Business

Bad News For Europe, Good News For Investors

Bad news out of Europe, Germany in particular, makes two potentially profitable outcomes significantly more likely. Firstly, the European Central Bank will be more flexible in its efforts to keep Greece in the Eurozone. Secondly, there are fewer roadblocks in the ECB’s way for announcing further QE. Policy is diverging. While the US contemplates tightening, Europe is exploring the opposite. Resulting currency moves could provide a welcomed boost to European exporters.

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Bad news for Europe, good news for investors

Investor hopes for ‘government bond-buying’ QE were raised today as Germany came under renewed pressure.

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Investors are calling this risk “Lehman Squared”

As Eurozone turmoil resurfaces, Gemma Godfrey takes you through the under the radar risks and how to trade them.

The risk of Greece leaving the Euro is looming large over markets as a ‘snap’ election nears on Jan 25th. Threatening to reverse the austerity measures (spending cuts etc) required for bailout funds and remaining in the Eurozone, Syriza looks likely to lead any coalition government, if it does not win outright.

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1 Simple Rule To Tell Who’s Naked & How To Avoid Losing Money

“In light of the naked celebrity photos doing the rounds, I’m going to tell you today how to tell who’s really naked in Silicon Valley and beyond.

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How To Save Yourself From The Next Madoff Ponzi Scheme

“Don’t invest in anything you don’t understand – beware of anything that seems too good to be true and where noone is able to explain to you why it isn’t…”

In the below clip, Smart Money Expert Gemma Godfrey quickly explains how to avoid another Madoff – how a Ponzi scheme works, how to spot one and how to be smarter with your money.

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Let’s Kiss More: Here’s Why & How

“Today I’m going to teach you to kiss. At work. On TV. In life or death situations. I’m going to show you how. And then when we go our separate ways you’re going to kiss with other people more than you’ve ever done before!.

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Economic ‘Potholes’ Ahead

Gemma Godfrey highlights the factors that could cause a pullback in markets and provide buying opportunities, on CNBC’s Fast Money. Published on cnbc.com by Bruno J. Navarro.

Disappointing growth in Germany, the potential for political deadlock in Italy and corruption allegations in Spain appears to be increasing risk.

Market elation has been a little bit too early, moved a little bit too far, and there are these potholes that actually could cause markets to stumble, at least in the shorter term. Markets do not like uncertainty, and the longer this continues, the longer the uncertainty is over the markets, the more likely is it will have a pullback.

The U.S. stock market is approaching 500 days since a 10 percent-plus correction, which she said was the tenth-longest time in history that such a bull run has occurred.

And it means when we’re looking at where valuations are , they’re no longer cheap with respect to the U.S. market, growth isn’t coming through as we thought it was going to come through, and you’ve got this level of uncertainty, meaning that it is more likely that these momentum followers – for example, the hedge funds are buying into financials – that they’re going to start to stumble.

But I do think that that means if we do see a correction, it could be muted because it’ll be a fantastic buying opportunity for those investors that are looking to rotate back into risk assets because over long-term, we’re actually more bullish about equities.

Low interest rates, credit spreads at multiyear lows and the prospects of a return to growth could still bode well for equities.

What the market needed was confidence and the return of depositors to put their money into European banks, something that hasn’t happened sufficiently.

All of that gives us slight cause for concern, meaning that we’re growing more cautious shorter-term, although, obviously, more bullish longer-term.”

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And just a reminder of why Spain has been able to withstand bailout pressure and markets have shrugged off European woes until recently…

Reading Between The Lines: Why Eurozone Improvement is Being Ignored

Published on the Front Page of Huffington Post Business

Markets have shrugged off improvement in the Eurozone because more is needed for stability. Rising demand for German goods, an improving business climate and stability in Spanish housing should have given markets cause for celebration. However, after the substantial rally we’ve seen, and the headwinds yet to be tackled within the region, caution has crept back into markets.

Absence of Growth and Currency Risk

There is deep concern over Europe’s ability to kickstart growth, as austerity measures dampen economic expansion and a strong euro stifles exports. The increase in demand for German factory goods interestingly was driven by demand within the euro area. Domestic demand was weak and the currency still source of concern abroad. Furthermore, despite an overall improving business climate, uncertainty in the political and economic landscape going forward is causing delay in hiring and investment.

Spain Precarious and Firepower Lacking

Once again hitting the headlines, Spain could derail European stability, as corruption charges are directed at the government while they continue to grapple with a large budget deficit. The latest data points to a possible floor in Spanish housing prices but defaults on bank loans due to the real estate bubble remains elevated and there is only limited further financial aid available directly from the rescue fund. In order to meet its main obligation of lending to struggling countries, additional direct bank aid has been rumoured to amount to less than €100bn, nowhere near enough to contain future turmoil!

Reform and Unity Needed

With France expected to have slipped back into recession, Draghi, the European Central Bank President, is right to warn that the region is not in the clear yet. What’s needed now are structural reform and closer fiscal and political unity. Only with a return of confidence, based on improving fundamentals, can stability return.

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Should Banks Be Lending? (CNBC Video Clip)

European Central Bank action has failed: Some have claimed the LTRO was a game changer but it hasn’t solved the structural issues within Europe. They continue so yields are starting to rise again, and the lending isn’t being passed on to consumers and businesses… Watch the debate below and vote…

The Greek Tragedy: Could a ‘Haircut’ Help?

Debate has been raging as to whether the Greek economy can avoid bankruptcy. Just how big is the problem, what are the options and how is this impacting financial markets? 

Background to the Problem

Greece is around €300bn in debt. Putting that into context, its budget deficit is one of the highest in Europe and last year amounted to more than four times the Eurozone limit at 13.6% of GDP. This more than supports the country’s inclusion in the infamous ‘PIIGS’ acronym (Portugal, Ireland, Italy, Greece and Spain) used to refer to the areas of sovereign debt concern.

What’s Going On?

Despite the jobless rate reaching 16% (and a horrific 42.5% for youth), the Greek economy has seen only marginal deleveraging. Instead, people are depending on consumer credit to maintain their levels of expenditure and service their debts (i.e. paying credit card bills with other credit cards). Moreover, whilst many in the UK struggle to obtain loans from banks, the overall banking sector in Greece actually increased their credit availability, with the most significant increase going to the government itself.

Attempted Solutions

Last Thursday, Jean-Claude Trichet, President of the European Central Bank, announced that they would lend Greece €45bn in new loans. However, this alone, they acknowledge, is not enough. The ECB wants to see structural reforms and a good deal of privatization, with the claim that €50bn could be generated over 3 to 5 years to reduce debt/GDP from 160% to 140%.

What are the Complications?

Loans to ‘bailout’ struggling countries are partially funded by taxpayers from different countries within the EU. Therefore, the problem is not an isolated one. Furthermore, even after this loan and the privatization contributions, there will be a financing gap of €170bn between 2012 -14 which will need filling. European banks have to refinance €1.3tn maturing debt by end 2012 and are owed over €200bn already by the PIIGs for refinancing ops.

Could a Good ‘Haircut’ Help?

With so much talk of a ‘restructuring’, i.e. bond holders sharing some of the pain, it is interesting to hear the views of Lorenzo Bini Smaghi, an ECB executive board member on the subject. He maintains that these are not the tools by which Greece can save its economy but could cause a “Depression” and “banking system collapse”. Furthermore, those pointing to a compromise of a voluntary or ‘soft’ restructuring appear to be fooling themselves. According to him, there is “no such thing as an ‘orderly’ or ‘soft’ re-structuring” since ‘haircuts’ (a percentage knocked off the par value of a bond) would have to be forced by governments. Crucially, any type of restructuring would cause a panic in the markets and cause credit events reducing the value of these investment vehicles either way.

Yield on a 10 year Greek Government Bond (Orange), 10 year German Government Bond (white) and the spread between the two (yellow) - showing the higher premium demanded by investors for holding Greek debt, near historical highs - highlighting a heightened risk perceived by the markets.

So, What Are the Options?

As previously mentioned, a default on some of its debts would have dire consequences but the prospects for sustainable financial solvency appear weak with such a substantial deficit and the habits of borrowers and lenders not much improved. Most worrying, from the perspective of European stability is the recent comments from a Greek EU Commissioner that “The scenario of removing Greece from the euro is now on the table”. Therefore, although in stark contrast to statements by Greece’s Prime Minister and with France and Germany still heavily exposed to EU laggards, which together make a break up of the euro unlikely in the short-term, it is a fear weighing on investors minds.

How are the financial Markets Reacting?

Risk aversion is back on the rise. Investors are worried and, understandably, demanding higher premiums to lend to Greece. That’s not all. Other markets are suffering. “All sophisticated indicators of systemic risk, cross correlations of CDS and yield spreads show a high sensitivity to restructuring moves and are at levels higher than in September 2008”.

The Investment Insight: What Can You Do?

This has two consequences. Firstly, investors should be more cautious of an indiscriminate sell-off but secondly, this can be used as an opportunity to pick up high quality assets at a lower price. Be wary but remain opportunistic.

Putting to test the property that you can buy for investment


One of the most lucrative investments is investment in real estate. Although, the process may seem quite simple to you, but it is not so. The way you evaluate a property while buying for investment purposes is not the same as the way you will evaluate a property while home buying. When it comes to investment property you have to think like a business owner and not a home owner.

Thus, there are various tests that you must out the property you are buying through, before you purchase it. 2 of the most important tests are as follows.

1. Testing for a good neighborhood: Location is a very important factor when it comes to purchasing a property. The property you buy should have the availability of basic amenities in close proximity. You must also check if the area in which the property is situated should not be prone to crime. You must check all this because no one would like to stay in a place where the crime rate is high and there is no proper availability of essential facilities. So no matter how well decorated the property you buy, is from within, it will not sell well in the real estate market because of the location factor.

2. Testing for the need of extensive repairs: Before you buy a property it is essential that you check what sort of repairs are required in the house. Find out if these repairs are an extensive repair that is structural repairs or they are merely minor repairs that you can tackle. You must not buy properties that need structural repairs, this is because you lose a lot of money and the percentage of profit reduces.

These are the 2 tests that are very essential before you buy any property.

Nancy Smith