The cost to insure Irish bonds against a government default jumped to a record yesterday (Tuesday) after Standard & Poor's said the cost of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion.
Contracts on credit default swaps (CDS) on Anglo Irish bonds rose 1.5 basis points to 937.5, implying a 56% probability of default within five years, after earlier climbing to an all-time high of 960.5.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. Increasing prices signal deteriorating credit quality.
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More Investors Betting Ireland Will Go the Way of Greece
Hungary's Spat with the IMF and EU Could Signal Another Crisis to Come
The biggest financial news story out of the Europe this summer is getting very little play in the U.S. mainstream press. However, it has the potential to torpedo the European Union (EU), and has disastrous implications for borrowing costs worldwide.
Basically, a miniature banking crisis is festering in Hungary. If it isn't contained, it could grow into a genuine crisis that infects the secondary lending markets around the world.
Hungary is supposed to have about $30 billion in domestic liquidity for exchange, the equivalent of about five months of capital in its national account. But it won't be getting additional funds from the EU machine in Brussels, or the International Monetary Fund (IMF), anytime soon.
Basically, a miniature banking crisis is festering in Hungary. If it isn't contained, it could grow into a genuine crisis that infects the secondary lending markets around the world.
Hungary is supposed to have about $30 billion in domestic liquidity for exchange, the equivalent of about five months of capital in its national account. But it won't be getting additional funds from the EU machine in Brussels, or the International Monetary Fund (IMF), anytime soon.
Six Ways to Invest in Korea – Asia's Can't-Miss Market
With the U.S recovery looking a bit iffy after last week's unemployment report, Japan and Britain battling huge budget problems and Europe in trouble because of the Greek debt crisis, investors have quite naturally shifted their focus to Asia.
But even there the pickings seem a bit slim. Asian stalwarts China and India show signs of overheating (India more so than China). Taiwan and Singapore - both excellent markets - seem pretty fully valued right now.
That leaves us with one Asian market whose economy is enjoying well-balanced growth, whose government is a model of competence and efficiency and whose stock market is surprisingly reasonably valued.
I'm talking about South Korea.
To discover the five essential Korea profit plays, please read on...
But even there the pickings seem a bit slim. Asian stalwarts China and India show signs of overheating (India more so than China). Taiwan and Singapore - both excellent markets - seem pretty fully valued right now.
That leaves us with one Asian market whose economy is enjoying well-balanced growth, whose government is a model of competence and efficiency and whose stock market is surprisingly reasonably valued.
I'm talking about South Korea.
To discover the five essential Korea profit plays, please read on...
U.S. Economy: Headed For a Second-Half Slowdown
Constant stock market volatility, a crippled job market and the troubles plaguing the European markets are starting to take their toll on the U.S. economy. After the major market rally of 2009, is the U.S. economy headed for a second-half slowdown... or, worse, the dreaded double-dip recession? Read this report to find out exactly what’s in store for the U.S. economy...
Money Morning Midyear Forecast: The U.S. Economy is Headed For a Second-Half Slowdown
Most textbook economists say that the U.S. economy is engaged in a broad-based recovery. But while there's a consensus that there's no "double-dip" recession on the horizon, the evidence suggests the nation's economy is headed for a slowdown in the second half of 2010.
The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.
If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.
And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.
The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.
If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.
And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.
Is it Time to Bet Against the U.S. Dollar?
The U.S. dollar has been one of the world's strongest currencies in the first part of 2010. But, is the greenback really the bet choice for safety, quality and security? Read this report to find out why it's time to bet against the dollar...
How to Profit From Europe's Stealthy Resurgence
European countries - both inside and outside the Eurozone - are slashing their budget deficits.
Greece, Portugal and Spain - three of the so-called "PIGS" - have to do so, of course. But Germany - generally reckoned to be in excellent shape - is also cutting its deficit, as is France, which hasn't run a budget surplus in 40 years. Britain, too, with no need to protect the euro (it's not a Eurozone member) just introduced a budget that cut the deficit by $140 billion over four years.
U.S. President Barack Obama and other Keynesians warn that Europe may push its own economy - or even the global economy - back into recession.
But here's the surprising reality: Europe may gain from its fiscal pain - and its deficit-trimming actions offer the best hope for a lengthy recovery.
Greece, Portugal and Spain - three of the so-called "PIGS" - have to do so, of course. But Germany - generally reckoned to be in excellent shape - is also cutting its deficit, as is France, which hasn't run a budget surplus in 40 years. Britain, too, with no need to protect the euro (it's not a Eurozone member) just introduced a budget that cut the deficit by $140 billion over four years.
U.S. President Barack Obama and other Keynesians warn that Europe may push its own economy - or even the global economy - back into recession.
But here's the surprising reality: Europe may gain from its fiscal pain - and its deficit-trimming actions offer the best hope for a lengthy recovery.
Why Investors Must Keep an Eye on Spain
Greece is not the big story of Europe anymore - just a smoke screen.
The big story is Spain and the United Kingdom, and the news is getting worse.
In the past week, Spanish officials acknowledged to reporters that the country's banks and companies were having difficulty obtaining credit. The credible website EuroIntelligence reported that Spain is now effectively cut off from international capital markets, which is a major new development.
The big story is Spain and the United Kingdom, and the news is getting worse.
In the past week, Spanish officials acknowledged to reporters that the country's banks and companies were having difficulty obtaining credit. The credible website EuroIntelligence reported that Spain is now effectively cut off from international capital markets, which is a major new development.
Money Morning Mid-Year Forecast: The Dollar Headed for Some Change
In spite of an assortment of economic uncertainties at home, the U.S. dollar has been the star of the currency world for most of 2010. Spooked by persistent and seemingly insurmountable debt problems east of the Atlantic and the specter of unsustainable growth and potential inflation on the Pacific side of the globe, savers and investors fled European and Asian currencies for the relative safe haven of the dollar.
As Keith Fitz-Gerald, Money Morning's Chief Investment Strategist, pointed out last week (June 10), from January through May, the dollar gained ground against all but two of the world's leading currencies - China's yuan and the Japanese yen - and it retained parity with them. The greenback appreciated by as much as 16% versus the struggling euro, which last week (June 8) briefly dipped to a four-year low below $1.20, and 13% against the British pound.
The InterContinental Exchange's (ICE) U.S. Dollar Index (USDX), which measures the dollar's value versus a trade-weighted basket of six leading foreign currencies, climbed from a low of 76.732 on Jan. 14, 2010, to an intra-day high of 88.586 on June 8.
As Keith Fitz-Gerald, Money Morning's Chief Investment Strategist, pointed out last week (June 10), from January through May, the dollar gained ground against all but two of the world's leading currencies - China's yuan and the Japanese yen - and it retained parity with them. The greenback appreciated by as much as 16% versus the struggling euro, which last week (June 8) briefly dipped to a four-year low below $1.20, and 13% against the British pound.
The InterContinental Exchange's (ICE) U.S. Dollar Index (USDX), which measures the dollar's value versus a trade-weighted basket of six leading foreign currencies, climbed from a low of 76.732 on Jan. 14, 2010, to an intra-day high of 88.586 on June 8.
Hungary is the Latest European Domino to Fall
As if Greece, Spain and Portugal were not enough of a concern for the European financial system, another villain has emerged from behind the curtains: Hungary.
A new government swept into office in late May and the ruling party leader declared the country had little chance of avoiding a Greek-style credit crisis because the former government had been cooking the books.
A spokesman for Prime Minister Viktor Orban said it was not an exaggeration to talk about the potential for default.
A new government swept into office in late May and the ruling party leader declared the country had little chance of avoiding a Greek-style credit crisis because the former government had been cooking the books.
A spokesman for Prime Minister Viktor Orban said it was not an exaggeration to talk about the potential for default.
From Leader to Laggard: Is it Time to Bet Against the U.S. Dollar?
The U.S. dollar has been one of the world's strongest currencies in the first part of 2010, posting double-digit gains through the end of May.
And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.
In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.
But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.
To see why the dollar could roll over - and to see how to play it - please read on ...
And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.
In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.
But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.
To see why the dollar could roll over - and to see how to play it - please read on ...
Spain's Banco Santander Stands Strong Against Debt Crisis with Confident Global Expansion
The Eurozone's largest bank, Banco Santander, S.A. (NYSE ADR: STD) of Spain, showed the European debt crisis has not hurt its prospects by announcing today (Wednesday) it would buy Bank of America Corp.'s (NYSE: BAC) stake in its Mexico unit. The $2.5 billion purchase increases Santander's exposure to the high growth opportunities of Mexico's banking sector.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
Despite Eurozone debt concerns and rocky markets, Santander's move to expand into Mexico shows a healthy balance sheet that has stood strong against the debt problems plaguing other European banks. Santander has managed to keep solid footing among Spain's unstable banking sector, where the nation's debt has hurt financing conditions and smaller unlisted savings banks have been suffering losses on property and housing loans.
"Santander is showing that it can still make decisions and go on with its business plan despite the liquidity problems in the markets," Venture Finanzas analyst Ignacio Mendez told Reuters.
China's Exports Surprise Contradicts the Critics
Chinese exports in May posted a 50% gain over last year, blowing away estimates and suggesting that the risk of a Chinese economic slowdown is overblown, Reuters reported, citing anonymous sources.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
Banks and Investors Both Rattled by European Debt Concerns
European debt concerns continued to weigh on investor sentiment today (Thursday) as rumors circulated that the European Central Bank (ECB) was planning an intervention into the continent's banking sector.
The ECB is buying government bonds and increased its lending to banks, but that has done little to alleviate concern that the nearly-$1 trillion (750 billion euros) Eurozone bailout package announced last month won't be enough to prevent a collapse in the banking industry.
The ECB said on Monday that European banks will have to write off more loans this year than they did in 2009. The region's banks are expected to write off some $237 billion (195 billion euros) in bad debt by 2011.
The ECB is buying government bonds and increased its lending to banks, but that has done little to alleviate concern that the nearly-$1 trillion (750 billion euros) Eurozone bailout package announced last month won't be enough to prevent a collapse in the banking industry.
The ECB said on Monday that European banks will have to write off more loans this year than they did in 2009. The region's banks are expected to write off some $237 billion (195 billion euros) in bad debt by 2011.
Top Profit Plays for a Defensive-Investing Portfolio
Prussian military theorist Carl von Clausewitz once said that "the best defense is a good offense." Although that bit of wisdom has been used everywhere from the battlefield to the gridiron, it could just as easily be deployed as part of a "defensive investing" strategy.
And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.
With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.
And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.
With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.
For the full text of the interview, please read on...
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