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Ingo Potsch Premium Member Group moderatorThe company name is only visible to registered members.Die USA und die Euro-Krise
NEW YORK (CNNMoney) -- Who said investing was hard?
All you need to do these days is wake up in the morning, follow what European stocks are doing and pay attention to all the latest chit-chat about what Angela Merkel and Nicolas Sarkozy allegedly said to each other during their latest emergency phone call.
Easy peasy.
I've been covering the markets for 16 years and I cannot remember a time when what was going on in the United States mattered so little. (I tweeted yesterday that the U.S. is now the Jan Brady of global economies to the EU's Marcia. "Europe! Europe! Europe!")
Just look at the chart at the top of this page. The swings in the S&P 500 (SPX) may not be as dramatic, but the moves clearly mimic what the DAX (DAX) in Germany is doing.
Bad earnings from some of the banks? Who cares? What's the latest speculation on how big the European Financial Stability Facility really needs to be?
Did Ben Bernanke just say something? Yawn. Someone just blogged that Italian bond yields are soaring again because of rumors that UniCredit may have to take a bigger haircut on Greek debt.
Europe's debt drama goes into extra innings
The U.S. market tanked during the summer because of worries about the lack of a plan by the European Union, International Monetary Fund and European Central Bank to save Europe.
And now the market is surging during "Rocktober" (S&P 500 is up more than 9%!) because there are hopes that the troika we've all come to know and love may finally announce a plan to rescue Greece and solve the debt crisis. For reals this time. We mean it! No later than next week! Or early November?
The Europe obsession is going to last for at least a few more weeks. And for good reason. If the EU cannot get its act together and the problems in Greece spill over to the rest of the continent, that is not good news for the U.S. at all. To start, the impact on U.S. banks could be disastrous.
But if the troika does come out with a reasonable plan -- which is clearly what the market is betting on right now -- the October rally could very well continue for the next few months.
"The progress in Europe has been painfully slow but it seems like European leaders are coming to the conclusion that the rescue fund has to be increased in size and steps have to be taken to recapitalize the banks," said Alan Skrainka, chief investment officer Cornerstone Wealth Management in St. Louis. "I think Europe is finally taking this more seriously."
As such, sentiment seems to have shifted. Instead of fearing the worst, bulls are hoping for, if not necessarily the best, something that isn't absolutely horrendous.
"There is a certain element of panic buying going on," said Bruce McCain, chief investment strategist with Key Private Bank in Cleveland. "If Europe doesn't blow up, investors may be positively surprised. Right now, it's more a matter of avoiding huge disappointments."
That may be true. But given how sharply stocks have rebounded from their summer slump, I'm not convinced that all Europe has to do is not implode to satisfy investors.
G20 finance chiefs back Europe rescue
You can easily make a case for a classic "sell the news" dumping of stocks once we finally have a concrete plan to digest as opposed to the dribs and drabs we keep getting through the rumor mill. And remember, there still isn't an official, definitive plan.
"European leaders are still wrangling over how to get more firepower out of the bailout fund," said Paul Christopher, chief International strategist Wells Fargo Advisors in St. Louis. "Some want to use it as an insurance fund. Some want to turn it into a bank. Germany and France are still going back and forth."
Christopher pointed out that the market seems to be ignoring the fact that forcing European banks to take deeper discounts on their Greek debt holdings while also requiring them to be recapitalized are "mutually contradictory goals." He added that it's still not certain that Europe will be able to avoid a worst-case scenario of an abrupt Greek default.
Graham Summers, chief market strategist with Phoenix Capital Research in Charlottesville, Va., agreed. Summers worries that this month's rally will be short lived. He thinks that even if the EFSF gets increased to several trillion euro, it still may not be able to stop an eventual Greek default or be enough to prevent things from getting worse in debt-laden Spain and Italy.
"It's pointless. It's just one massive verbal intervention after another. Unless aliens come down from the sky dropping money, you can't keep all the bailouts going," Summers said.
Reader comment of the week. I wrote a lot about the big banks this week in light of Occupy Wall Street and earnings from the likes of Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500).
There was a lot of Twitter chatter about the fact that many banks were able to benefit from a little thing called DVA, essentially a quirk that lets banks mark the current discounted value of their debt to market as a profit.
That led to the following tweet from Scott Williams, aka @inklingsw. I listened to the #BAC conf call - was that "$6.2 billion on accounting games" or "gains" it was a little early..."
Nice one. Anyway, The Buzz is taking Monday and Tuesday off. I'll be back Wednesday. Sadly, I'll miss weighing in on what could be a very interesting earnings report from Netflix (NFLX) Monday. Oh well. But I'm sure that whatever they announce Monday they'll abandon on Wednesday, right?
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks
- 22 Oct 2011, 06:42 am
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Ingo Potsch Premium Member Group moderatorThe company name is only visible to registered members.
Re: Die USA und die Euro-Krise
NEW YORK (CNNMoney) -- In a carefully worded statement, Moody's Investor Service hinted that the outlook for France's top-tier credit rating could be at risk.
The nation still enjoys "very high government financial strength," said the ratings agency in its annual credit report on France, released late Monday.
But that strength has been diminished by the global economic and financial crisis to the point where the French government's "debt metrics" are the lowest of any AAA-rated country, according to Moody's.
Moody's said France's credit rating "rests on investors' confidence in the government's ability and its willingness to tackle unforeseen challenges."
That's a problem because investor confidence is in short supply, while unforeseen challenges tend to come in spades.
In particular, Moody's points to "the possible need to provide additional support to other European sovereigns or to its own banking system" as potential events that could result in "significant" liabilities for the French government.
"The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government's AAA debt rating," Moody's said in a statement.
France and Germany, the two largest European economies, are expected to be on the hook for much of the cost associated with a possible restructuring of Greek government debt.
The French government stands behind €89 billion in loan guarantees by the European Financial Stability Facility, which makes low-cost loans to euro area nations in need.
Europe: Time is running out
French banks are among the most exposed to government bonds issued by euro area nations that are struggling to repay debt, such as Italy, Spain, Portugal and Ireland.
The concern is that French banks, which are seen as lacking sufficient capital reserves to survive a contagious sovereign debt crisis, may need to be bailed out by the government.
"We have always viewed France as the most problematic of the so-called core eurozone countries," wrote Win Thin, a market strategist at Brown Brothers Harriman, in a note to clients.
Thin said France's credit metrics are weaker than those of the United States, which had its rating downgraded earlier this year.
Moody's stressed that its report does not constitute a ratings action, and that the outlook for France remains stable. But the agency said it will monitor the government's progress on its fiscal and economic reforms over the next few months.
"Moody's are going to review the stable outlook over the next three months, so it is likely that we will see an outlook change at a minimum early in 2012," said Gary Jenkins, head of fixed-income at Evolution Securities, in a note to clients.
French finance minister Francois Baroin told broadcaster France 2 that the government will make "every effort" to maintain its pristine credit rating, according to Le Monde.
Baroin said preserving the nation's rating is crucial. But he added that the government has the "flexibility" to avoid being downgraded, "so there is no concern."
Baroin called for "sang-froid," apparently referring to jittery investors. But he acknowledged that implementing planned economic and fiscal reforms will be challenging.
"Obviously it's difficult, but indispensable," he said.
- 22 Oct 2011, 06:43 am
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Ingo Potsch Premium Member Group moderatorThe company name is only visible to registered members.
Re^2: Die USA und die Euro-Krise
NEW YORK (CNNMoney) -- Finance ministers from the world's largest economies pledged Saturday to take "all necessary actions" to stabilize global financial markets and ensure that banks are well capitalized.
"We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with the current crisis," the Group of 20 finance ministers said in a statement issued after a two-day meeting in Paris.
The meeting comes as officials in Europe move closer to an agreement on a comprehensive plan to secure the banking system and resolve Europe's long-standing sovereign debt problems.
The plan, outlined by European Commission president Jose Manuel Barroso last week, will be discussed in detail at a meeting being held by the European Council in Brussels on Oct. 23.
"We heard encouraging things from our European colleagues in Paris about a new comprehensive plan to deal with the crisis on the continent," said U.S. Treasury Secretary Tim Geithner in a statement.
Geithner added that European leaders "clearly have more work to do on the strategy and the details."
But he sounded optimistic about the support the plan has received from Europe's two largest economies. "When France and Germany agree on a plan together and decide to act, big things are possible," he said.
Europe: Many hurdles, little time
European leaders have been under pressure to decisively resolve the debt crisis in Greece and increase the firepower of a recently overhauled bailout fund to provide a stronger "backstop" for other euro area nations struggling with unsustainable levels of debt, such as Italy and Spain.
The 27-nation European Union has also been grappling with the threat of a banking crisis, amid fears in financial markets that banks do not have enough capital to withstand the shock of a contagious sovereign debt crisis.
The G20 ministers welcomed the recently approved overhaul of the European Financial Stability Facility, which now has power to intervene in the sovereign debt market and loan money to governments that need to recapitalize banks.
The EFSF is still widely seen as needing additional "leverage" to address both the sovereign debt and banking crisis simultaneously.
EU officials are expected to discuss ways to give the €440 billion fund greater "firepower" at a meeting later this month, but increasing the amount of money the fund controls has been ruled out.
"We look forward to further work to maximize the impact of the EFSF in order to avoid contagion, and to the outcome of the European Council on October 23 to decisively address the current challenges through a comprehensive plan," the G20 communiqué read.
The "comprehensive plan" is expected to be formally presented early next month when the G20 heads of state meet in Cannes, France. Meanwhile, the G20 also said it made progress on an "action plan" to address problems in the global economy and help boost growth.
The ministers said developed economies must continue to reduce debts and deficits, while taking steps to spur economic growth.
Emerging economies need to address risks such as inflation and capital imbalances, the G20 said, adding that developing nations with export-driven economies need to stimulate domestic consumption.
Is the euro a broken dream? - CNN
The G20 said it is taking "concrete steps" to strengthen the international monetary system, including the management of capital flows and exchange rates.
The ministers also welcomed new surveillance powers by the International Monetary Fund, but the statement seemed to suggest that the G20 expects more from the multinational lending institution.
"We committed that the IMF must have adequate resources to fulfill its systemic responsibilities and look forward to a discussion of this in Cannes," the G20 said.
Geithner said in his statement that the IMF has a "substantial arsenal of financial resources" that can be used to "supplement" Europe's comprehensive plan.
But he added that the IMF resources would be used "alongside a more substantial commitment of European resources." The G20 also pledged to continue working on plans to strengthen the global financial system and contain the risks posed by financial institutions that are deemed too-big-to-fail.
The G20 consists of large, industrialized economies such as the United States, Germany, France, Italy, Japan, the United Kingdom and Canada. It also includes emerging economic powers China, India, Brazil and Russia.
First Published: October 15, 2011: 12:27 PM ET
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- 22 Oct 2011, 06:43 am
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Ingo Potsch Premium Member Group moderatorThe company name is only visible to registered members.
Re^3: Die USA und die Euro-Krise
NEW YORK (CNNMoney) -- European Commission president Jose Manuel Barroso announced a five-point plan Wednesday to address Europe's sovereign debt problems, saying policymakers need to act immediately to resolve the long running crisis.
"We now need to get ahead of the curve," Barroso told the European Parliament.
Barroso, who heads the European Union's executive body, outlined a series of measures that represent a "comprehensive response" to the debt problems that are putting stress on the European banking system.
He said European leaders need to act quickly and agree on the plan at the next meeting of the European Council on October 23.
"Confidence can be restored through an immediate deployment of all the elements needed to solve the crisis," said Barroso. "Only in this way we will be able to convince our citizens, our global partners and the markets that we have the solutions that measure up to the challenges all economies are facing."
Slovakia rejects European bailout plan
Barroso said the first step is to take "decisive action on Greece," including the latest installment of bailout money for the debt stricken nation.
International monitors in Athens completed a review of the Greece's finances Monday, saying the nation should receive the much-needed funds in early November.
Greece should also receive a second "adjustment program," based on a combination of private sector involvement and "adequate financing" from European governments, he said.
Barroso called on European leaders to "urgently strengthen the banks," which have been hit by liquidity problems linked to fears that the debt problems in Greece could spread to Italy and other euro area nations.
A roadmap or dead end? - CNN
"The sovereign contagion and banks, whether we like it or not, are now linked," he said.
Echoing recent comments made by the leaders of Germany and France, Barroso said banks should first seek to raise capital from private investors. If they cannot, he said European states should inject capital into banks before tapping funds from the European Financial Stability Facility.
Barroso also called on the European Banking Authority to conduct another assessment of the banking system to determine which banks have the largest exposure to distressed government debt.
Banks that do not meet new capital requirements should be prevented from paying dividends to investors and bonuses to employees, he said.
In addition, Barroso said EU policymakers should "fast track" policies aimed at enhancing stability and economic growth in Europe.
"We are really speaking seriously when we mention the need for more discipline, more integration," he told Parliament.
Barroso said policymakers should accelerate the adoption of the European Stability Mechanism, a permanent replacement for the temporary EFSF. He also called for swift action on a proposed financial transaction tax.
In addition, he urged policymakers to take steps toward greater cooperation on economic and fiscal policies across the 27-member European Union.
"We must complete the monetary union with a real economic union," Barroso said. "The future of the euro depends on it."
But he also said the need to make longer-term structural reforms should not prevent officials from taking immediate action on measures to contain the crisis.
"It is time to say that the speed of European Union should not be the speed of its slowest member," he said.
First Published: October 12, 2011: 12:40 PM ET
- 22 Oct 2011, 06:44 am
