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:
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Money Morning Mailbag: Jaded Investors Cast Wary Eye On Scope of Bank Stress Tests
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.
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.
Taipan Daily: What Happens When Peter Wants His Money Back?
FedEx's unfunded pension problem gives us a clear look at the troubles lurking just around the corner for those who borrowed their way through the recession. Is the recession truly over? It may seem somewhat late to be asking that question. After all, haven't Washington and Wall Street already bragged as to how we have […]
Question of the Week: Readers Respond to Money Morning's Market Volatility Query
The Dow Jones Industrial Average last week dipped below 10,000 for the first time since February as a month of market volatility and price declines continued. Analysts predicted volatility to continue into June as government exit strategies begin and liquidity dwindles.
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Figures show that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
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.
U.S. Treasury Bonds: The Not-So-Safe "Safe Haven"
In the last few weeks, international investors spooked by the budget crisis in Greece and the turmoil in southern Europe have been flocking into the U.S. Treasury bond market as a "safe haven."
The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?
To learn about the potential investment dangers posed by U.S. government debt, please read on...
The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?
To learn about the potential investment dangers posed by U.S. government debt, please read on...
Sell in May - But Don't Go Away From the U.S. Stock Market
If you embrace the old Wall Street adage "Sell in May and Go Away" as an investing strategy, you could end up with a bad case of the U.S. stock market summer blues, a new research study has found.
That concept is based on the notion that the May-to-November span provides a weak environment for U.S. stock market investors. According to Jon Markman, a best-selling author and contributing writer to Money Morning, that viewpoint started gaining traction in late April. And why not? The major U.S. indexes were already up a lot more than anyone expected, making that a seemingly convenient point to take profits.
Those who didn't follow that strategy probably now wish that they had.
That concept is based on the notion that the May-to-November span provides a weak environment for U.S. stock market investors. According to Jon Markman, a best-selling author and contributing writer to Money Morning, that viewpoint started gaining traction in late April. And why not? The major U.S. indexes were already up a lot more than anyone expected, making that a seemingly convenient point to take profits.
Those who didn't follow that strategy probably now wish that they had.
Borrowing Costs on the Rise as Banks Cope with Contagion Fears
LIBOR (London Interbank Offered Rate) - the rate banks pay each other for three-month loans in dollars - yesterday (Tuesday) rose to its highest level since last July.
The rise in borrowing costs is directly attributable to Europe's debt crisis, which is forcing financial institutions to re-think their peers' creditworthiness.
The Libor increased to 0.536%, the highest level since July 7, from 0.510% on Monday, the 11th consecutive day it has increased, according to data from the British Bankers' Association (BBA). German and French bonds surged, pushing 10-year yields to record lows, as investors moved into the safest assets.
The rise in borrowing costs is directly attributable to Europe's debt crisis, which is forcing financial institutions to re-think their peers' creditworthiness.
The Libor increased to 0.536%, the highest level since July 7, from 0.510% on Monday, the 11th consecutive day it has increased, according to data from the British Bankers' Association (BBA). German and French bonds surged, pushing 10-year yields to record lows, as investors moved into the safest assets.
We Want to Hear From You: How Are You Responding to Market Volatility?
The Dow Jones Industrial Average dipped below 10,000 Tuesday for the first time since February as a month of market volatility and price declines continued.
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Data shows that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
The zooming rebound in U.S. stock prices from their March 9, 2009 bottom - the strongest rebound since the Great Depression - has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Data shows that the bulls are still hanging around - on the sidelines - but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.
"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."
Does the EU Bailout Signal the Euro's Demise?
Does the European Union (EU) bailout signal an end for the euro currency?
Investment icon Jim Rogers and lauded economist Nouriel Roubini think so.
And they may be right.
Eurozone governments were forced to spring into action on Sunday to defend the besieged euro. The currency has come under tremendous pressure as investors wonder if Greece's fiscal crisis will spread to other heavily indebted nations.
Greece's deficit-to-gross domestic product (GDP) ratio is a staggering 13.6%, but Greece is No. 2 on the list of over-spenders. No. 1 is Ireland, whose deficit-to-GDP ratio is 14.3%. Spain comes in third at 11.2%; and Portugal is fourth at 9.4%.
The euro in the past six months has dropped by about 17% against the dollar, as investors rushed to ditch the currency.
Investment icon Jim Rogers and lauded economist Nouriel Roubini think so.
And they may be right.
Eurozone governments were forced to spring into action on Sunday to defend the besieged euro. The currency has come under tremendous pressure as investors wonder if Greece's fiscal crisis will spread to other heavily indebted nations.
Greece's deficit-to-gross domestic product (GDP) ratio is a staggering 13.6%, but Greece is No. 2 on the list of over-spenders. No. 1 is Ireland, whose deficit-to-GDP ratio is 14.3%. Spain comes in third at 11.2%; and Portugal is fourth at 9.4%.
The euro in the past six months has dropped by about 17% against the dollar, as investors rushed to ditch the currency.
Despite Spiraling Contagion Fears, Spain Debt Worries Are Overblown
It had a huge housing boom, and is now dealing with the fallout. It has a left-of-center government and a big budget deficit, but relatively low debt in relation to its gross domestic product (GDP). And it has a worrisome current account deficit.
I'm talking, of course, about Spain, which investors clearly fear will be the next domino to fall as a result of the Greek debt contagion.
I disagree.
I'm talking, of course, about Spain, which investors clearly fear will be the next domino to fall as a result of the Greek debt contagion.
I disagree.
To see why Spain will shrug off the Greek contagion, please read on...
European Debt Crisis Raises Caution Flags But U.S. Economy Won't Be Derailed
Stocks somersaulted into the red early last week in the wake of European debt downgrades, rising revulsion over the prospect of a bailout of Athens and a broad re-pricing of risk. Breadth was negative, the number of new highs shrank and number of new lows swelled. Financials tumbled and retailers stumbled. Caution flags are rising.
Click Here to Read More on how European Debt Will Affect the Markets
Debt Contagion Fear Spreads in Europe as S&P Lowers Eurozone Credit Ratings
Standard & Poor's yesterday (Wednesday) lowered Spain's credit rating - just one day after downgrading the ratings of Greece and Portugal. The downgrades have prompted Germany to promise a quick release of Greece bailout funds as fears of a debt contagion spread rapidly across Europe.
"It is probably fair to say that Tuesday, 27 April was the day that the situation in the euro area took a dramatic and rather frightening turn for the worse," credit analysts at Credit Suisse (NYSE ADR: CS) in London said in a research note. "The concern is the extent and speed of the spreading of the crisis in an environment of too many financial obligations, not all of which will be serviced, in our view, and in a crisis which in our view is about far more than Greece."
S&P downgraded Spain's long-term credit rating one notch to AA from AA+ with a negative outlook, citing an extended period of low economic growth and high borrowing costs.
"It is probably fair to say that Tuesday, 27 April was the day that the situation in the euro area took a dramatic and rather frightening turn for the worse," credit analysts at Credit Suisse (NYSE ADR: CS) in London said in a research note. "The concern is the extent and speed of the spreading of the crisis in an environment of too many financial obligations, not all of which will be serviced, in our view, and in a crisis which in our view is about far more than Greece."
S&P downgraded Spain's long-term credit rating one notch to AA from AA+ with a negative outlook, citing an extended period of low economic growth and high borrowing costs.
The Winners and Losers in the 'Commodities New World Order'
In the "commodities new world order," commodity producers will be king.
Investors who need proof need only consider recent events. Iron ore prices are at record levels, and the annual-price-setting arrangement has broken down. Venezuela President Hugo Chávez has signed "dark side" agreements with Russian Prime Minister Vladimir Putin for Russian companies to develop Venezuela's oil-and-mineral resources. China may have invested $1 trillion or so in U.S. Treasuries, but the Asian giant's only truly successful investment so far has been the 17% stake it took in Canadian-resources player Teck Resources Ltd. (NYSE: TCK).
Welcome to the commodities new world order. These events serve notice that - as we put the global financial crisis behind us - the commodity "haves" will set the agenda ... while the commodity "have nots" will fall farther and farther behind.
Investors who need proof need only consider recent events. Iron ore prices are at record levels, and the annual-price-setting arrangement has broken down. Venezuela President Hugo Chávez has signed "dark side" agreements with Russian Prime Minister Vladimir Putin for Russian companies to develop Venezuela's oil-and-mineral resources. China may have invested $1 trillion or so in U.S. Treasuries, but the Asian giant's only truly successful investment so far has been the 17% stake it took in Canadian-resources player Teck Resources Ltd. (NYSE: TCK).
Welcome to the commodities new world order. These events serve notice that - as we put the global financial crisis behind us - the commodity "haves" will set the agenda ... while the commodity "have nots" will fall farther and farther behind.
To discover the identities of the new-world-order winners – and losers – please read on...