- Wealth PMS (50L+)
Three things that should catch your attention:
Europe’s banks are seriously exposed to the sourthern banks, the stress tests have revealed. 8 of the 90 banks tested have failed the tests, which seem to be doctored to provide for a favourable result. (All such stress tests are, in reality. No one will do a stress test on a leveraged institutional framework like banking where negative news can cause an immediate bank run and a crisis, without an attempt to doctor the results towards the positive. I would be naive to believe otherwise.)
Europe is at the edge of a precipice, looking down. The US looks comparatively attractive, but if the peripheral countries leave the Euro, it will make the Euro stronger (not weaker) so watch the Forex trades. The main issue now is how long you can pretend and extend. Japan has done it till now. The US has been trying for three years and not succeeding. It’s now Europe’s turn but who will pick up the slack? India and China will take YEARS to reach the same levels of consumption, in dollar terms, as the US and Europe. (To give you an idea, India’s about $2 Trillion, China’s about $5 trillion; Europe plus US add up to $30 trillion)
The slack-picking-up can happen if the dollar/euro lose their collective value against the Indian and Chinese currencies, but that will cause a recession in these countries.
Either way, the problem now is that the shit is hitting the fan. We are going to be impacted, no matter how much we might think otherwise.