Europe is heading off a cliff! From one end of the continent to the other, the numbers suggest a double-dip recession is striking with brutal force…and with the world as interconnected as it is these days, what happens in Europe WILL impact our companies and markets here so now is the time to position your portfolio to weather the storm. Words: 900
So says Mike Larson (www.moneyandmarkets.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Larson goes on to say, in part:
Just consider the following …
1. A key industrial activity index in the euro zone tanked…to its worst reading in 25 months.
2. The main European purchasing managers’ index fell to 45.9 in April, a nine-month low.
3. The Italian purchasing managers’ index sank to a six-month low.
4. The Spainish purchasing managers’ index dropped to a 34-month low….
5. Germany’s manufacturing index sank to its own 33-month low! That proves the recession is spreading from the periphery of Europe to its very core!
6. Unemployment in the 17-nation euro zone rose to 10.9 percent in March, the most since the euro currency was launched 13 years ago. [In addition], German unemployment unexpectedly rose by 19,000 to 2.87 million, another confirmation of Europe’s spreading sickness.
7. The European Central Bank (ECB) was able to tamp down the crisis in the European debt markets temporarily in late 2011 and early 2012…by doling out one trillion euros in nearly free money to hundreds of banks across the Continent via the so-called Long-Term Refinancing Operations, or LTROs…
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The banks could have used that money to lend to companies and individuals who need it… [and/or] shored up their balance sheets but they didn’t. A just-released ECB survey showed that small business access to credit is on track to fall another 7 percent in the coming few months after collapsing by 20 percent in the past quarter….
[Instead] the banks have bought even MORE of the same, lousy sovereign bonds that got them into trouble in the first place! Spanish banks increased their holdings of Spanish government bonds by 26%…Italian banks raised their stake in Italian government debt by 31%, Irish banks boosted holdings by 21%, while Portuguese banks jacked up their exposure by 15%!
Bottom line? You have a European economy that’s sinking into a double-dip recession and you have a European financial system that’s buried under a massive — and GROWING — mountain of troubled sovereign bonds.
It may seem easy to brush those concerns under the rug….but I urge you to keep your eye on the big picture. With the world as interconnected as it is these days, what happens in Europe WILL impact our companies and markets here….so please make sure you have select downside hedges in place…[and that] your upside plays are in ironclad, rock-solid companies that can withstand the deepening European crisis!
*http://www.moneyandmarkets.com/euro-zone-heading-off-a-cliff-49583 (To access the articles please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
“The real risk for the euro zone now is not Greece, but France,” says a top French finance boss. Nicolas Baverez, a commentator who foresaw the country’s looming debt problems in a bestselling book of 2003, agrees: “I’m convinced that France will be the centre of the next shock in the euro zone.” [below their views are substantiated with some alarming and disturbing facts about France;s financial situation and how their politicians are failing to address the brewing crisis.] Words:740
About three months ago, shortly before Greece’s sovereign debt was restructured, I began to warn about Spain as the next Eurozone country to focus on. That has, indeed, turned out to be ‘all the news’ with reports every day on Spain’s deteriorating financial condition. Given the ongoing world economic uncertainty and volatility, however, I suggest you now begin to pay very careful attention to Italy going forward, but doing so without losing sight of what is transpiring in Spain. [Let me explain why I see ‘Italy’ eventually surpassing Spain as ‘all the news’.] Words: 485
It was just 6 months ago that Spain enjoyed a credit rating of AA. In early October, 2011, S&P downgraded Spain to an AA- rating with a negative outlook (details below as to why) and then again in January, 2012 from AA- to A for failing to make much in the way of improvements. Then, just last week, having clearly forewarned Spain that it was at risk of having it’s credit rating even further downgraded with all the financial implications of such a move, S&P further reduced Spain’s credit rating by two levels to BBB+. When you read what S&P said back in October and again in January, Spain has only itself to blame for its amazing mismanagement and sorry state of affairs. Words: 2000
In this article I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months, why it will have dire consequences on the U.S. and why the Fed can do absolutely nothing to stop it this time round. Words: 1334
When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 – devolution.] Words: 1520
The European economic situation is explained very simply in the illustration below. Take a look.
The International Monetary Fund wants the rules of the IMF changed so it can lend directly to banks and underwrite a rescue of the Spanish financial system without increasing Spain’s government debt. If the IMF is permitted to do so, however, the banking system’s control would pass to the IMF and such an increase in powers would be momentous. Here’s why. Words: 755