Italy, Spain... (We're all DOOMED content)

rick_chasey

Rumours I've been hearing the past few weeks is that Italy is already dead in the water.

Market seems to be reflecting that today - Italian bond yield is higher than Spain's.

For what it's worth, Spain grew at the same rate as the UK in the last quarter. IMF analysts are blaming the heavy state cuts.

OffTheBackAdam

The financial minnows of Europe, are a side show.
It's America that matters. When and it is when, the American economy tanks, the rest of the Western world will follow.
Obama's put a thin veneer over the issue, http://www.zerohedge.com/news/guest-pos ... ing-anyone
http://www.telegraph.co.uk/finance/comm ... hoice.html
Now, add in a string of bitterly cold winters, with the criminal idiocy of our current energy policies and there's the potential for not just major social disruption, but virtual revolution.

daviesee

OffTheBackAdam wrote:

The financial minnows of Europe, are a side show.
It's America that matters. When and it is when, the American economy tanks, the rest of the Western world will follow.
Obama's put a thin veneer over the issue, http://www.zerohedge.com/news/guest-pos ... ing-anyone
http://www.telegraph.co.uk/finance/comm ... hoice.html
Now, add in a string of bitterly cold winters, with the criminal idiocy of our current energy policies and there's the potential for not just major social disruption, but virtual revolution.

+1

This is bloody depressing. Can't we just enjoy what is left of the summer before the gloom sets in?

rick_chasey

daviesee wrote:

OffTheBackAdam wrote:

The financial minnows of Europe, are a side show.
It's America that matters. When and it is when, the American economy tanks, the rest of the Western world will follow.
Obama's put a thin veneer over the issue, http://www.zerohedge.com/news/guest-pos ... ing-anyone
http://www.telegraph.co.uk/finance/comm ... hoice.html
Now, add in a string of bitterly cold winters, with the criminal idiocy of our current energy policies and there's the potential for not just major social disruption, but virtual revolution.

+1

This is bloody depressing. Can't we just enjoy what is left of the summer before the gloom sets in?

US employment figures are out today at around 13.30 I think. If they're worse than expected, expect the markets to sh!t the bed....

finchy

OffTheBackAdam wrote:

The financial minnows of Europe, are a side show.
It's America that matters.

I agree that if the USA goes tits up then we all do, but when you say financial minnows of Europe, are you talking about Portugal, Greece and Ireland, or do you include Spain and Italy in that description?

daviesee

johnfinch wrote:

OffTheBackAdam wrote:

The financial minnows of Europe, are a side show.
It's America that matters.

I agree that if the USA goes tits up then we all do, but when you say financial minnows of Europe, are you talking about Portugal, Greece and Ireland, or do you include Spain and Italy in that description?

The problem with the Euro is that if one goes then they are all dragged down to greater or lesser extent. No one will be unaffected.

daviesee

Rick Chasey wrote:

US employment figures are out today at around 13.30 I think. If they're worse than expected, expect the markets to sh!t the bed....

Phew! We are saved.

http://www.bbc.co.uk/news/business-14420702

For now.................

rick_chasey

daviesee wrote:

Rick Chasey wrote:

US employment figures are out today at around 13.30 I think. If they're worse than expected, expect the markets to sh!t the bed....

Phew! We are saved.

http://www.bbc.co.uk/news/business-14420702

For now.................

The figures are not as good than they appear - 200,000 left the job market, so no jobs were created.

daviesee

Rick Chasey wrote:

daviesee wrote:

Rick Chasey wrote:

US employment figures are out today at around 13.30 I think. If they're worse than expected, expect the markets to sh!t the bed....

Phew! We are saved.

http://www.bbc.co.uk/news/business-14420702

For now.................

The figures are not as good than they appear - 200,000 left the job market, so no jobs were created.

Well that reprieve didn't last long...
http://www.bbc.co.uk/news/world-us-canada-14428930

Batten down the hatches......

Cressers

Now this is bad, the US's major creditor is pulling the choke chain...

http://uk.finance.yahoo.com/news/China- ... 0.html?x=0

anto164

Cressers wrote:

Now this is bad, the US's major creditor is pulling the choke chain...

http://uk.finance.yahoo.com/news/China- ... 0.html?x=0

Looks like China is able to hold the world to ransom, and is slowly becoming more influential..

There is no way that i want to be speaking chinese in my lifetime, but i'll embrace it's food!

Won't be long before china take over!

Cressers

Never mind China, it's the state-funded, predatory markets that ought to concern you. They can bully govts into screwing the people, who wern't responsible for the crisis, into further austerity, which leads to a further slowdown, which results in more austerity...

At some point we'll have to kill off these financial leeches.

verylonglegs

What I don't understand is how these ratings agencies can still make noises that influence the markets because are these not the same ratings agencies that were horribly wrong about the sub-prime mortgage packages which were the route cause of the whole mess?
Shouldn't that have completely discredited them as a company and render any future advice from them as worthless...after a mistake like that they shouldn't even still be in business.

EKIMIKE

In any other industry (with a genuine economic output/production) the above would be the case. But this is the dreamworld of financial markets where if enough people say it, it's true.

Collective thought is powerful in an industry where nothing actually exists as a measure against it.

rick_chasey

verylonglegs wrote:

What I don't understand is how these ratings agencies can still make noises that influence the markets because are these not the same ratings agencies that were horribly wrong about the sub-prime mortgage packages which were the route cause of the whole mess?
Shouldn't that have completely discredited them as a company and render any future advice from them as worthless...after a mistake like that they shouldn't even still be in business.

Who else is going to rate them? Someone has.

In theory, the reason there is more than one firm is so that they are forced to compete for the most accurate ratings. In practice, before the crash anyway, the most competitive was the agency that gave the most favourable rating to let the banks make cash, rather than being accurate.

More regulatory walls have been put in place, and I think the agencies have learnt more about the ratings process since the crash.

Ultimately, one of the main problems they have is that their analysts are always the bottom of the barrel. Any good analyst can be paid 2-3 time as much at a bank as an equity analyst than they can at a ratings agency.

There are many problems with them - it's a pretty bad set up. I don't know what the solution is, but I do think it's wrong to say that the agencies are holding the US up to ransom about their AAA rating. Ultimately, the agencies need to be accurate, and the problem is that US credit isn't worth what it used to be.

lifeform

This is the same S&P who were AAA rating all the sub-prime crap right up to the day the whole ponzi scheme came crashing down. However, it's worth noting that S&P's rating isn't so much about the absolute liquidity of the USA (and therefore it's likelihood of paying debt), it's to do with intent.

America has made no effort whatsoever to reduce it's structural deficit - like the rest of the G8, it hit the buffers a while back. Everyone else - UK, Germany, France, etc - at least starting thinking about reducing the rate at which debt was increasing (both public and private), whereas the US just carried on blithely in the misguided self-belief that it's too big to fail.

That is bad enough in itself, but then Congress failed to grasp the whole macro-economic thing of 'confidence' and subsequently turned the relatively humdrum job of raising the debt ceiling into a partizan punch-up of epic proportions at precisely the time when that was the last thing it should have done.

Nevertheless, the US economy is too big to fail just because it's now AA+ - not least because it'll drag China with it, and if both were to fail then that would literally be the end of civilisation as we know it, certainly in it's current consumerist form.

The bigger worry is that this downgrade continues to fuel a run on the stock markets. So what? If you don't have shares you don't need to worry what's happening on the market, right? Wrong, aside from the obvious pension pot problems, there's a challenge on Market Capitalisation - which is more or less driven solely by share price.

Reduction in a company's market cap brings problems - not least of which is the ability to borrow money cheaply. Which drives internal cost up, which drives external cost up. Things cost more. That has a percussive effect through the economic chain, which can become self-sustaining, in theory at least.

What does that mean for most people? It means that your utilities prices carry on rising, your pay review never happens, structural investment in things like telecoms is delayed. Investors leave the stock market and head for safer havens - Oil prices rise, as do metals like copper - percussive effect is to the consumer's wallet, percussive to B2C companies, percussive to B2B companies, which further precipitates drop in share prices.

Meanwhile, relative tax revenue dwindles - companies are making less profit, individuals are earning and spending less - yet cost continues to rise. Structural deficit increases - often exponentially, even despite the most dramatic spending cuts.

America's problem is our problem - not only because since WW2 our economy has become gradually more intertwined, but also because as the largest economy in the world, every other economy is affected by it, therefore it indirectly affects us as other places we trade with have the same issue.

Britain now sits in an interesting place - we thankfully managed to avoid getting mangled up in the economic kamikaze mission that is the Eurozone, but it will affect us massively when it smashes into the ground. And, we thankfully don't hold the level of US Treasury bonds or industrial reliance on American consumers that China's does, but it will affect us massively if that smashes into the ground.

It's interesting because in the long-term, the UK could exit this crisis very well indeed - we're a net importer, so our economy is less reliant on how much foreign consumers spend like Germany, China, or - to a degree - the USA.

My facepalm is that to position the UK to really benefit in the aftermath of Eurozone and /or Sino-American collapse requires some strong, forward thinking leadership with a real understanding of where this will all end up, and how to steer Britannia through it.

Unfortunately we seem to be graced with the same careerist politico halfwits that the Americans have who, at best, expend all their energy trying to stick little plasters over the by now thorougly dead proverbial horse - seemingly fooled into thinking there's still life in the old nag because it's still twitching.

Meanwhile, for the emerging economies - those not saddled with pandering to electorate, miles of red tape, or indeed much concern for the present but rather the future - this can only increase their emergence.

I wrote on another forum some time ago that there is every chance that it'll be our collective Great-Grandchildren speaking Indian in an offshored call-centre in Weybridge, or stitching together trainers for 60p per day in Gloucester for Chinese teenagers to wear.

deptfordmarmoset

Here's a curiosity: according to the French online press, Tel Aviv stock exchange suspended trading this morning after severe losses. This fact doesn't not appear to have gained much recognition in the UK press - in fact I haven't found any reporting about in the UK free press. (I'm sure the FT is covering it but that's behind a paywall.)

I'm wondering why French papers, like Le Monde and Libération, not usually the most pro-active on a Sunday morning, are headlining with it while there's a general UK silence. Any ideas?

EDIT: opened again at 10am BST but ready to shut again if losses exceed 5% ( http://www.lemonde.fr/economie/article/ ... id=1216746 )

rick_chasey

Nothing in the FT.

Can't imagine people are too concerned about a nation that isn't really internationally embedded financially. Israel has its own political problems that tend to be unrelated to the rest of the world..

The French presumably want to make out the situation is bad enough that Germany MUST pull its finger out to sort the Euro out.

That and UK papers are particularly poor at focussing at anything beyond the UK (and occasionally the US)

lifeform

I'd imagine politics aren't the driver here - I'd put a few quid on there being an awful lot of Jewish-American dollars tied up in Israeli stock, which could make the exchange uncomfortably linked to US Investor confidence. The only real protection, therefore, is to suspend trading.

I am surprised that it's not made UK news yet, if only because BBC, ITN, and Sky do love anything - no matter how insignificant - which could mean the world is ending.

Edit - however, it could be do with this.
http://news.sky.com/home/world-news/article/16045200

deptfordmarmoset

lifeform wrote:

I'd imagine politics aren't the driver here - I'd put a few quid on there being an awful lot of Jewish-American dollars tied up in Israeli stock, which could make the exchange uncomfortably linked to US Investor confidence. The only real protection, therefore, is to suspend trading.

I am surprised that it's not made UK news yet, if only because BBC, ITN, and Sky do love anything - no matter how insignificant - which could mean the world is ending.

Edit - however, it could be do with this.
http://news.sky.com/home/world-news/article/16045200

Maybe it is because of the Israeli demonstrations but surely the few countries where there is Sunday trading should give a clue about what's likely to hit Asia in the morning. Besides, the normally drowsy French Sunday press had no difficulty in covering both stories. The silence has left me confuddled and befused.

guinea

lifeform wrote:

This is the same S&P who were AAA rating all the sub-prime crap right up to the day the whole ponzi scheme came crashing down. However, it's worth noting that S&P's rating isn't so much about the absolute liquidity of the USA (and therefore it's likelihood of paying debt), it's to do with intent.

America has made no effort whatsoever to reduce it's structural deficit - like the rest of the G8, it hit the buffers a while back. Everyone else - UK, Germany, France, etc - at least starting thinking about reducing the rate at which debt was increasing (both public and private), whereas the US just carried on blithely in the misguided self-belief that it's too big to fail.

That is bad enough in itself, but then Congress failed to grasp the whole macro-economic thing of 'confidence' and subsequently turned the relatively humdrum job of raising the debt ceiling into a partizan punch-up of epic proportions at precisely the time when that was the last thing it should have done.

Nevertheless, the US economy is too big to fail just because it's now AA+ - not least because it'll drag China with it, and if both were to fail then that would literally be the end of civilisation as we know it, certainly in it's current consumerist form.

The bigger worry is that this downgrade continues to fuel a run on the stock markets. So what? If you don't have shares you don't need to worry what's happening on the market, right? Wrong, aside from the obvious pension pot problems, there's a challenge on Market Capitalisation - which is more or less driven solely by share price.

Reduction in a company's market cap brings problems - not least of which is the ability to borrow money cheaply. Which drives internal cost up, which drives external cost up. Things cost more. That has a percussive effect through the economic chain, which can become self-sustaining, in theory at least.

What does that mean for most people? It means that your utilities prices carry on rising, your pay review never happens, structural investment in things like telecoms is delayed. Investors leave the stock market and head for safer havens - Oil prices rise, as do metals like copper - percussive effect is to the consumer's wallet, percussive to B2C companies, percussive to B2B companies, which further precipitates drop in share prices.

Meanwhile, relative tax revenue dwindles - companies are making less profit, individuals are earning and spending less - yet cost continues to rise. Structural deficit increases - often exponentially, even despite the most dramatic spending cuts.

America's problem is our problem - not only because since WW2 our economy has become gradually more intertwined, but also because as the largest economy in the world, every other economy is affected by it, therefore it indirectly affects us as other places we trade with have the same issue.

Britain now sits in an interesting place - we thankfully managed to avoid getting mangled up in the economic kamikaze mission that is the Eurozone, but it will affect us massively when it smashes into the ground. And, we thankfully don't hold the level of US Treasury bonds or industrial reliance on American consumers that China's does, but it will affect us massively if that smashes into the ground.

It's interesting because in the long-term, the UK could exit this crisis very well indeed - we're a net importer, so our economy is less reliant on how much foreign consumers spend like Germany, China, or - to a degree - the USA.

My facepalm is that to position the UK to really benefit in the aftermath of Eurozone and /or Sino-American collapse requires some strong, forward thinking leadership with a real understanding of where this will all end up, and how to steer Britannia through it.

Unfortunately we seem to be graced with the same careerist politico halfwits that the Americans have who, at best, expend all their energy trying to stick little plasters over the by now thorougly dead proverbial horse - seemingly fooled into thinking there's still life in the old nag because it's still twitching.

Meanwhile, for the emerging economies - those not saddled with pandering to electorate, miles of red tape, or indeed much concern for the present but rather the future - this can only increase their emergence.

I wrote on another forum some time ago that there is every chance that it'll be our collective Great-Grandchildren speaking Indian in an offshored call-centre in Weybridge, or stitching together trainers for 60p per day in Gloucester for Chinese teenagers to wear.

I rate this post AAA.

Thanks for taking the time.

rick_chasey

Double post.

rick_chasey

It's a 3 fold problem.

#1 Eurozone crisis.

That's been eased in the short term, buying some time, because the ECB has announced it's going to buy up Italian and Spanish bonds.

That'll need a bit of French and German support, but that will probably come, grudgingly.

#2 US - if their economy slows, it all slows globally. That's what's making the markets tank today.


#3 - Asia is an export driven economy, and if both Europe and the US are slowing, it will slow too. They're also the big creditors at the moment, and, naturally ,they're getting a little tetchy about the credit they're supposed to be getting

So whenever you get a small rally on one of the problems, another one smacks it down again. Today's case, a rally in the Euro problem smacked down by US fears.

4kicks

Most of the above post is pretty good, well done! I agree were in for at least couple more years of recession, but disagree the causes

Most companies cost of capital isnt linked to their market cap as much as you think, as long as theyve got coverage ratios and, here we go again, good credit ratings (dont think S&Ps considers market cap in assessing creditworthyness), so htey can still raise money if ALL companies P/E ratios have fallen, not just theirs. In fact you may argue as Market cap falls, at the same time as intrest rates are rock bottom, cost of capital will fall (easier to meet expectations of shareholder return if youve already lost 50% of your portilio)- so falling stock prices dont affect "real people" unless there is a lack of consumer confidence, which, lets face it, cant get much worse, so I dont think you will get poorer just cos Bill Gates lost a couple of billion in share value. Part of the reason recession and growth is cyclical (despite what Greenspan said about a new capatalist model for the world) is people get bored with bad news and just dust off the credit card & start spending again.

US will come back, the ratings warning was a hefty shot across the bows, I think. Asia can whine all they want but until China starts to appreciate its currentcy in line with what its really worth then I dont think theyll have much leverage in discussions with the US.

What Im worried about, and it is really worrying, is the continuted political decisions for Germany, on behalf of the ECB, to buy PIGS govt bonds means these countries have no incentive to balance their budgets, so more & more bailouts seem the only strategy German & France has got. The longer this is left until Greece, Portugal, Possibly Italy devalue, the bigger the bang when they will. This will hurt mostly European banks, but it will mean, surprise surprise, banks will stop lending to each other. Again. This will cause the double dip recession eveyone things we are in right now.

rick_chasey

Bad day all round on the markets.

Traders don't seem to think things are going to be good in the future.

German DAX down 5%, Athens down 6% and announced a ban on short selling for 2 months. FTSE down roughly 3% just before the close.

In short, massive carnage.

Anyone retiring soon? Better speak to your pension manager ASAP.

4kicks

Ban on short selling is always the first nail in the coffin- Lehman Brothers tried that one!

Le Commentateur

lifeform wrote:

This is the same S&P who were AAA rating all the sub-prime crap right up to the day the whole ponzi scheme came crashing down. However, it's worth noting that S&P's rating isn't so much about the absolute liquidity of the USA (and therefore it's likelihood of paying debt), it's to do with intent.

America has made no effort whatsoever to reduce it's structural deficit - like the rest of the G8, it hit the buffers a while back. Everyone else - UK, Germany, France, etc - at least starting thinking about reducing the rate at which debt was increasing (both public and private), whereas the US just carried on blithely in the misguided self-belief that it's too big to fail.

That is bad enough in itself, but then Congress failed to grasp the whole macro-economic thing of 'confidence' and subsequently turned the relatively humdrum job of raising the debt ceiling into a partizan punch-up of epic proportions at precisely the time when that was the last thing it should have done.

Nevertheless, the US economy is too big to fail just because it's now AA+ - not least because it'll drag China with it, and if both were to fail then that would literally be the end of civilisation as we know it, certainly in it's current consumerist form.

The bigger worry is that this downgrade continues to fuel a run on the stock markets. So what? If you don't have shares you don't need to worry what's happening on the market, right? Wrong, aside from the obvious pension pot problems, there's a challenge on Market Capitalisation - which is more or less driven solely by share price.

Reduction in a company's market cap brings problems - not least of which is the ability to borrow money cheaply. Which drives internal cost up, which drives external cost up. Things cost more. That has a percussive effect through the economic chain, which can become self-sustaining, in theory at least.

What does that mean for most people? It means that your utilities prices carry on rising, your pay review never happens, structural investment in things like telecoms is delayed. Investors leave the stock market and head for safer havens - Oil prices rise, as do metals like copper - percussive effect is to the consumer's wallet, percussive to B2C companies, percussive to B2B companies, which further precipitates drop in share prices.

Meanwhile, relative tax revenue dwindles - companies are making less profit, individuals are earning and spending less - yet cost continues to rise. Structural deficit increases - often exponentially, even despite the most dramatic spending cuts.

America's problem is our problem - not only because since WW2 our economy has become gradually more intertwined, but also because as the largest economy in the world, every other economy is affected by it, therefore it indirectly affects us as other places we trade with have the same issue.

Britain now sits in an interesting place - we thankfully managed to avoid getting mangled up in the economic kamikaze mission that is the Eurozone, but it will affect us massively when it smashes into the ground. And, we thankfully don't hold the level of US Treasury bonds or industrial reliance on American consumers that China's does, but it will affect us massively if that smashes into the ground.

It's interesting because in the long-term, the UK could exit this crisis very well indeed - we're a net importer, so our economy is less reliant on how much foreign consumers spend like Germany, China, or - to a degree - the USA.

My facepalm is that to position the UK to really benefit in the aftermath of Eurozone and /or Sino-American collapse requires some strong, forward thinking leadership with a real understanding of where this will all end up, and how to steer Britannia through it.

Unfortunately we seem to be graced with the same careerist politico halfwits that the Americans have who, at best, expend all their energy trying to stick little plasters over the by now thorougly dead proverbial horse - seemingly fooled into thinking there's still life in the old nag because it's still twitching.

Meanwhile, for the emerging economies - those not saddled with pandering to electorate, miles of red tape, or indeed much concern for the present but rather the future - this can only increase their emergence.

I wrote on another forum some time ago that there is every chance that it'll be our collective Great-Grandchildren speaking Indian in an offshored call-centre in Weybridge, or stitching together trainers for 60p per day in Gloucester for Chinese teenagers to wear.

The future has to be high(er) inflation, I mean we're already seeing it with fuel prices in the past couple of years.

P_Tucker

Rick Chasey wrote:

Bad day all round on the markets.

Traders don't seem to think things are going to be good in the future.

German DAX down 5%, Athens down 6% and announced a ban on short selling for 2 months. FTSE down roughly 3% just before the close.

In short, massive carnage.

Anyone retiring soon? Better speak to your pension manager ASAP.

If you're about to retire and you still have significant exposure to equities, you're doing it wrong.

rick_chasey

P_Tucker wrote:

Rick Chasey wrote:

Bad day all round on the markets.

Traders don't seem to think things are going to be good in the future.

German DAX down 5%, Athens down 6% and announced a ban on short selling for 2 months. FTSE down roughly 3% just before the close.

In short, massive carnage.

Anyone retiring soon? Better speak to your pension manager ASAP.

If you're about to retire and you still have significant exposure to equities, you're doing it wrong.

Most pensions have some link to equities (especially pensions which are not private/personal pensions!)

daviesee

All pensions have exposure to equities but a smart fund manager will move the funds into "safer" investments to preserve what is in the pot in the last few years. It is not foolproof but better than leaving them in equities until the last day.