesday, analysts at energy focused investment bank Simmons and Company wrote, "This position is an indication that Saudi is not overly concerned about the recent pullback in oil prices. It is not yet anxious to aggressively cut supply."

As a matter of fact, Saudi Arabia has actually been increasing its oil supply over the last few months in an effort to pick up the slack from Iran's declining output, which experienced a slump in exports on the heels of tightening U.S. sanctions.

Iran is the No. 2 oil producer in OPEC's exporting countries, earning more than half of government revenue from oil sales, according to the International Monetary Fund (IMF). Its oil output has slipped more than 40% this year, the International Energy Agency (IEA) reported Wednesday.

The IEA report could influence OPEC's decision on production quotas. At OPEC's last meeting in December the members decided to maintain actual output at 30 million barrels per day.

Iran Sanctions Approaching

Also influencing oil prices was a report from the Obama administration on Monday that noted seven countries, including India and South Korea (sizable importers of Iranian crude), have sufficiently reduced their oil imports from Iran and will not be subject to sanctions from the U.S., set to take effect at the end of June.

"By reducing Iran's oil sales, we are sending a decisive message to Iran's leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure," U.S. Secretary of State Hillary Clinton said in a statement Monday.

Oil prices have slipped as markets expect the U.S. exemptions will prevent major supply disruptions.

China, the leading Iranian crude importer in the first half of last year, has not yet been granted an exemption. U.S. officials said talks were ongoing and that status could change before the June 28 deadline to impose sanctions.

Talks over Iran's nuclear programs will restart this weekend in Moscow. It'll likely be the final round of discussion before the sanctions and before a ban on importing Iranian oil into Europe is set in motion.

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Why the Spain Bailout Package Won't Work

The pricey Spain bailout package convinced markets it could fix the Eurozone debt crisis for only a moment Monday, before reality set in that the plan was far from ideal.

Following the announcement of a $126 billion (100 billion euro) bank rescue package, markets rose briefly. But the relief was short-lived as investors hastily refocused and remembered that the struggling Eurozone still faces a number of key obstacles.

The Dow Jones Industrial Average lost 142.97 points, or 1.14%, to close at 12,411.23.

Spain's bailout package was assembled swiftly as EU officials attempt to stave off suppositions about the country's sickly banks with crucial Greek elections just a few days away.

But it falls short of resolving what the Eurozone as a whole is up against.

Banking analysts at Societe Generale summed up in a note to clients, "The plan looks like a classic Eurozone fudge."

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Eurozone Debt Crisis: Why the Next Three Months are Crucial

Many people wonder how much longer the Eurozone can survive as it struggles to deal with its plaguing debt crisis. Well, billionaire investor George Soros has the answer. On Saturday, in a thorough and enlightening speech made at the Festival of Economics in Trento, Italy, Soros gave the region a deadline for resolving its debt […]

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No Bull: Could the 10-Year Note Hit 1%?

In the wake of Friday's disastrous jobs number, 10-year Treasury Note yields finally fell through the 1.5% level, trading as low 1.44% on the day.

That plunge took many traders, talking heads and politicians by surprise.

Our "leaders" in Washington D.C. were heard to say: "Nobody saw this coming."

Well, that's just not true. Not one iota.

If you've been reading Money Morning you saw this coming. So did tens of thousands of our Money Map Report subscribers.

I've been warning that 10 year yields would drop below 2% then hit 1.5% for more than 2 years now.

In fact, our readers had the opportunity to profit handsomely on our bond related recommendations that have earned them 30%-71% so far.

What does this mean for you?

First questions first...

Now that we've busted 1.5%, the next stop is 1%.

I can even see negative yields ahead, meaning that investors who buy Treasuries will actually be paying the government to keep their money.

Be prepared. I'm going to show you here what to do and - yes -how you can profit from this move-- even at this stage of the global financial crisis.

Why Bond Yields Will Continue to Fall

First off, 10-year yields dropping to 1% means several things:

  • Bond prices go even higher. Rates and prices go in opposite directions. Therefore when you hear that yields are falling, this means that bonds are in rally mode.
  • The world is more concerned with the return of its money than the return on its money. You can take your pick why. Personally I think it comes down to two things above all else: the looming disintegration of the Eurozone and the fact that our country is $212 trillion in the hole and warming up for another infantile debt ceiling debate instead of reining in spending.
  • More stimulus. Probably in the form of a perverse worldwide effort coordinated by central bankers as part of the greatest Ponzi scheme in recorded history.
But zero percent or negative yields - right here in the US of A?

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EU Calls for "Banking Union" to Ease Eurozone Debt Crisis

Blame the tumultuous tumble in equities Wednesday on Europe.

World markets were shaken as worries over the Eurozone debt crisis, in particular the Spanish banking system, again rattled investor confidence.

The Dow Jones was down 160 points, the S&P 500 fell 19 and the Nasdaq lost 34.

Sending shivers through markets Wednesday was a statement from the European Central Bank (ECB) saying it had not been consulted on the bailout for Spain's No.4 bank Bankia, and that such a recapitalization could not be provided by the Eurosystem. Spanish lender Bankia announced last week it needs $23.8 billion in state aid.

Also weighing on markets was Spain's debt downgrade late Tuesday by independent ratings agency Egan Jones. The move sparked more questions about the ailing country's ability to fund bank bailouts that could balloon to some 100 billion euro.

A number of other Spanish banks have recently been downgraded by various rating agencies. The woes hanging over Spain and its sickly banking system shoved the euro down to a near two-year low Wednesday of around $1.24.

"I believe that the markets have not yet fully priced in a Greek exit, nor the full implications of a Spanish default - both of which remain distinct possibilities in my mind," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Until they do, expect trading to be an unholy mess of rallies driven by hopes for further bailouts, and short, sharp declines driven by the absence of the same."

Now the EU has a new bailout plan.



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