About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, August 29, 2012

Eurozone Status Check

Amidst a battle with the Goths of the Bundesbank over sovereign paper purchases, ECB head
Draghi has passed on Jackson Hole to fade into theEuro haze for another week or so. The guy has
succeeded in pulling enough levers to Get the EZ's liquidity deficit moved from critical on to
serious and may not be far from restoring liquidity to a level that reduces the risk of a deflationary
downturn.

The EZ remains mired in recession and lower growth outside the zone is crimping export orders
as global trade slows to a crawl. Debt levels are shrinking on weaker demand and on forced
bank recapitalizations.The ECB must contend not only with the German monetary authorities but
with occasional bouts of capital flight. In reality the EZ has held up far better than most, myself
included, would have thought. But there are tight limits, both economic and social. Seven years of
fat has been followed by four of lean. Three more lean years is likely to prove unmanagable.

After a fast, sharp bear market from spring 2011 into the fall, Euro stocks have been trying to
establish a base in anticipation of eventual economic recovery with action and volatility heavily
reflecting perceived potential for both ECB and Fed monetary easing. Euro 350 IEV Chart Ditto
the Euro ($XEU). The IEV is getting overbought.

Further monetary easing by the ECB through bond purchases and other schemes it might try for
is just the first step for EZ recovery. The authorities will also have to lighten up on bank
recapitilization plans and plan for stimulus to avoid or cope with oncoming humanitarian issues.
A number of countries in the EZ have been pissing regularly into the well and its foundations
are rapidly corroding.

There is much more to say about the eventual geopolitical / economic status of Europe, but I'll
hold off for now as I need to figure more out concerning the US vs Germany and how to say it
politely.

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