Notes From Europe
My observations on the world of Finance and Politics from a European perspective.
Friday, May 27, 2005
What Constitution?
Oh boy, here we go again! The “Liberal elite” of Europe are at it again trying to convince the French electorate that they need to vote “oui” in the upcoming referendum. I must confess, I’m a little upset at the prospect of not being able to add my voice to “non” camp.
It strikes me as odd, that the European Union is trying to convince the electorate that a vote of non on the referendum would be disastrous for the state of the European Union as a whole. This of course is nonsense, but really comes as no surprise at the length this bloated bureaucracy will go to, in their zealous but careless attitude to convince us that we in Europe need to be ruled by a centralized behemoth, telling us what to do.
It’s true that come the day after the referendum, a vote of non will have an impact on the Euro, and possibly on the debt of tier – 2 government debt (Greece, Spain and Portugal). In any event this would merely indicate that their debt rating/yield are currently being skewed by tier-1 government debt, namely that of France, Germany and the United Kingdom.
Just look at the economics: Unemployment in the EU as a whole has not fallen below 8% of the labour force since 1990, with the latest date showing unemployment steadily creeping up to 8.6%, a good 2.0% above that of the United States and over 3% higher than the United Kingdom. What is noteworthy here is the fact that the United Kingdom is seeing unemployment numbers not witnessed for some 20 years, and of course, the United Kingdom is not in the Euro. Its true that Euro has aggressively appreciated against the US dollar, but this mealy belies the true problem, and is more due to the change of Asian Central Banks diversifying their currency holdings.
Europe needs a bureaucratic constitution wreaking the resolving of the its member states like a hole in the head. What ever happened to the notion of Europe as a group of nation states willing to cooperate on matters of social policy, trade and commerce? Perhaps solace can be found in the fact that this will give the elite pause for though on any further thought of tighter integration!
It strikes me as odd, that the European Union is trying to convince the electorate that a vote of non on the referendum would be disastrous for the state of the European Union as a whole. This of course is nonsense, but really comes as no surprise at the length this bloated bureaucracy will go to, in their zealous but careless attitude to convince us that we in Europe need to be ruled by a centralized behemoth, telling us what to do.
It’s true that come the day after the referendum, a vote of non will have an impact on the Euro, and possibly on the debt of tier – 2 government debt (Greece, Spain and Portugal). In any event this would merely indicate that their debt rating/yield are currently being skewed by tier-1 government debt, namely that of France, Germany and the United Kingdom.
Just look at the economics: Unemployment in the EU as a whole has not fallen below 8% of the labour force since 1990, with the latest date showing unemployment steadily creeping up to 8.6%, a good 2.0% above that of the United States and over 3% higher than the United Kingdom. What is noteworthy here is the fact that the United Kingdom is seeing unemployment numbers not witnessed for some 20 years, and of course, the United Kingdom is not in the Euro. Its true that Euro has aggressively appreciated against the US dollar, but this mealy belies the true problem, and is more due to the change of Asian Central Banks diversifying their currency holdings.
Europe needs a bureaucratic constitution wreaking the resolving of the its member states like a hole in the head. What ever happened to the notion of Europe as a group of nation states willing to cooperate on matters of social policy, trade and commerce? Perhaps solace can be found in the fact that this will give the elite pause for though on any further thought of tighter integration!
Thursday, May 05, 2005
GM “roils” the markets!
As a Dow Jones Industrial, and Standard and Poor’s member, the markets had a massive and pronounced sell off as Standard and Poor’s (ratings agency) cut the debt ratings to junk status(below investment grade) for General Motors. This downgrade to junk by Standard & Poor’s was not just limited to GM, but hit Ford Motors as well.
While the Markets were in a fairly “tight” range prior to the downgrade, its clear that this move combined with the non-farm payroll data due to be released on Friday, left investors including “yours truly” concerned. This was all worth -54.68, -5.43 and -3.28 on the Dow, S&P500 and NASDAQ respectively.
Standard & Poor’s stated that their downgrade of GM was due to feeling that management’s strategy may prove to be ineffective in addressing GM’s competitive disadvantage.
It should really come as no surprise in light of the fact that the automotive industry as a whole is in what could only be describe as “up the proverbial creek, without a paddle!” I’m mindful to point out however; that all of GM’s woes can’t be entirely causative of this general decline in automotive sales.
General Motors and the UAW must “seriously” reconsider the prohibitively expensive health care package enjoined by workers at GM. Health care provisions GM are some of the “richest” in industry as a whole. And just to put it in perspective, here’s a nice little stat: “Approximately $1,250.00 of a cars price manufactured at GM goes to workers health care cost”; it should be clear that is just in not sustainable.
I just hope that the old maxim “As goes GM, so goes the country!” is nothing more than that a maxim!
For information of Junk Bond and how they are rated:
http://www.investopedia.com/articles/02/052202.asp
While the Markets were in a fairly “tight” range prior to the downgrade, its clear that this move combined with the non-farm payroll data due to be released on Friday, left investors including “yours truly” concerned. This was all worth -54.68, -5.43 and -3.28 on the Dow, S&P500 and NASDAQ respectively.
Standard & Poor’s stated that their downgrade of GM was due to feeling that management’s strategy may prove to be ineffective in addressing GM’s competitive disadvantage.
It should really come as no surprise in light of the fact that the automotive industry as a whole is in what could only be describe as “up the proverbial creek, without a paddle!” I’m mindful to point out however; that all of GM’s woes can’t be entirely causative of this general decline in automotive sales.
General Motors and the UAW must “seriously” reconsider the prohibitively expensive health care package enjoined by workers at GM. Health care provisions GM are some of the “richest” in industry as a whole. And just to put it in perspective, here’s a nice little stat: “Approximately $1,250.00 of a cars price manufactured at GM goes to workers health care cost”; it should be clear that is just in not sustainable.
I just hope that the old maxim “As goes GM, so goes the country!” is nothing more than that a maxim!
For information of Junk Bond and how they are rated:
http://www.investopedia.com/articles/02/052202.asp
Wednesday, May 04, 2005
Talk about a “non event”!
Well, like all other traders, my eyes where firmly glued to the newswires in anticipation of the feds decision on the federal funs rate. Alan Greenspan & Co as expected nudged the rate up by one-quarter basis point (a unit used in fixed income and is equal to a 1/100th of 1%) – No surprise there!
For those of us who are consummate fed watchers, our attention was more attuned to what the actual fed statement was going to say – more specifically that “measured” pace statement. That stayed in with the intent of offsetting faster inflation.
My title of “non-event” is due to lack of true direction, either bullish or bearish on the major bourses with the release of this news. Yes, the Dow, S&P and NASDAQ, rallied; but this just fizzled out. This I guess could be due to the FED correcting its statement with respect to inflation expectations being contained.
In a way I’m glad with my trade on the 10-Year Treasury Note future, as I went long, and the future fell, only to rise again on correction by the feds to close at 111’120. Well I won’t say I was entirely sure I would be able to get out of this trade, but I did manage – needless to say, in the words of Austin Powers “I’m spent”!
Tomorrow’s another day, and hopefully we should get some direction, especially in light of light sweet crude closing again down -0.075 point to 49.425.
Later bloggers!
For those of us who are consummate fed watchers, our attention was more attuned to what the actual fed statement was going to say – more specifically that “measured” pace statement. That stayed in with the intent of offsetting faster inflation.
My title of “non-event” is due to lack of true direction, either bullish or bearish on the major bourses with the release of this news. Yes, the Dow, S&P and NASDAQ, rallied; but this just fizzled out. This I guess could be due to the FED correcting its statement with respect to inflation expectations being contained.
In a way I’m glad with my trade on the 10-Year Treasury Note future, as I went long, and the future fell, only to rise again on correction by the feds to close at 111’120. Well I won’t say I was entirely sure I would be able to get out of this trade, but I did manage – needless to say, in the words of Austin Powers “I’m spent”!
Tomorrow’s another day, and hopefully we should get some direction, especially in light of light sweet crude closing again down -0.075 point to 49.425.
Later bloggers!
