Thank goodness we no longer have to give Europe a second thought now that the EU and IMF (18% of the IMF kitty comes from the US) brought a bazooka to a knife fight in terms of bailouts. The euros involved are huge as the austerity needed was too difficult to implement. The lack of political will to make the sacrifices needed to avoid a bailout were obviously formidable and I had no idea how they thought they could pull it off and it turns out neither did they.
The reaction in the Monday session was truly astounding. Regardless of your take on whether this is the right thing a 4.4% rally in one day is big. We were reminded a couple of years ago that the biggest single day moves come during bear markets. Maybe 4.4% doesn't qualify as big enough but maybe it does. I'm not sure how the consequences can be anything but bad but the rally in the US, that might be over, shows a willingness to buy that is tough to assess.
Last week in the immediate aftermath of the proposed Aussie mining tax I said that iShares should get their filed for New Zealand ETF to the market. Well they came close by listing Ireland (EIRL) and Indonesia (EIDO) . NETS, remember that short lived ETF provider, had an Ireland ETF that was very heavy in financials but now that the banks are down 95% or so that sector only comprises 14% of the fund which is not small but does make for a more rounded fund--at the sector level. The Indonesia fund is 28% financials. There are quite a few interesting materials companies in Indonesia that would be a preferable way in but they are very difficult to access and in some instances very difficult to even follow. Hopefully this improves.
A reader left a comment on the Seeking Alpha version of a recent post that I think was disagreeing with my implication about not enough people living below their means. Of course I could be wrong about this and maybe it is not the problem that I think it is. My view could be skewed by just the people I encounter but I have to say when I think about the increase in foreclosures caused by resets, the mortgage extraction numbers, total indebtedness of this countries, the debt that exists in other countries and combine that with folks I have encountered first hand I have to think this is a massive problem.
Short post today, I am headed down to Phoenix for the day to speak at an investment management conference. The topic of the panel I'm sitting on will be ETFs. I know, I know shocking but it should be fun.
Wikinvest Wire
5 comments:
The US contribution to the Europe bailout (via the IMF) comes to less than 5% of the total even if one mistakenly assumes that all of the US contribution is going to the bailout. IOW it's peanuts but something to squawk about I suppose. Personally I think the US/EU swap agreement is more problematic but that may be too complicated to resonate in the echo chamber.
Agree that overall debt levels are becoming unsustainable and, as the saw has it, that which is unsustainable will stop. How the stop occurs however is going to make a hell of a lot of difference to the 99.5% of the worlds population unfortunate enough not to own the equivalent of their own country.
All modern economies are credit-based and if social mores provide insufficient counter-incentive to over-use of credit either additional counter-incentives must be strengthened (e.g., laws, regulation) and/or money must be destroyed more rapidly (e.g., inflation, taxes) or booms and crashes become normal which means long-term strategic planning and entrepreneurship become impossible; uncertainty level rises too fast over time so horizon closes in.
Have a good day at the conference.
Isn't there already a couple of good New Zealand ETFs?
There is a very interesting article on Fanny & Freddie's problems here http://finance.yahoo.com/news/Ignoring-the-Elephant-in-the-nytimes-3670078648.html?x=0
I heard some nitwit talking on tv in Las Vegas saying that there are only 7500 houses on the market in Vegas. He's obviously not counting the thousands in various stages of foreclosure.
Good read IMO on Europe bailout:
http://alephblog.com/2010/05/11/complexity-abhors-volatility/
I deal with scores of families in my volunteer work through the public schools and at two large churches.
Your take on not enough folks living within their means is absolutely correct, from my observations.
Another observation is that more people are blaming others for their financial mistakes - and do not expect to suffer consequences as they continue to binge over and above their means.
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