New party Anti Euro Party in Germany

 http://www.dw.de/german-party-says-no-to-the-euro-yes-to-the-eu/a-16660602

Opponents of the euro in Germany have founded a new party in favor of abolishing Europe's common currency. But critics question whether the rather academic group can pack the populist punch it needs to enter parliament.

"The Alternative for Germany" - Germany's new party opposing the eurozone - is unlikely to impress Angela Merkel. The German chancellor takes pride in her policy aimed at saving Europe's monetary union. "The end of the euro would also be the end of the European Union," she has said - justification in her view for why the monetary union must be sustained.
But there is a substantial group within Germany that disagrees. In a survey conducted by the Germany weekly news magazine "Der Spiegel" in July 2012, 54 percent of interviewees said they don't believe investing vast sums of money to keep the common European currency is really worth it.
Opposition to the common currency in not reflected in the German parliament at all, says Konrad Adam. For years, he was a journalist at the center-right German daily "Frankfurter Allgemeine Zeitung," and has decided to start the new political party together with a handful of business experts who have worked in media and research.
The group, which calls itself Alternative for Germany, demands the dissolution of the eurozone and an open discussion of bailout strategies.
The euro is ‘destroying Europe'
Adam is frustrated about the lack of representation for euro opponents in parliament.

Konrad Adam, founder of Alternative for Germany

“All of the parties in the Bundestag have effectively the same opinion when it comes to rescuing the euro,” he told DW. “The only distinction between them is how much money should be invested and when. The euro is seen as holy, and anyone with a differing opinion is either dismissed as a populist or is shamed. That is not right.”
That's what led Adam to band together with like-minded journalists and scholars, such as Bernd Lucke, who teaches economics at the University of Hamburg, to start their own party.
“When I go to vote, I want a choice, which is why we wanted to create an alternative,” Adam said.
The issue isn't exactly minor in the German political arena. Germany must contribute 21.7 billion euros ($28.2 billion) to the euro rescue fund, which is meant to prevent EU countries with financial problems from slipping into bankruptcy by providing such countries with favorable lending conditions. So far, Greece, Ireland, Portugal, Spain and Cyprus have tapped into the fund.
According to the founders of Alternative for Germany, the possibility of getting rid of the euro and stopping the payments is being ignored by German politicians. They believe the end to the common currency to be the best thing that could happen to Europe.
“We are afraid that Europe isn't benefitting from the euro, but is actually being subtly destroyed by it,” Lucke told DW.
Dissolving the eurozone, not the EU

Germany has pumped over 20 billion euros into rescue funds

Lucke clarifies however that while the party is against the euro, it is not against European unity. The party focuses on getting rid of the eurozone. They call for the countries to either choose between national currencies, such as the deutschmark, the franc, or the drachma, or to create smaller currency unions. Adam could envision a northern euro and a southern euro, for example
The founders of Alternative for Germany don't want to get too specific with such proposals at the moment. While they support the principle of adherence to EU treaties, the group's members also hope to see changes to EU treaties that would allow Germany and other countries legal means of exiting the eurozone. Further, the new party is calling for binding referendums that would give EU citizens more power to make decisions.
A decision on whether the party fulfils the criteria to take part in Germany's federal elections this September is expected in April. At the very latest, the party's leaders hope to take part in the European elections in 2014.
A 'dangerous' position?
Rudolf Hickel, an economist and former head of the Institute of Labor and Economics (IAW) at the University of Bremen, considers Alternative for Germany's chances for success in September's elections to be slim.

Rudolf Hickel believes calls to dissolvr the eurozone are 'dangerous'

“Normally, I'd certainly give a party like this a chance to reach five percent,” Hickel told DW, referring to the law in Germany that a political party must win at least five percent of the vote to gain parliamentary representation. “But the people behind Alternative for Germany are the best guarantee that the party won't make it into the Bundestag. They are professors and frustrated economists. If the party were headed by a populist, I'd consider them dangerous.”
Hickel does welcome an open debate about the euro rescue mechanisms, but he considers abandoning the currency bloc to be very dangerous.
“If Greece, for example, was out of the euro, it would be a permanently poor country, but would remain in the European Union,” Hickel explains. “And I can say now that, in that case, the EU would have to help with payments, or pressure would mount on Greece until it left the European Union. Then other EU countries would have to pay more. That would be an extreme burden on the European project."
That's where the founders of Alternative for Germany disagree. The party believes Germany's political elite must stop clinging to the joint currency without paying more attention to the sacrifices being made to keep the currency bloc afloat along the way.

 

Weekly Review 10.30.2012

 

This was a record setting week! Literally 

Europe
Eurozone hit a record high debt of 90% from all 17 countries that use the single euro currency.  This is the highest level since 1999 when the EU currency was first implemented.
"The euro area economy remains stuck in a rut" said James Ashley, Sr. European economicst at RBC Capital Markets.
According to the Eurostat, five countries are in recession Greece, Spain, Italy, Portugal and Cyprus.  Many analyst expect the Eurozone to slip back into a recession next month when the official numbers are released. (recession is defined as two downward quarters of negative growth in a row)
Furthermore, PMI remains lowest in three years at 45.8  We can see this with BMW and VW, their exports have taken a hit on YoY basis. 


China
PMI- HSBC report showed Wednesday rising new orders.  3 month upward trend shows that the economy is slowly picking up.  However, this is not sustainable given US potentially falling off the cliff and the meltdown in Europe.  Nonetheless, PMI was 47.9(August)  49.2(September) and 49.8 in October.  This is still below 50 but indicates slow improvement and a moderate rebound of the worlds second largest economy.  Weak external demand and a slack job market are key factors, therefore one should expect more easing policies to secure recovery.

China's yuan reached a 19 year high against the US dollar.  Currency hit 6.2417 yuan per dollar, it has been appreciating since QE3 and the ECB bond buying plan.   HK monetary authority has injected more than $14B to stabilize Curreny.  Could this be the start of a currency war? Last weeks review we talked about Brazil's finance minister publicly scolding the US selfish actions at the IMF conference in Tokyo.   Chinese exports are sure to take a beating. 

Japan
Japan adds $9.4B to stimulus program to bump up growth as bond investors told government they were worried about delays and more spending.  Finance minister said this was necessary because Japan would run out of money if the bill was not passed.  This is only estimated to boost GDP by .1%.  Japan has the highest debt level among developed nations and has experienced 2 lost decades.  According to world renowned economists Rogoff and Reinhart  a Country with debt-to-gdp in excess of 90% is unsustainable.  Japan is at over 200%. (see book "This time is Different")

United States
Fiscal Cliff can be much worst than it is.  Many economist think every dollar of deficit reduction will subtract nearly the same amount from economic growth.  The IMF suggest 1$ could drain as much as $1.70.  With interest rates at near zero the pain will be much worse. Bernanke has acknowledged he would not be able to fully offset the pain if the economy runs into the fiscal cliff.  


The “fiscal cliff” and long-term government deficit issues are weighing heavily on the minds of finance professionals, and they do not expect business conditions to improve regardless of the results of the Nov. 6 presidential election.
Three-fourths of 949 executives who responded to a survey at the annual conference of the Association for Financial Professionals (AFP) this month reported that they believe overall economic conditions will weaken if various tax law provisions expire and mandated government spending cuts go into effect as scheduled in January 2013.
Respondents rated implementing changes to avoid the fiscal cliff as the second-most important issue for federal elected representatives to focus on after the election. The most important issue to respondents was resolving long-term government fiscal and deficit issues, identified by 63% of finance professionals in the survey.

Herman Venegas
 

Weekly Review 10.22.2012

All eyes were on the Second Presidential Debate.

Both Romney and Obama delivered strong punches tackling issues such as unemployment, oil and energy.  All said and done, Mitt Romney is in the lead in the gallop polls 52% to 45%.

Central Bankers and Government officials met up in Tokyo for the annual IMF conference.  (http://www.imf.org/external/am/2012/) The IMF lowered its GDP outlook on the global world economy.  The major theme talked about was fiscal unity among political leaders hinting towards the EU leaders.

Also, Bernanke addressed critics abroad saying stronger growth in the United States bolsters global prospects as well, countering the likes of Brazil's Finance Minister Guido Mantega who has labeled the Fed's latest stimulus effort "selfish".
Critics say the Fed's unorthodox policies weaken the U.S. dollar and boost the currencies of developing countries, hurting their ability to export.

Canada has blocked Malaysian state oil firm Petronas’ C$5.17 billion bid for gas producer Progress Energy Resources in a surprise move that could signal problems for a much larger Chinese deal in the country’s energy sector.
Canada’s announcement late on Friday, minutes before a deadline, was a blow to Petronas whose domestic oil supplies are shrinking and which has been seeking to boost its resources beyond Malaysia and volatile areas such as Sudan.
It also raises doubts over Chinese oil group CNOOC’s C$15.1 billion offer for oil producer Nexen and could weigh on other Canadian firms hoping for foreign investment to tap their vast energy reserves.
Any rejection of the CNOOC bid would likely damage trade ties Canada has been trying to build with China, underlining political sensitivity to Chinese corporate expansion in North America.
http://www.vancouversun.com/business/Canada+blocks+billion+Petronas+Progress+deal+with+video/7422103/story.html#ixzz2A4gWGYes

Google's earnings were released ahead of schedule.  The stock plummeted -$3.12.  Why? according to experts mobile has been a mixed blessing. Smartphones and tablets are bringing in new users — and the advertisers that follow them — but it makes less money on mobile ads than on desktop ads.

For a  list of companies who released earnings this week click here.   http://www.earnings.com/highlight.asp?client=cb

Weekly Review - 10.15.2012

·      Starting off with Canada this week, it looks like the Bank of Canada will continue to keep interest rates low even though the housing market continues to cool off, the number of employed continues to increase, inflation remains at a historic low and business confidence remains almost non-existent. In a new report, CIBC predicted that Canadians might experience low interest rates into 2014 as economic and global conditions will probably worsen and risks will rise in the short-term.

·      Following up on last week’s update on the Venezuelan elections, now that Chavez has won another 6-year term as president, we can be confident that his country will continue to have the world’s best performing stock market until the end of the year. In the last year of his prior term as president, Chavez increased fiscal spending by 41% in real terms beating all growth expectations and making Venezuelan equities seem safer than they really are, but for how long?

·      Today the German finance minister addressed the second Bank of Thailand Policy Forum in Bangkok with an update on the situation in Europe. Wolfgang Schaeuble ruled out a Greek exit as the E.U. remains divided on how and whether to aid Greece climb its way out of the massive hole it is in right now. Spain finds itself in a similar situation as bonds slumped today. With Greek’s debt having been restructured in March, still not much has improved in the E.U. region.

·      Last quarter, the total money spent on IPO’s fell down to $21.3 billion. This is the second-lowest this number has been at since the market crash of 2008. One of the biggest contributing factors for the above is the poor performance of Facebook’s stock since its IPO in May. The Facebook stock has lost half of its value since then as its major growth instrument, the smartphone, is still the principal risk to its stock. The pessimistic global growth forecasts are of course another reason for the declining numbers of the last quarter. 

·      Ending this update with news from the United States, last week the national debt dropped to a six-year low as borrowing by homeowners and businesses both fell relative to the size of the economy. This leads us to question whether the credit rating agencies were right in downgrading the credit rating of the United States. The red, white and blue now has a GDP which is 30 percent of the nation’s debt.

Ali Kazerani

Weekly Update - September 17, 2012

What a week it was, big announcements from the fed, geo-political tensions grow, and Apple announces its long anticipated iPhone 5

Want to take a closer look? Let’s go!

Step right up folks; Get your stimulus, this one’s going to be big!

First and foremost the biggest news this week was Federal Reserve Chairman Ben Bernanke’s announcement of another attempt at stimulating the sluggish American economy, QE3 (the 3rd Quantitative Easing):

Like a toddler on Christmas day, markets have been anxiously anticipating the full details of QE3. Here’s what QE3 entails:

Open market purchases of mortgage backed securities at a rate of $40 Billion per month... Indefinitely! (well, to be clear, until the jobs markets improve substantially as long as inflation stays contained)

Here’s a part of the official Fed. statement:

“If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,”

The Fed. also hinted at keep rates (which are already near rock bottom) unchanged until at least mid-2015. Pushing back earlier promises to keep rates unchanged till 2014. Yikes...

Market results for the week:

·        US equities gained on the news of QE3

·        The dollar fell broadly

·        Oil prices rose and gold hit a 6-month high

Although, the key metric from QE3 is yet to be determined... INFLATION! For a more in-depth analysis of QE3-inflation risk and how to keep your investments safe & sound, take a look at the below article:

http://investomax.blogspot.ca/2012/09/inflation-is-always-and-everywhere.html

Dispute over Pacific Islands leads to violence and harms Chinese-Japanese Business relationship:

Oh my, this does not look good. Asia’s two largest economies are amidst a heated territorial battle over Diaoyu/Senkaku islands which is leading to violent attacks on businesses.

What’s this all about? In a nutshell, Japan claims to have purchased these islands for nearly $30 million dollars, China simply does not recognize this purchase and says Japan is stealing these Islands from them. Now there we’re all caught up to speed, let’s talk about what’s happening to business between the nations which last year generated two-way trade of $345 billion.

·        Both Toyota and Honda have claimed that arsonists have badly damaged plants in China. Honda has halted production in China for two days – other car makers have followed as well in halting production in China including Mazda and partner Ford

·        Seven & I Holdings, is said to close 13 Ito Yokado supermarkets and 198 “7-11” convenience stores in China on Tuesday following the violent attacks

·        Tech giants like Panasonic have halted production facilities in China (following an alleged sabotage by Chinese workers), same goes for Cannon and Sony has discouraged all non-essential travel to China

Let’s hope this issue reaches a conclusion soon and business returns to normal. For now though, keep an eye on Japanese depository receipts traded in China and expect sharp loses.

Is it really here?

Yes it is! The moment many geeks and Apple loyalists have been waiting for has finally arrived. The iPhone 5 is here!

And it’s taller than ever! This is big news for the economy as a whole as the iPhone has some quite astonishing affects on GDP; take a look at what some economists are saying about it:

·        The iPhone 5 could inject $3.2 billion to the U.S. economy in the fourth quarter or $12.8 billion at an annual rate

·        0.33-percentage-point boost to GDP

With pre-orders hitting a record high of 2-million units, Apple could be well on it’s to reaching these estimates and further continuing its super-growth phase

That’s all for this week folks, stay tuned for more

                                                                                         

Matthew MacMull

Could India’s biggest threat to growth be…Itself?

Raghuram Rajan could be the ‘go-to-guy’ to get India out of it’s slower than expected growth-woes

Hey folks! Let’s take a dive into some metrics that have come out of India recently; figures which have many investors scratching their head wondering, ‘what happened to the rapid-growth (and returns) seen only a few years back?’

Let’s get down to the point and expose the elephant in the room: GDP growth. The once jewel of the British Empire’s economy expanded at a rate of only 5.5% in the April-June period. Granted this was higher than the 5.3% GDP growth of the previous three months BUT it cannot even come close to the 9% expansion of early 2011!

"Whilst an upside surprise at 5.5%, the pace of growth is undeniably below potential and validates the need for the government to address sluggishness in investment and external sector activity," said Radhika Rao an economist at Forecast Pte.

So let’s break down what’s holding our mighty elephant back:

        Slowing global demand and uncertainty: What a surprise! (well, not really)… with key economies in trouble (such as Europe and even China) the global macro climate is hurting India in a big way.

•      India's factory output fell 1.8% in June from a year earlier, the third fall in four months

•      Foreign direct investment in India fell by 78% in June, from a year earlier

          A growing trade deficit:

•     Recent figures show that imports outgrew exports by 15.5 Billion dollars

•       India's trade deficit with China jumped 42% to $40 billion in the last financial year

             An indecisive government in a political deadlock and numerous allegations of corruption has harmed India’s outlook toward foreign investors.

•          There is becoming a growing concern amongst economists and opposition parties that India’s government  will only pursue reforms which are favorable to its political partners

•       Analysts are recommending that the government needs to take action to improve the investment climate in order to maintain a high growth rate in the future

            The S&P's has stated it would be more comfortable if the government raised retail petroleum prices and reduced energy subsidies as it has promised, and introduced a goods and services tax (GST)

Let’s talk about the Trade Deficit for a moment…

A 15.5 Billion dollar deficit is no laughing matter, especially given the perceived notion of India being an exporting power house. What’s happening… is this a cause for concern? Or should we be tingling from the excitement of new growth possibilities? Well, if India plays its cards right, the latter may be the correct course of action.

India has significant investment needs; it has issues in its infrastructure – or lack thereof – and needs to import capital goods as a part of where it is in its growth cycle. The result is (no matter how you spin it), India simply needs to import at this phase in the game.

And with a specific note on China; as China advances its production to a more value-added model, India will become more of a manufacturing center than what it is today – so it might sound like a good idea now to recapitalize and invest in infrastructure for the future.

So who will guide India through these uncertain times?

Enter: ‘reformed minded’ and newly appointed Chief Economic Adviser to the Indian Government: Raghuram Rajan (he called the 2008 Financial Crisis in 2005!!)

Could he be the man to save the day in India? As a strong believer in liberalization and privatization, he says “We need to become paranoid again [about growth], as we were in the early 1990s,” And while it might take some work, here’s what he suggests in terms of policy reform as quoted from a recent speech:

1)   Raise fuel prices to international levels in a set of quick steps, and then completely deregulate them. Announce this as soon as politically possible, and do not roll back.

2)   Be kinder to foreign investors – they are not the enemy but a necessity -- we need their money to fund our spending to the tune of 4% of GDP. No doubt, however badly we treat them today, they may eventually want to be in India, but crisis are always about timing. We need them now, when India looks increasingly tattered compared to alternative investment opportunities, not five years from now when growth recovers.

3)   We should bring certainty about taxation to foreign investors, and resist the temptation to levy new retrospective claims.

What in effect Mr. Rajan is trying to do hand India over to the free market again. Reduce government subsidies and appease foreign investors by making India a reliable market to do business in. Can it work? I think so, but there needs to be strong support from the government and a crackdown on corruption for it to happen.

The bottom line:

While recent scares in growth and trade metrics might make you skeptical of India’s future – hold on a moment and think: the trade deficit is there because India needs to invest in capital for production and infrastructure, all which will pay off in the future. Moreover, now with a more free-market inclined chief economic advisor, India will (hopefully) take the correct policy actions to promote a healthy market and ensure foreign investors are kept happy and wanting to come back to India for their business needs.

Matthew MacMull