I find it ironic that a country which defrauded its way into the Euro Zone is likely to be the first country to exit the Euro Zone. Despite a raft of hasty denials by just about everyone in Brussels, it now seems all but inevitable that Greece will bail on the Euro when they default on the €110 billion bailout they received just one year ago.
Of course, this all started on Friday when an article came out in Der Spiegel claiming that Greece was mulling an exit from the Euro due to near-daily violent protests and the apparent failure of austerity measures. An emergency meeting of European finance ministers was convened in Luxembourg in response to the report, which they all denied. Methinks they doth protest too much.
Greece
Article Index
How to Profit From Europe's Stealthy Resurgence
European countries - both inside and outside the Eurozone - are slashing their budget deficits. Sure, some - like Greece and Spain, have to. But others are too. And 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. Find out how, in this free report.
More Investors Betting Ireland Will Go the Way of Greece
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.
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.
Europe: The Investor Escape Hatch From the U.S. Recession
When I speak with the U.S. subscribers to my Permanent Wealth Investor advisory service, there's one bit of wisdom that I repeat time and again: Just because you're living through a recession doesn't mean that your money has to.
If that's a high-falutin way of telling folks to invest globally, so be it. The reality is that there are other places to invest than in the U.S. economy - and many of those "other" spots offer much better returns.
Take Europe...
If that's a high-falutin way of telling folks to invest globally, so be it. The reality is that there are other places to invest than in the U.S. economy - and many of those "other" spots offer much better returns.
Take Europe...
Emerging Stock Markets Thrive as U.S. Shares Tumble
As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.
Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook from Cisco Systems Inc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.
Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.
Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook from Cisco Systems Inc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.
Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.
Read on to find which markets are outshining the U.S....
Buy, Sell or Hold: Siemens AG (NYSE: SI) Will Benefit from Germany's Strength and the Euro's Weakness
The euro has suffered from the Greek debt crisis, and Spain and Portugal also are under closer scrutiny. But there are still significant opportunities for profit in the Eurozone.
Germany, for example, has the lowest debt to gross domestic product (GDP) ratio of all the major advanced industrial economies. And right now, it is taking measures to bring its budget deficit quickly into line. Despite a very rigid labor system, Germany is the second-largest exporter in the world, right after China. And the recent euro sell-off has given an extra "subsidy" of some 25% to German exporters.
This "subsidy" is likely to last for quite a while, since the structural situations of weaker European Union (EU) member countries will take time to resolve. It goes way beyond just having European banks pass some stress tests. So we are going to take advantage of a prudently managed exporting powerhouse with Siemens AG (NYSE ADR: SI).
Siemens is a conservatively run firm. It has very low levels of debt, which is rated in the middle of the investment grade scale (A). And despite the weakness in Europe, it has managed to increase its bottom line by 50% from last year's levels.
Germany, for example, has the lowest debt to gross domestic product (GDP) ratio of all the major advanced industrial economies. And right now, it is taking measures to bring its budget deficit quickly into line. Despite a very rigid labor system, Germany is the second-largest exporter in the world, right after China. And the recent euro sell-off has given an extra "subsidy" of some 25% to German exporters.
This "subsidy" is likely to last for quite a while, since the structural situations of weaker European Union (EU) member countries will take time to resolve. It goes way beyond just having European banks pass some stress tests. So we are going to take advantage of a prudently managed exporting powerhouse with Siemens AG (NYSE ADR: SI).
Siemens is a conservatively run firm. It has very low levels of debt, which is rated in the middle of the investment grade scale (A). And despite the weakness in Europe, it has managed to increase its bottom line by 50% from last year's levels.
Money Morning Mailbag: Jaded Investors Cast Wary Eye On Scope of Bank Stress Tests
The results of Europe's bank stress tests are due July 23. But the question remains whether the tests will shed enough light on the banking sector to restore investor confidence.
"All these stress tests mean that we are peeling away layers of the onions, but chances are we are not going to get the full clarity that we as investors deserve," Neil Dwane, chief investment officer for Europe at equities specialist firm RCM, told The New York Times. Readers who are already on guard from Wall Street manipulation and stalled financial reform have pulled back from volatile markets and are skeptical about the effectiveness of bank stress tests:
"All these stress tests mean that we are peeling away layers of the onions, but chances are we are not going to get the full clarity that we as investors deserve," Neil Dwane, chief investment officer for Europe at equities specialist firm RCM, told The New York Times. Readers who are already on guard from Wall Street manipulation and stalled financial reform have pulled back from volatile markets and are skeptical about the effectiveness of bank stress tests:
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.
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.
Are Spain's Banks Better Off than Speculators Would Like to Believe?
Somebody is bluffing.
Either Spain's financial system is on the verge of a breakdown, or hedge funds and speculators are exaggerating the vulnerability of Spain's banks to capitalize on short-selling Eurozone securities.
Investors will have a clearer picture of what's going on in Spain when the results of stress tests performed on the nation's banks are released. But until those results are known, rumors of a bailout of Spain will continue to circulate and liquidity will remain tight.
Borrowing costs in Spain and throughout Europe have been on the rise in recent months, as market observers fret over high levels of debt. At a closely watched auction for 12- and 18-month bills on Tuesday, the Spanish government raised $6.4 billion (5.2 billion euros). However, the 2.3% interest rate on the 12-month bills was 0.7 percentage points higher than what it paid last month. And t he yield on the country's benchmark 10-year bond rose 9 basis points to 4.823%, the highest in almost two years.
Either Spain's financial system is on the verge of a breakdown, or hedge funds and speculators are exaggerating the vulnerability of Spain's banks to capitalize on short-selling Eurozone securities.
Investors will have a clearer picture of what's going on in Spain when the results of stress tests performed on the nation's banks are released. But until those results are known, rumors of a bailout of Spain will continue to circulate and liquidity will remain tight.
Borrowing costs in Spain and throughout Europe have been on the rise in recent months, as market observers fret over high levels of debt. At a closely watched auction for 12- and 18-month bills on Tuesday, the Spanish government raised $6.4 billion (5.2 billion euros). However, the 2.3% interest rate on the 12-month bills was 0.7 percentage points higher than what it paid last month. And t he yield on the country's benchmark 10-year bond rose 9 basis points to 4.823%, the highest in almost two years.
This Weekend's G-20 Meeting Won't Bring Any Answers on Financial Regulation
Finance ministers from the Group of 20 (G-20) nations this weekend will attempt to reach a compromise on the implementation of stricter banking regulations at a meeting in Busan, South Korea. However, significant changes to financial regulation will come slow, if at all.
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
Global Recovery Gaining Momentum, but Obstacles Remain
The Organization for Economic Cooperation and Development (OECD) announced yesterday (Wednesday) that it has lifted its economic growth outlook, but warned that governments must enforce strict fiscal policies to sustain the global recovery and balance global expansion.
The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.
The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.
The OECD reported that the combined economy of its 31 members would grow 2.7% this year and 2.8% in 2011. Troubles of debt-plagued developed economies will be offset by the rapid economic growth of emerging markets. The numbers have been revised upward from November predictions of 1.9% growth in 2010 and 2.5% growth in 2011.
The OECD estimated global gross domestic product (GDP) would rise 4.6% this year and 4.5% in 2011, up from the previous expectation of 3.4% and 3.7%, respectively.
Is Europe on the Verge of a Liquidity Crisis?
The euro's recent struggles have done more than bring the currency's viability into question. They've put the European Central Bank (ECB) on a collision course with a liquidity crisis.
The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.
The euro yesterday (Wednesday) remained at a near four-year low against the dollar, tumbling 0.5% to $1.2306. The beleaguered currency dropped against the yen and British pound, as well.
The ECB is running low on dollars, and that problem could escalate when the U.S. Federal Reserve closes swap lines that were temporarily reinstated as the Greek debt crisis escalated. Additionally, more deposits are being yanked from the central bank as holders question whether or not the ECB has enough juice to stop a classic bank panic.
The euro yesterday (Wednesday) remained at a near four-year low against the dollar, tumbling 0.5% to $1.2306. The beleaguered currency dropped against the yen and British pound, as well.
Money Morning Mailbag: The Euro and Other Hot Topics Spark Reader Debate
The Money Morning Facebook page is gaining more members daily and the Money Morning Mailbag feature is fueling a record number of reader comments and e-mails, giving us a better picture of how readers feel about recurring content like the euro, company profits, and emerging economies. Some articles like the evaluation of Australia's mining super tax have sparked lengthy reader conversation and argument we enjoy observing - and hope readers enjoy being a part of.
Here is another look at some recent articles generating the most attention and some additional links for further reading.
Here is another look at some recent articles generating the most attention and some additional links for further reading.
A Broad-Based U.S. Recovery is Strengthening the Global Economy Against Europe's Turmoil
Stocks scattered across the capital markets last week like the unwanted children of a terrible divorce, as a blunted rally following a global margin call put a hex on every sector and most commodities - but a U.S. recovery marched on.
So far in the ten sessions of May, the Dow Jones Industrial Average is down 3.6%, the Nasdaq 100 is -4.7%, the S&P SmallCap 600 is -3.1% and overseas large-caps are down 8.6%.
That's a whole lot of falling, and for what reason? The headlines tell us that investors freaked out over Greek debt, fear of a contagion effect on Spain, speculation that U.S. earnings have peaked, and worry that the great global capital machine will soon seize up for lack of customers and credit.
But headlines don't always tell the whole story.
To take a closer look at why the markets are down, click here.
So far in the ten sessions of May, the Dow Jones Industrial Average is down 3.6%, the Nasdaq 100 is -4.7%, the S&P SmallCap 600 is -3.1% and overseas large-caps are down 8.6%.
That's a whole lot of falling, and for what reason? The headlines tell us that investors freaked out over Greek debt, fear of a contagion effect on Spain, speculation that U.S. earnings have peaked, and worry that the great global capital machine will soon seize up for lack of customers and credit.
But headlines don't always tell the whole story.
To take a closer look at why the markets are down, click here.