Tag Archives: Greece

Portugal will be the next Greece, predicts Mohamed El-Erian

Please refer to the story below:

Portugal will be the next Greece, predicts Mohamed El-Erian (The Guardian)

El-Erian, who is also co-chief investment officer of Pimco, said he expected Portugal’s first bailout package to be insufficient, prompting it to ask the EU and IMF for more money.

“Then there will be a big debate about how to split the burden between the EU, creditors, the IMF and the European Central Bank. And then financial markets will become nervous because they are worried about private sector participation,” he said.

Analysis

Lets look at the unemployment rate in Greece and Portugal (thanks to Google, it is much easier). As a note, I am trusting Google data feed for now, but I plan to take a look into where the data is coming from for future analysis.

The unemployment numbers are minimized by Governments, and growth is usually exaggerated. Given the current polticial situation in the Euro Zone (aka Shit), it seems that Mohammad El Erian is correct in making that call for Portugal following Greece’s path. The next question is, what other countries will follow Portgual?

I found another fun “Debt” clock – thanks to The Economist. Check it out here. (The funny thing is that Greece has 141% debt to GDP ratio, Portugal: 94.6%, Spain: 78.4%, Italy: 121.6%, France: 92.5%, Germany 77.8%). As the debt increases for one country, then it has to be an asset (loan out by) another country, which will be Germany in most of the cases. Is the last card Germany?

Alpha

IMF Loan for Italy, Spurs Risk On Trade in Stocks and Commodities

The markets were hit hard last week on fears of Italy’s growing problem with the borrowing costs rising on their bonds. This lastest fear on Italy only adds to the fire of contagion and fear spread through the EU Region. Last week was the worst pre-Thanksgiving  for our Stock Markets since 1932. Last weeks deep sell offs in commodities and stocks were driven by risk off trading aversion, due to the events in Italy and Greece.

The markets have been stuck in a pattern with bad news coming out of Greece and Italy, and other EU region countries sending the markets into a risk off mode.  When the markets going into risk off mode, it leads to deep sell offs in our equity markets and commodity markets as well as hits markets around the world.  Some fears of a China Slowdown, also rocked the markets last week. Worries that China is slowing down are fueling the fire that the Global Economy is on the brink of recession and headed for trouble.

This markets can turn though on a dime if the news and events improve overnight.  It is now Sunday night, and the news out of Europe is that the IMF is preparing an emergency loan package for Italy in case things get really out of hand and they have the money they need to keep their country operating and to prevent a default on their debt.

This news is changing the market sentiment around the world, and is fueling a large surge in our equity futures. Our Equity Futures and commodities are rising on the news as traders go back on a risk on mentality with good news from this loan, and with a great sales number for our Retailers for Black Friday Sales.

I would urge traders to be cautious and to wait this out. One more piece of bad news out of Europe can send us right back into risk off mode and fuel another sell off.

For now it appears the market will go back and forth until there is either a huge effort that really stops the fears of the EU debt crisis such as a large Quantitative Easing program developed by the European Central Bank.

Until we get such a progam the markets will move in lockstep with what is going on out of Europe.

 

Beta Market Analyst

On Greece

Let’s talk Greece.

But first, let’s talk about how I came about writing about Greece. You see, I’ve been sitting at my desk for hours, flipping through news articles, trying to decipher economists’ words, and my mind drew a blank, which stayed blank for days. How do I write this, so that the average population, without sophisticated business degrees, can understand this? That is, until I changed my location, and spent the night with my best friend, watching a chick flick. And then, it was when I realized, Greece and its debt is like watching the plot of a typical chick flick. Girl meets boy, they fall in love, they go through many trials and tribulations, but at the end of the 2 hours, they are together and all is well.  In this case, Greece meets Euro, Greece likes Euro, gives chase and finally adopts it as its own, but things don’t go as planned and we are in the middle of the movie where Greece and the Euro are having many trials and tribulations.

Don’t get me wrong; like any blossoming relationship, it is very good in the beginning, especially for Greece. Things were looking in the up and up. The Euro was shared amongst the Eurozone countries; thus, it doesn’t appreciate or depreciate based on Greece’s actions and events that affect the country. Now, because Greece adopted the Euro, they get many benefits that they otherwise wouldn’t receive if they had used their own currency, the drachma. When the Euro didn’t depreciate, foreign goods will be cheap, hence Greece consumes more, but at the same time, they produce less. The other benefit that Greece received from adopting the Euro was that countries have confidence in the Euro; hence they kept lending money to Greece without second thought. The point in the movie we are at now, is when the girl is asking her boyfriend to buy her more luxury goods, while she herself has quit her job, and stopped taking care of herself.

So now, we come to the part where the boyfriend is growing tired of the girlfriend. The European Union is having doubts about the relationship with Greece. What will come of it?

Continue reading