On Economy

 

Regulators are “Worried”- but it is way too Late

We have discussed the immense credit bubbles in Scandinavian countries in these pages several times in recent years. As it turns out, they have now become even bigger. The euro area debt crisis has had a number of side effects. One of them is that not only Switzerland, but also other countries in Europe outside of the euro zone have tried their best to keep their currencies from appreciating. This is based on the erroneous mercantilist notion that having a strong currency is somehow “bad”.

In Denmark the central bank’s benchmark lending rate has been stuck at minus 0.75 percent since February. Denmark’s households are incidentally the most leveraged in the world, with household debt amounting to over 530 percent of the country’s economic output.

 

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A City Gone Quiet

We are sitting at a sidewalk café in Paris. It is August. Families have decamped for the country. So it is quiet in this part of the city (the 16th arrondissement). At this hour of the morning, there would normally be children going to school with satchels on their backs. The streets would be clogged with commuters. And the cafés would be crowded with all manner of people.

But the children are gone. Along with their parents. All that is left are a few fathers wondering how to get into trouble with their families gone, along with some old people, tourists, and mental defectives, dragging behind them their worldly goods in rolling caddies. We are not sure which category we fit into.

 

Caf+®_de_FloreCoffeehouse in Paris in the summer – France may be economically dead, but Paris is a very nice city

 Photo credit: Arnaud 25

 

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Greek Stocks Reopen with a Thud

The Greek stock market very likely represents an emerging opportunity, as many stocks are sporting extremely low valuations these days. However, when we last discussed the Greek market, we pointed out that there was probably no hurry and more importantly, that using ETFs to play the Greek market would pose a difficulty at the current juncture.

 

arquitectura-del-pasado-7161Greek ruins – emblematic for the country’s situation.

Photo credit: fondos7.net

 

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Spectacular Growth

We spent much of January on the beach at Rancho Santana in Nicaragua. The longer we stayed, the more we liked it. It was warm and dry on the Pacific coast… but we woke up to the sound of rain on the roof this morning.

“Lake Arenal has a different climate,” our overseas real estate scout, Ronan McMahon, explained. Ronan is a young Irishman with long dark hair, a sunny disposition and a thick County Cork accent. He also advises members of our family wealth advisory, Bonner & Partners Family Office, on where to find the best real estate deals.

 

na-lake-arenal-sunsetThe Arenal volcano near Lake Arenal in Costa Rica, an artificial lake at the bottom of which the two old towns of Arenal and Tonadora lie abandoned. The lake is surrounded by a rainforest that is home to an estimated 2,000 plant species, 300 bird species and 120 different mammals, including jaguars and tapirs.

Photo via vacationscostarica.com

 

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What’s Really Killing Capitalism

VANCOUVER, Canada – Hillary is taking the bull by the horns… and putting the knife between her teeth. She is a “take-charge” candidate and aims to let us know.

Yes, earlier his week, she promised to improve capitalism. Now, it’s the climate of planet Earth that has her attention. She’s going to make it better by decreasing carbon emissions – by force, of course.

 

ClintonSaints preserve us! Now she wants to “save the planet” too. Ironically not even the reds and professional scaremongers are happy with her “climate change” contortions (as seen in the Guardian, a hotbed of climate alarmism and a preferred medium of assorted limousine socialists).

Photo credit: Pablo Martinez Monsivais / AP

 

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Austria’s Constitutional Court Decides to Uphold Property Rights

To everybody’s vast surprise, Austria’s constitutional court has decided not to side with the government in the infamous Hypo Alpe Adria (HAA) case. The bank went belly-up after the 2008 crisis and slowly but surely it emerged that it represented a financial catastrophe of truly stunning proportions.

Incompetence on a rarely seen scale, but probably also fraud (although that angle has yet to be pursued by the judiciary) ultimately produced the biggest de facto (if not de iure, yet) insolvency in Austria’s history.

 

Hypo_Centar_7_downloadHypo Alpe Adria – a giant house of cards that imploded in the course of the financial crisis.

Photo credit: hypo-alpe-adria.hr

 

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Greece’s Citizens Know More than Paul Krugman

One of the interesting dynamics in Greece is the continued attachment of the Greek population to the Euro. All the polls show 60-70% majorities for staying in the euro zone, notwithstanding the ravages of austerity. But there is a very simple explanation for this paradox. As much as the Greeks blame the rest of Europe, and especially the Germans, for their problems, they understand very well that nothing is worse than their home-grown politicians.

 

091926b1-b5eb-4886-ba1a-cf61b07e64eb-2060x1236We generally don’t make the mistake of overestimating the competence of Paul Krugman on this site (PT) …

Photo credit: David Levene

 

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Easy Money … Hard Times

VANCOUVER, Canada – What would the world do without well-intentioned, earnest, and intelligent public servants like Hillary Clinton? We don’t know. But we’d like to find out!

 

Billary“And this afternoon, right after I’ve saved the planet from catastrophic anthropogenic global warming, I will save capitalism too…” What would capitalism do without Hillary Clinton?

Photo credit: Becker / AP

 

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Equity Risk Is Increasingly Non-Existent… By The Numbers

The concept of risk for hedge fund managers is a constant concern. The internal monologue goes something like this…what’s my downside if I initiate this position…how much can I lose if I am not right?”

The real answer is that you really have no idea…despite best efforts…even with stop losses [which I abhor]. The true, measurable risk of any position is only exactly known after you liquidate the position. Plus, risk management is more capital management than single stock management.

 

Beer-StierLittle did he know how it would all end …

Cartoon via wallstreetsurvivor.com

 

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No Trend Uniformity

As John Hussman points out in his most recent weekly missive, the stock market currently reflects all the characteristics observed near previous major market peaks. Apart from the more obvious ones, such as overvaluation and lopsidedly bullish sentiment which have been with us for some time, the market’s internals continue to deteriorate. This makes the current situation especially dangerous. As Hussman notes:

 

When extreme valuations and lopsided bullish sentiment are joined by deterioration in market internals, one faces an environment that couples compressed risk premiums with increasing risk aversion. Throughout history, severe market losses and crashes have nearly always been the result of an upward spike in previously compressed risk premiums.”

 

(emphasis added)

 

trader_1963744bPhoto credit: Alamy

 

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