Seeking Alpha

Mike Kane's  Instablog

Mike Kane
27 Followers
50 Following
Send Message
I am the Founder and CEO of Hedgeable. Hedgeable is a next generation investing brand revolutionizing the retirement market. My market commentary has been featured in such places as MarketWatch, CNN Money, Forbes, Yahoo, the AP, The Washington Post, ABC News, and the Boston Globe. Hedgeable has... More
My company:
Hedgeable
My blog:
Hedgeable
View Mike Kane's Instablogs on:
  • A European Crumble
    Ah, Europe, that strange and mystical place, home to great food and culture, but not the greatest economic or political systems.

    “…peace, commerce, and honest friendship with all nations, entangling alliances with none.”
     
    So said, Thomas Jefferson in his 1801 inaugural. This doctrine rarely was heeded by the Europeans in the 19th Century, and brought us two World Wars in the 20th
    Century. It seems like the 21st Century may be disastrous in its own right, not on the battlefield but in the financial markets.
     
    The rosy idea of a grand economic block that could challenge the U.S. has always been somewhat of a fantasyland science experiment in my opinion. Europe is culturally, economically, and historically very diverse. Countries like Portugal, Ireland, Italy, Greece, and Spain (known as the “P.I.G.S”) have economically lagged their British and German counterparts for decades. At no time since the EU’s founding will this be more harmful than over the next few years.
     
    How can an entire continent maintain a single economic policy, when they are so very different? Are the German people going to stomach a bailout of Greece or Italy and their trillion in debt? I highly doubt it.
    “The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece,” so said Jürgen Stark, a European Central Bank executive board member. “The ECB has no mandate or intention to take into account the situation of a specific country, especially not with regard to public finances," said Ewald Nowotny, a member of the ECB's Governing Council.
    At some point the ECB will begin to raise rates. This is going to leave some countries standing in the weeds. Said Jordi Gali, head of the Barcelona Center for Research in International Economics-

    “If inflation picks up in France and Germany, the smaller economies will be left behind in stagnation and deflation. Such an asymmetric recovery is pretty likely. And if the ECB raises rates, it could get very ugly.”
    Will the ECB stand by and let one of these countries spend their way into financial ruin? It is not unrealistic to think Greece or Spain could descend into anarchy in such a case. These two countries don’t exactly have the greatest track record in political stability.

    What this means for the average investor is simple. The EU is going to fall apart; it is just a matter of time. It could be next year or next decade, it is really hard to say. As long as there remains one economic policy for all EU states, they are in a heap of trouble. Let’s keep an eye out for rate hikes from the ECB. The next one just might be the turning point for the greenback/Euro relationship.
     
    Tags: VGK, FXE, Europe, Economy, EU, Interest Rates
    Jan 12 7:33 PM | Link | Comment!
  • Aeschylus Would Be Proud
    In a plot straight out of an Aeschylus tragedy, Greece has been teetering on the brink of fiscal failure. Since nearly doubling their 2009 budget deficit estimate, the Greek and European debt markets have been thrown into a bit of panic. Greek officials say they are committed to cutting the budget deficit from 12.7 per cent to 3 per cent of gross domestic product – the eurozone limit – by the end of 2012. But how do they intend to do that? How does the biggest debtor nation in the history of the world- the U.S.- expect to decrease its deficit? Nobody really knows either, and that’s the point.
    “These most recent revisions are an illustration of the lack of quality of the Greek fiscal statistics (and of macroeconomic statistics in general) and show that the progress in the compilation of fiscal statistics in Greece, and the intense scrutiny of the Greek fiscal data by Eurostat since 2004 (including 10 EDP visits and 5 reservations on the notified data), have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU Member States.”
    Ouch…Not the most diplomatic way of saying the Greeks deliberately falsified their statistics. Who would blame them? In a world where debt is measured in trillions and a budget deficit is actually a good thing, what is 12.7% vs. 3% between friends?
    Tags: BWZ, VGK, Greece, EU, Europe, Bonds, Debt
    Jan 12 1:21 PM | Link | Comment!
  • The Tale of the Market Pundits

    In this era of 24 hour sound bites, its hard to get an accurate description of what the pundits are saying. One minute we're out of the recession, the next we're in the middle of Armageddon. Case in point, Nouriel Roubini, the famous NYU professor. Everybody wants his opinion, but the end result is somewhat muddled.

    Its about time Roubini makes up his mind. Today he correctly stated that the unemployment problem in this country is disastrous, but he needs to be more clear with his outlook, especially now that the markets tend to move when he speaks. Sometimes he states that we are headed for a V shaped recovery, but then other times he states that things will get a lot worse-

    As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.

    The damage will be extensive and severe unless bold policy action is undertaken now.

    What is the bold policy action that he recommends?

    a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers

    He must be joking. The last thing we need right now is for the government to spend more money...that we don't have!

     

    Tags: SPY, GLD, IEI, IEF, SLV, SH, SDS, DOG, Roubini, Recession, Unemployment, Inflation, Government, Stimulus
    Nov 17 12:37 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

  • Hedgeable.com officially launched to the public today!
    Sep 16, 2009
  • Hegeable.com officially launched to the public today!
    Sep 16, 2009
  • continue to overweight asia to the u.s. and it has been paying off nicely
    Sep 8, 2009
More »
Posts by Themes
africa, Asia, Bear Market, bear market, Bearish, Bill Gross, bonds, Bonds, BRIC, bull market, Bullish, Cash, China, China; Federal Reserve; Dollar; , Chinese, Citadel, Commodities, commodities, CPI, crisis, currencies, Currencies, Currencies , Currency, Debt, Deflation, Depreciation, Devaluation, Devaluation , Dollar, Dow Jones, drawdowns, Economics, Economy, Egypt, Emerging Market Equities, Emering Markets, Employment, EU, Europe, fixed income, gold, Gold, Government, Government Data, Greece, hedge fund, Inflation, Inflation; Federal Reserve; Ben Bernanke; Debt; Gold; Silver; Interest Rates, Inflation; Gold; Swiss Francs; Euro,
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.