Blog
One more day waiting for Greek talks.
February 09, 2012 12:07:22 | 3 comments

More uncertainty coming from Greece: as of yesterday the 3 political parties had not agreed on further cuts in the economy, but everybody believes that it will happen today, at the last minute. Also, today the banks will finalize the agreement and accept losses of almost 70% at the same time the IMF and EU should agree on the new package of aid. Despite the uncertainty, the European  and Asian stock market were in positive territory .In the US, futures are pointing to a decline but the announce of jobless claim at 8:30 should give direction to the market. The BOE announced more quantitative easing and left interest rate unchanged .Today should be one more good day for the market, if jobless claim helps.  

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Mr 1%.
January 27, 2012 22:32:36 | 0 comments

This has been an interesting week, with two republican debates, the state of the Union, the FED meeting and the announcement of GDP. The Fed’s announcement that interest rates would continue to be very low until 2014 provoked euphoria in the market. Once the euphoria passed,  however, people started to  realize that if that was the decision, it must be because they are not very optimistic – to say the least- about the prospects of the economy and Europe's ability to resolve its problems. Unfortunately the GDP came in lower than expected, so we are ready for a pullback in the stock market. The tug of war continues; risk on, risk off. Obama’s speech was great, as always. If only he would follow up his words with actions, that would be even better. One of his problems is too many words, and very little action - except when it comes to military acts, like the killing of Osama Bin Laden and the rescue of the prisoners in Somalia. In fact, one of the best statements of the night was "Osama is dead and General Motors is up!" Meanwhile in the political arena, the republican establishment decid...

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Brazil 2012
January 19, 2012 21:23:54 | 1 comments

Today I attended a seminar sponsored by the Brazilian Chamber of New York about the economic and political outlook of Brazil. The program had excellent speakers – Murilo de Aragão, Monica Baumgarten de Bolle, Mauro Leos and Eduardo Loyo – and a great moderator - Paulo Vieira da Cunha. The main points highlighted by the speakers were the following: 1-      In the short term, and more specifically in 2012, Brazil will continue to do very well, especially compared to the rest of the world. We will see economic growth – though less than it was in 2011, and we will still have primary surplus. Additionally, despite being in the high range of the target, inflation will be under control. 2-      In the long term, structural problems will continue to be a challenge: lack of infrastructure, loss of competitiveness, taxes, etc. Unfortunately, there is no political will or popular pressure to make any reforms to tackle these problems. The truth is that success is the enemy of transformation. When a country faces a crisis, it is necessary to look for solutions and correct whatever...

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The Eurozone
January 17, 2012 17:48:43 | 0 comments

According to Nouriel Roubini there are seven headwinds to Eurozone growth: 1-The slowing core (France and Germany) 2-Fiscal Austerity- it will take years to see the benefits and in the meantime will make the recession worse 3-Politics- draconian measures will lead to a public backlash 4-The banks – will get worse in a slowing economy 5-The ECB- valiant, but overwhelmed 6-An overvalued currency 7-Greece, yet again.  

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Nine causes of slow global growth in future years
January 11, 2012 14:43:48 | 0 comments

excerpted from the January 2012 edition of A. Gary Shilling's INSIGHT

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Volatility is here to stay.
December 14, 2011 02:27:17 | 0 comments

According to the movie “Too Big to Fail” (HBO), after the Lehman Brother’s collapse, Christine Lagarde , then the  French Minister of Finance, called Hank Paulson, the Secretary of Treasury. The “dialogue” went more or less like this: “You allowed it to fail, Hank. It was a horrible mistake. How could you let this happen? It is having enormous consequences all over Europe. The European Banks have tremendous exposure and it will be even worse with AIG. It is not just an American problem!” She then hung up on Paulson.   Last week, the current Secretary of Treasury of the US, Tim Geithner, decided to return the call…in person. Geithner travelled through Europe in the days before the Euro Summit and his main message was that they could not allow the countries to default; they had to find a lender of last resort.   On Friday, the markets were exulting because of the results of the Euro Summit, and the Dow Jones closed almost 200 points up. Of course during the weekend, investors digested the news from Europe and the markets went down on Monday. As I write, the...

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Lessons from Brazil.
December 03, 2011 02:11:07 | 0 comments

I have been talking in my newsletters about the fact that the European leaders are not doing their jobs. Everybody knows that they are kicking the can down the road. It was necessary for the Central Banks to step in and coordinate joint actions with other central banks to calm the markets. Well, it worked: the stock market had its best week in a while. The action probably was initiated by Bernanke:  those who read the book Too Big To Fail, know that his intervention and his knowledge was critical to injecting funds into the American banks in 2008. He not only spent his academic life studying the great depression but improved his knowledge with the 2008 lessons. Thank God the central bank is independent, because if it was up to the leaders and American politicians, nothing good would come of it. During my lifetime, I never thought I would see the day where Brazil could set an example for other countries. Well, that day has arrived. In 2008, the Brazilian authorities implemented a series of measures that not only lessened the  impact of the crisis but made the recovery faster than ...

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Central banks act, market jumps.
November 30, 2011 15:16:02 | 1 comments

Today we woke up with the news that the major central banks- our FED, Canada, Bank of England, Switzerland and Japan- decide to act in coordination to improve global liquidity. Also, the Bank of China decided to lower its reserve requirements for Chinese banks, and there were good news on the employment front in the USA. As a result, there was a jump in the stock market. Increase liquidity helps Europe, helps economic growth and at the same time increases the risk of inflation. The question is if this will be enough to sustain an upward movement in the market. Will the markets break the trading range they are since July? Are we going to see a “Santa Rally”?   I am skeptical. At the end of the day the euro zone fundamentals are still unchanged. However is a good opportunity to take a look in your positions and make adjustments

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Crossroads
November 16, 2011 13:27:39 | 2 comments

Investors can be bold like Warren Buffet and buy American companies which are undervalued at the moment. Or they can continue to be afraid of Europe, believing that the problems are getting worse and continuing on the sidelines with lots of cash. The truth is that the European problems are far from being resolved: the investors had celebrated the statements of the European authorities, the changes in Government in Greece and Italy, but all the changes involve time and there is no time. Italian and Spanish yields are increasing and investors will require more and more to buy the assets. Notwithstanding Merkel efforts to preserve the European Union, there is not much to be done except to find almost 2 billion euros to solve the problem. For those who think that is time to buy I recommend watch the movie “Too big to fail “to remember how contagion happens. However I celebrate the ones who are courageous enough to jump in, like Buffet.  

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The volatility continues.
October 21, 2011 00:48:13 | 0 comments

Since August 2nd the Dow has been trading on a range between 10,600 and 12,130. This week the Dow was up on Monday, down on Tuesday, mixed – up and down -on Wednesday and mixed again today. Again, we are having more of the same: Europe, Greece, mixed economic indicators.The news that Angela Merkel was cancelling a statement, plus- according to the Die Welt newspaper- the possibility of a postponement of the planned euro summit weighed on the market.The protests in Greece escalated in the last few days before the expected vote of a new austerity package by the Greek congress.In the US, existing home sales decreased by 3.0% - the market was expecting 2.6%- and the new claims for unemployment remained above 400,000. The volatility of the market is just a manifestation of the fact that nobody really knows what is going on and what is going to happen. In the US and in Europe nobody is taking decisions. I hate to be so repetitive but this is what happens when you have the most powerful economies of the world without effective leadership. That doesn't apply to Brazil though: yesterday...

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