Euro Debt Crisis Under Control?

12-Oct-2011 | Reggie | Banks Economy Europe

It would seem as though investors are starting to believe that this latest European debt crisis is under control.  Markets throughout the world took some pretty serious hits over the past few weeks as investors headed to the exits based on fears that European banks could begin to collapse.  With the monetary union rallying behind the common cause of keeping the economy afloat, investor confidence seems to be on the rise.

 

The latest refinement of the bailout fund, referred to as the EFSF European Financial Stability Facility, has just been approved by Slovakia, one of the smaller nations of the Eurozone.  The EFSF will have a total value of €750 billion, part of which will be raised by issuing its own bonds that will have an AAA rating. 

 

The other big news is that the Belgian government agreed to nationalize the domestic operations of Dexia bank.  Dexia was in dire straights thanks to the bad European debts it was holding and weak capitalization that resulted.  With not having to worry about a run on the bank, investors and asset holders could take a breath.

 

Also, the Chinese sovereign wealth fund bought shares of the four big banks.  The move is meant to shore up capital of the banks and increase investor confidence.  The Chinese markets were closed when the announcement was made, but shares on the Hong Kong market rallied hard immediately following the announcement. 

 

With this latest round of good news, the TSX has managed to rebound over 1,000 points since the lows hit last week.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Markets Tumble again on European Debt Woes

03-Oct-2011 | Reggie | Asia Banks Europe Government

Following their Asian counterparts, North American markets took quite the tumble on the first day of October, a notoriously bad month for stocks.  The Hang Seng was hit the hardest with a 4.4% drop while the TSX and Dow Jones dropped 3.2% and 2.4% respectively.  This decline put the TSX into official bear market territory now that the index is off more than 20% from its April high.  Once again, the European debt troubles are front and center of the blame. 

 

Greece once again failed to meet its target set for spending cuts for both this year and next.  Failure to meet the deficit target set means Greece is far less likely to receive any additional bailout funds which have prevented the country from claiming bankruptcy thus far.  That said, many are predicting that the next round of funds will be paid out to Greece in order to give the policy makers more time to formulate a plan. 

 

Accompanying the bad news, Bill Gross the world’s biggest bond manager outlined in his monthly investment outlook that a recession is becoming quite likely at this point. “Sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack.” 

 

Making things worse, consumer spending in the US is likely to fall in the future thanks to declining wages for the US work force.  Consumer spending has been a huge proponent of the world’s largest economy.  With spending on the decline, the writing could be on the wall for growth in the United States.

 

These headlines, combined with others have investors throughout the world on their heels as they hope to avoid huge losses like those we saw in 2008 and a full out recession.  The one ray of hope in the news for today was that China’s service industry managed to expand faster than expected last month.  If the Chinese economy manages to stay afloat throughout this European crisis, there is a good chance the rest of the world can remain afloat.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Gold Bugs Beware

24-Aug-2011 | Reggie | Commodities Currency USA

 

Just because something goes up, doesn’t mean it has to go down, but in the case of Gold bullion which has risen nearly 25% in value over the past weeks, you start to wonder if the dramatic price increase is reasonable and sustainable. The price of gold started the month of July just under $1500 an oz. Fast forward to August 22nd and we’re looking at $1900 an oz. That type of dramatic increase raises some eyebrows when the main value is to be a store of value.

 

That kind of rapid ascent is usually reserved for more speculative holdings that are subject to huge shifts in supply and demand. The majority of the world’s gold supply is held by governments and central around the world Up until 1971 currencies were linked to the price of gold. A reserve form of currency is something you wouldn’t really expect to increase by 25% in value over a few weeks or nearly double over the past year unless something really awfully terrible was happening in the economy.

 

While some might argue that’s exactly what is going on right now, I believe the facts hang on the other side. TheUnited Statesdropping from AAA credit rating to AA+ according to 1 debt rating agency has been attributed to much of the rapid ascent in the price of gold. While this is not a good thing, it has little to no impact on how theUnited Stateswill continue to operate their country and pay their debtors. The debt issues ofGreecehave also been attributed for much of the rise in Gold. However,Greeceis one of the smallest countries in the European Union and of very little consequence to overall EU productivity. While unfortunate, these types of issues aren’t anything new. Countries are like businesses. They go through ups and downs. First world countries like theUSare not going to disappear and devolve into panic and pandemonium.

 

As always, noted investor and market commentator Dennis Gartman made some very impactful statements regarding the whole gold issue.

“To bring fact to this story, as of last Friday, the SPDR

Gold Trust’s market capitalization rose to $76.7 billion as

gold moved to and through topped $1,880/ounce. The

SPY’s “capitalization” was that day $74.4 billion. It is

senseless that the SPY has a lesser capitalization than

the gold ETF and it will not much longer, either because

stocks rise or gold falls or both; but as Herb Stein said,

that which cannot continue won’t. This won’t.”

As of writing this, the price of Gold is already down over $120 from its peak of $1900/oz and further decline is expected. Some are calling it investors cashing in gains, and others are calling it the end of the bubble.

 

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Banking Stress Test

13-Jul-2010 | kate | Banks Europe

The European Commission has finally agreed on the criteria for the “Stress Test” which will be given to 91 European banks. The idea behind the stress test is to test the banks’ ability to withstand various scenarios so that fundamental issues in the banking system can be exposed and then addressed.

The Committee of European Banking Supervisors announced last week that they will test “adverse scenario’s” in which the EU GDP is three percentage points lower than the current forecast for the next two years. And will set a minimum capital basis for banks to maintain. The test, however, will vary unemployment, inflation and GDP on a country-by-country basis.

The purpose of the stress test is to help restore consumer confidence, as evidenced by the 36% increase in US banking stocks following the release of their test results. The test is made to help reassure consumers that the banks will survive the difficult scenarios and come out stronger on the other side. As a result the test has been made hard enough to be realistic, but no too difficult that too many financial institutions will fail. The European Commission faced a difficult task as their issue is complicated by a possibility that one or more country may default on their loans.

With market funding pretty much none existence to some of the EU banks, the banks are welcoming the stress test. Countries like Spain and Portugal, who have been borrowing form the European Central bank, are becoming passionate advocators of the American Style stress test to restore confidence.

The stress test is done by an independent body examining the banks books, losses and making the results public as to force the banks to raise more capital and restore confidence. The results of the EU bank stress test results should be made public in mid to late July.

The EU hasn’t yet decided whether or not they will provide cash to banks that fail the test, meaning that some countries could have trouble finding a bail out. European lenders have already loaned out 2.29 trillion to at risk EU countries by 2009.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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European Financial System threatens to Freeze Up

15-Jun-2010 | Reggie | Economy Europe Market Outlook

Similarly to the financial meltdown of 2008, the banks in Europe are once again refusing to lend money to one another.  This is another bad sign that of the lingering issues terrorizing Europe.  It also has some very negative implications for the rest of the country.

The banks refusing to lend money with one another is sending a message that they don’t even trust each other to stay afloat.  Instead the banks are choosing to conduct their business with the European Central Bank.  This could potentially result in a credit squeeze as the banks lose access to capital needed to conduct their business.  So far the ECB has managed to fill the void by lending out funds at record levels to institutions in need.  For the short term loans, the banks are paying the ECB nearly 3x as much as they would if they were to lend to each other.  This is very de ja vu.

Meanwhile, many stocks around the globe have been rising on renewed hopes.  The price of a barrel of Oil has bounced off its lows back into the mid 70s, while copper, the metal with a PHD has increased for the fifth day in a row.  Industrial production in the United States showed another month of positive increases that coincided with increased consumer confidence from the United States.  There is some chatter that the BP Oil spill in the Gulf will contribute to US GDP as well thanks to the billions of dollars they will be pouring into the economy for clean up and remuneration.

For now we still seem to be on a bit of a teeter totter as the pros and cons of the world economies continue to face off.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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