Austerity is already harsh in what has traditionally been the continent's
most euro-enthusiastic country - Spain. Unemployment, now affecting one in four
workers, is set to continue well into next year. In the Spanish capital, a
largely conservative place, the mood is of resignation rather than revolution.
There will be no Athens-style protests in Madrid – or not soon, although the
ongoing battles between balaclava-wearing miners and police in northern Asturias
are proof that anger is spilling over elsewhere. Photographers seeking dramatic
pictures on protest days travel to Barcelona, where radical left wingers see
police persecution in a wave of recent arrests, while police say they are
picking up those behind street violence during strikes. With the rescue money in
Spain's "bailout lite" looking likely to go straight to former savings banks,
the roots of its banking problem lie fully exposed. A decade-long housing boom,
fueled by cheap credit thanks to low interest rates needed by Germany, has left
the banks stuffed with toxic real estate. It is clear
: "Europe needs fiscal integration with a fiscal authority and
banking integration, a banking union with eurobonds, a banking supervisor and a
European guaranteed deposit fund," Rajoy said last week. A bank bailout does not
provide that. "The future of the euro is going to play out in the next few weeks
in Spain and Italy," finance minister Luis de Guindos has warned. The problem is
that Spain has already introduced harsh austerity measures, with official
unemployment at around 25% and over 50% for those under 25. If they push that
any further social explosion awaits. The further problem is that within this
system there is no alternative to a very bad decision. Either you bail out the
banks and shift the debt around the central banks in order to put off the awful
day or you let them go to the wall and then watch the whole economic system
collapse around our ears right now.
The trouble is that the orthodoxy of the last 50 years means that the IMF,
World Bank, European Bank and almost every university economics department are
run by Economists brought up on a paradigm that has failed
spectacularly....Monetarism, Thatcherism, Hayek, Friedman, the Chicago School
and the Austrian School ... all bollocks. We need a new paradigm and young
economists with new ideas. Otherwise we really are screwed.
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The calender is filing up. We're past the "Go Away in May" syndrome. Greece and Spain have dominated the headlines. And, despite appearance that the US Economy is slowing a bit, and a couple of countries might abandon the Euro and return to their own currencies so they can deflate the heck out of them, very little has changed since April.
The only thing that's really happened is that stocks have gotten cheaper- so cheap in fact that bargain hunters are starting to step in, and the markets appeared to have made some sort of temporary bottom and could improve considerably from here.
I'm very excited to report I've identified a couple new ideas that look really good. One of the older ideas I believe in long term is about to dish some goods as well. I was looking for some progress last week, but it's been delayed- stand by for news in the next few days.
Yes, next week we're going to crank it up the fun and profit meter again.
And, speaking of past winners (was I talking about them?), have a look at Luxeyard (OTC: LUXR). As I've repeatedly disclosed, I was a big holder of the stock, and sold my entire position between about $1.25 and $2 as the stock ran up the chart from our entry level of $.80. I'm still a holder of restricted shares from a direct investment I made in the company.
Note the upturn in price and volume surge on Friday. It looks to me like there might be a trade in this stock right now, so if you had a good experience with LUXR, now might be a good time to reload.
As I disclosed, I sold my entire free trading positions a lot higher. I was a buyer on Friday, so now I'm long the stock again, and hoping for another run up the charts.
The stock closed at $1.38 on Friday- perhaps it's ready to go back to $1.75 to $2. If you're a buyer on Monday morning, set your SSL at $1.20- if it goes below that level, it's likely to go lower.
There was a certain inevitability about Spain's decision to go cap in hand to Brussels and ask for a loan to help bail out its wrecked banks. Ever since Greece became the first member of the single currency to need assistance, each phase of the eurozone debt crisis has unfolded like a sad piece of classical music with its own distinctive melody.
The piece opens slowly. Policymakers in the country under threat deny that they have a problem, a view not shared by the financial markets. In the next movement the pace quickens as the pressure builds on the vulnerable country's bonds. Finally, there is a crescendo as the politicians admit that they are beaten and terms are agreed. There is a stirring passage where politicians claim to have snatched victory from the jaws of defeat.
It is not quite the end, though, because each piece has its coda. The faint echo of the melody can be heard as the crisis moves on to another eurozone capital.
Defending Spain's receipt of one of the largest eurozone bailouts yet, prime minister Mariano Rajoy on Sunday described it as a "victory": a victory both for Spain and for the European project. "It was the credibility of the euro that won," he declared to journalists before flying off to Poland to see Spain take on Italy in that other Euro sporting tournament. "If the banking situation was not resolved, I would not go."
Resolved? Not so fast. Whatever Mr Rajoy or the White House or the IMF might say, the deal that was announced on Saturday evening settles very little, but instead opens up many more questions – for Madrid, for the ordinary Spanish, for the country's banks and for the euro. The only thing that is absolutely certain is that Mr Rajoy's acceptance of a €100bn (£80bn) credit line marks a new phase in the euro crisis. First, it confirms that the scale of the problem is far bigger than previously suggested: Spain's economy is almost twice as big as the three other countries that are already in the euro bailout ward. Second, Madrid can't be dismissed as a spendthrift administration along the lines of Lisbon or Athens.
The more one looks at this bailout – which doesn't seriously address the restructuring of Spain's banks – the more it seems an unwitting invitation to speculate on which other eurozone members might soon be in the markets' firing line. Spain's financial situation is in some respects better than France's and very close to that of the Netherlands. Pessimistic? Maybe. Then again, just a couple of months ago Mr Rajoy was dismissing any suggestion that he would ask for a bailout. "Spain is not going to be rescued; Spain can't be rescued. There's no intention and no need and so Spain will not be rescued." And look what happened to him.
It might help the Greeks to understand that if they don't honour their agreements and start improving their economy by opening it up, that the Tsipras 'threat' to bring the whole of the EU down unless Greece is let off its debts, is already bolstered against his petulance.
It certainly has the feeling of a 'fire break' against Greek exit contagion, in that its only a temporary measure any may just hold long enough for the Greece to decide in/out, knowing that Europe is not going to be immediately crippled and that blackmail isn't an option anymore.
won't settle anything. It's probably a trillion or so light. The Euro is dead.
When are the so-called leaders in the Eurozone going to wake up and address that (embarrassing) little fact?
Then we can dismantle it to the extent necessary, take whatever knocks need to be taken, and move on. This death-by-a-thousand-cuts, this endless denial, is helping nobody. Including major economies around the world not in the Euro scam, and who never wanted to be, but who are also victims of gutless leadership, procrastination and vacillation from a bunch of toytown economies who would not know what a financial services sector was if it were handed to them on a plate.
They've had years to address this problem, and they just keep kicking the can down the road, and slowly but relentlessly driving the entire bloody world into a deep depression. Enough.
President Francois Hollande's Socialists and their allies are set for a majority following the first round of voting in French parliamentary elections, final results show.
Left-wing and green parties won a total of more than 46% of the vote compared to 34% for the centre-right UMP party, interior ministry figures showed.
The outcome of the polls is expected to determine the extent and pace of reform under the newly-elected French leader.
Run-offs are to be held next week.
The turnout nationwide was a modest 57%.
France's 46 million eligible voters have been picking representatives for 577 seats in the National Assembly.
TNS Sofres, Ipos and OpinonWay pollsters agreed that the Socialists and their Green allies might win as few as 283 seats or potentially as many as 347. However, potential allies in the anti-capitalist Left Front would take 13-20 seats and ensure a majority.
The communist-backed Left Front, led by Jean-Luc Melenchon, won 6.9% of the vote.
Spain has finally grasped a nettle that should have been grabbed a long time ago. By asking the euro zone for a loan of up to €100 billion ($125 billion) to recapitalize its banks, Madrid has acknowledged what the market already knew: that Spanish bank balance sheets have been massively understating the losses arising from the country's property bust.
But can this "financial aid" for the banks be presented in a way that ring-fences the problem, enabling the government to retain access to bond markets? This is the huge gamble. If it can't, a far bigger bailout may be needed.
The tragedy for Spain is that if it had confronted its banking mess at any time over the last four years, it could probably have funded the clean-up on its own. Yet the new government of Mariano Rajoy followed the same path as its predecessor, squandering valuable time and credibility with a series of half-baked restructuring plans that failed to provide any fresh capital to the system. For much of this year, Madrid has been engaged in a futile effort to persuade the euro zone to bail out its banks directly, without channelling the loans via the government.
Phew. Assuming Europe takes its lead from Asia, get ready for a relief rally this morning following the weekend’s decision by eurozone ministers to lend Spain up to €100bn to shore up its stricken banks.
Spain prefers not to call it a bail-out. But however you describe it, the looming arrival of all that money in Madrid has certainly given Asian markets a lift . MSCI's broadest index of Asia-Pacific shares outside Japan surged 1.6pc and the early reaction in Tokyo was to push the Nikkei up 2pc following Friday’s 2.1pc drop.
Now financial spreadbetters are forecasting a near 100-point jump, or 1.8pc rise, in the FTSE-100, with Germany's DAX likely to leap as much as 2.6pc and France's CAC-40 due for a 2.1pc rise. More here.
The bounce may be short-lived, though, as investors will inevitably start fretting over the outcome of the Greek election on June 17 that could put Athens on a route out of the euro bloc.
And Spain is also a long way from being out of the woods. The government has to refinance €82.5bn euros of debt maturing by the end of the year, with a big hump at the end of October. Meanwhile, the country's profligate regions have a further €15.7bn euros of debt maturing in the second half of 2012.
All in all, it’s an exciting day for new Bank of Spain Governor Luis Maria Linde , who might have picked a quieter moment to take office following the departure of his predecessor Miguel Fernandez Ordonez.
Sainsbury's has upped the stakes in the online retailing world this morning by taking on Amazon after acquiring a 64pc stake in the e-book platform Anobii from the troubled HMV Group for £1. Anobii is an online e-books platform which enables readers to research titles and purchase them to read on a range of e-reader, smartphone and tablet devices. Readers can rate, review, share and discuss their choices with other Anobii members on its website and across related social networking sites. The service currently has over 600,000 users worldwide, with a library of over 60,000 e-books. Sainsbury's will join other famous names on the Anobii's share register including HarperCollins, Penguin and Random House. The grocer says it intends to invest in, and develop, the business both here and overseas.
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