Category Archives: Europe

On Greece & Recent Market Volatility

We’ve heard from a number of clients and friends recently, asking us about Greece and the recent market volatility.  Here is our succinct summation:

We feel awful for the people of Greece who have been caught up in the mess over there through no fault of their own.  (Those who should take the blame, well….)  It has to be a frustrating and frightening experience.  The drama unfolding in Greece has certainly added to recent market volatility.  However, it feels to us like – to borrow from Yogi Berra – “Deja vu all over again.”  The things going on today in Europe are similar to events that occurred there only a few years ago.  And, when you come right down to the real numbers, the real economic impact Greece has in the world, consider this: the entire size of Greece’s economy is roughly equivalent to the size of the GDP of the City of Philadelphia.  Which isn’t much larger than the City of Detroit.  The same Detroit that went bankrupt.  If Detroit’s bankruptcy didn’t bring down the U.S. economy, we doubt that whatever happens in Greece will have any meaningful long-term impact on it either.  So yes, the events in Greece are a tragedy of sorts (sorry, I couldn’t resist), but for the most part it’s a drama for U.S. households that is better suited for TV than for making changes in our long-term investment outlook.

On a lighter note, we want to wish all of our readers a very Happy 4th of July!  We hope you spend it safely and in good company, good health, and good cheer!

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Trouble in Euroland

The Swiss national bank ended its policy of pegging the Swiss franc to the Euro. It had pinned the currency at 1.20 francs per euro for the past 3½ years. It abandoned the cap which led to an immediate increase in the price of the Swiss franc by 30%. Today, the Euro and the franc are trading at par.

What this means is that prices for Swiss goods are higher than they were a few days ago for people outside of Switzerland. That’s bad for Swiss companies and Swiss stocks fell 8.7% as traders worried the stronger franc would hurt Switzerland’s exports. Switzerland’s top exports are gold, medical products, watches and chemicals.

The sudden and unexpected move caught currency traders by surprise and created turmoil in world markets as investors tried to anticipate what the move means.

Stay tuned.

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Castles On Deep Discount In Eastern Germany

For those who have everything, here’s an unusual gift”

Mutzschen Castle

 

For sale: 18th century castle with a medieval prison tower, moat and lake on 14 acres. The price: 350,000 euros ($445,000), less than the cost of a Manhattan studio. The catch? It’s in eastern German.

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Bond yields worldwide under 1%

Bank of America said that 45% of all government bonds worldwide yield less than 1%. Central bankers from around the world meet today to find a way of spurring economic growth. Most have adopted a low interest rate strategy. That’s good for stocks, but it’s devastating for savers who are making less than zero once inflation and taxes are factored in.

Speculation that the European Central Bank will start buying debt in the year ahead pushed German 10-year yields to a record low of 0.866 percent last week. The rally helped drive demand for Treasuries and other notes as investors sought higher interest payments than they can get in Europe.

“No one’s talking about rate hikes in Europe for several years,”

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A castle that costs less than a NYC apartment

There was a fascinating article in BuzzFeed that had the interesting (to me) title: 6 Castles That Cost Less Than An Apartment In NYC

Here is the first pair:

Castle in FrancePRICE: $1,621,200

This 13,993-square-foot, 6-bedroom castle sits on 24 acres of land overlooking the countryside of Midi Pyrenees. Features include a large entrance hall opening to the courtyard, salon with a fireplace, grand staircase, elevator, large dining room with fireplace, two kitchens, a bedroom wing with a hall onto the courtyard, study rooms in the towers, two garages, and access to the chapel and east wing.

Apartment in NYPRICE: $1,650,000

Here’s a 1-bed, 1.5-bath, 1,200-square-foot apartment on East 30th Street. It’s conveniently located near nothing interesting.

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Looking ahead

As the second quarter of 2013 slips into history, investors are finding a few bumps in the road.  The tectonic plates of the world economy are shifting.  The yield on the benchmark 10-year Treasury is moving up as we hear hints from the Federal Reserve that there may be an end to QE (Quantitative Easing) 3, but not yet.

The assumptions behind the recovery of global markets has been based on the assumption that the US Fed would keep printing money, China would keep growing and Japan would stay mired in a decades-long slump.  Any hints that these assumptions would change have triggered sudden gyrations.

The Fed’s hints that QE-Infinity will not go on forever has some people worried.  There is also a question of how fast the Chinese economy is really growing.  And Japan has suddenly embarked on its own QE program. Currency markets are jittery, and currencies have a significant impact on investors in foreign securities.

What’s ahead for the rest of the year?  Answering this question now is impossible.

The prospect for slower growth in China is pulling commodity prices down. Japan’s stock and bond markets have been riding a roller coaster as attitudes shift almost daily about the new government’s economic policy.  Emerging market currencies are also in decline.  India, Poland, South Africa and Brazil are trying to prop up their currency.  Meanwhile Europe remains mired in recession.

Economists at J.P. Morgan Chase have turned mildly hopeful lately that the U.S., Europe and much of the rest of world economy will shift into a higher gear later this year, in what would be a pleasant contrast to the midyear slumps seen in recent years.

The International Monetary Fund is more cautious about the rest of the world. Managing Director Christine Lagarde said “We could be entering a softer patch.”

Whatever comes our way, we are, as always, positioning our portfolios to participate in further market gains and to cushion any market declines.  Over the long term the trend is up.

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Visit major World War I battlefields in France and Belgium before next year’s centenary crowds you out

French and Commonweath graves at the Thiepval Memorial

AUGUST 2014 MARKS the 100th anniversary of the outbreak of what came to be known as the “war to end all wars”—a reference that is now used ironically, because the devastation was soon overshadowed by the near-Armageddon of World War II.

When the first war ended, some nine million combatants were dead, and in the parts of eastern France and western Belgium that made up the Western Front it can seem like every road leads to a cemetery. But it is also a beautiful region, with gently flowing rivers, picturesque villages and noble Gothic cathedrals.

The areas where some of the most famous fighting took place—Verdun and Somme in France and Ieper (also known as Ypres) over the Belgian border—can easily be toured by car over a week, with side excursions to Champagne houses in Épernay and cathedrals at Amiens and Reims. Starting next year, big commemorations will be held, perhaps for the last time. Go soon to avoid crowds, or at least start planning—many hotels in the Somme are already booked for July 2016, the anniversary of the Somme offensive.

Read the rest.

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News from Europe

  • Greece’s jobless rate rose to 26.8 percent in March from a downwardly revised 26.7 percent in February, the country’s statistics service ELSTAT said on Thursday.
  • Latvia Advances Toward Joining Euro Currency
  • The European Central Bank kept its main interest rate on hold at a record low 0.5 percent on Thursday as it waits to see whether early signs of stabilisation in the euro zone will blossom into an economic recovery.
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