Can investors unearth bargains amid the eurozone ruins?

I am pretty sure there is something into this.

Will Greek default, things will go down, for sure. Irrespectively of , if EU survives, EU get rid of the EUR , Greece get out of EU , Greece get rid of the EUR, or if the whole kittn'keboodle goes down, there will still be a big number of well funded, and highly producing European companies, many world companies, that will be, during a crisis like this, no matter how the crisis will develop, or what will come out of it...that will be excellent buying opportunities when things looks the worst.

It's not that Europe have any risk of dissapearing from the map.

Factories, assembly plants, mines, and all that what nots, will be there, and whatever the outcome, they will still be there.

The Greece crisis, may or may not bring the EU, and the EUR down....but this is a social economical system...if it goes down, in whole or in part, all the physical elements of Europe will still be there.

It will be untouched, it's not like after WW2 when Europe was one smoldering ruin.

The only thing that changed, is the idea of how Europe should and will look.

Timing and price are critical.

I think... lets just wait awhile...lots of room for things to get worse... not much room for them to get better... EU stock prices will fall when the EU governments act like idiots... and they fall when the American government acts like an idiot... and they fall when the Chinese government does more of the same...

People need to buy and sell currencies every day. And the Euro is the currency for the largest market in the world. So it can only go so low. Nobody needs to buy stocks though. But they do need to sell them when they run into financial trouble. So when it comes to crashing, the stock market usually wins. And since they are quoted in their local currency, you also get a currency appreciation effect. Its a bit like compound interest.

But who knows how long the EU problems will continue for. So it is best to buy into companies that have a global reach. Nestle comes to mind. Whatever happens, it is highly unlikely the EU economies will grow faster than the world economy.

OMG... as if arguing with everyone else isn't enough...
now I have to try and interpret these long-winded posts from you and JR





I hope by now you're getting some kind of sense of humor but ...... probably not.

AW,

Well I think this scenario is geared around a theoretical collapse ( that is very real to me) of EU.

Not necessarily a description of the daily flow of currencies and stocks when the Chinese, US or EU governments will do their daily mess up.

During a collapse, the point is, things will get cheap in a hurry, while all the real estate will still be standing...it is in a time interval, a very short affair, and the description of good deals, would be when the bottom will be reached.

There is however no set limit in how high or low a currency can go, so the "it can only go so low" is not a statement of fact. If it is going down, it can always go lower, if going up, it can always go higher.

The value would be in buying into companies when the rock bottom is reached, wherever that is, as a market, by experience always over react, and will bring prices lower than the real value.

It's a bit off topic now, however as it is a bit outside of FX, and touching on stocks in companies, but I can for sure see possibilities in EU, come a crash.

Ericson, Nokia, MAN, VW, SKF, ASEA, IKEA, Siemens, ...well there are so many biggies in Europe that it would take a long page to list them all, but come a collapse....I would look closely on a buy scenario into those companies.

The win would not be in a growth together with the worlds economy, but the increase in value from it's bottom, during the collapse, to their normal range, once the dust have settled.

lol...that is all.

I agree. The key play is an irrational collapse of the European stock market which does not properly reflect the underlying economic realities.

But there are a couple of factors that might increase returns. They are:

a) a significant disconnect from the European economy -- we may be in for a 5 or ten year bad stretch in the EU but probably not globally. Real growth is ultimately from technological improvements and there are still a lot of low hanging fruit around the world. Not so many in Europe though.

b) timing the low of the market with the low of the euro -- that way you get the increase in stock value combined with the change of currency price. But really, we will have to take what is given.

Also, the global stock markets are connected. The bottom of the EU stock market will coincide with the bottom of the US and the Chinese stock markets. Just yesterday the global stock index passed the 20% off high that defines a bear market. Things are a bit better in the US and a bit worse in Germany, but everybody, everywhere is hurting. You can be sure that if the EU stocks are down 90%, that American and Chinese stocks are down 80%.

Stocks and currencies are fundamentally different. Stocks reflect a relationship of something with nothing. As such, a stock price can go up by 100X. Currencies are a relationship between the markets of two countries. Most of the majors bounce up and down against each other in a fairly narrowly defined range. For my life time the pound has been bouncing between 1.3 and 2.10 USD, while the Canadian Dollar has been bouncing between 1.6 and .90. You can get rich on the stock market without leverage. Not so easy on forex.

AW,

A significant disconnect can really not be made, if we take the extreme, and very possible scenario of a total break up of the EU.

What will go down, the social political set up, it will be connected with the market in the use of the EUR, and the social political use of ( misuse of) funds that will be the factor that will drag down the EU, and the whole market.

It's a loancircus that will unravel.

That loan circus , have to be either a big kiss and make up and forgiveness of all the criss cross loans across Europe, or it has to be paid by taxes.

That can have a future impact on Europes industry, depending on how heavy the taxes will be, ...but I have a feeling that it will be more a matter of printing money, and monetize it.

The EUR will be dismantled, that will have to take some time, to print, and redistribute each countrys new currency, but even if that looks like a task beyond meassure, it is not that hard, Iraq had a new currency very fast, all printed by a private company ( Dela Rue) and about 25 Jubo jets was filled, this was a farily quick action, and this was the product coming from one printing company alone, there are a lot of printing presses in Europe, and from the time it is decided to get rid of the EUR to the time they would have their own currency, we are talking about a comparable short time.

In the meanwhile, the EUR will still be valid, and the EUR can be exchanged with the new currency on a new exchange program. Most money exist in an electronic account, and does not need paper.

In the meanwhile, production will not stop, cars will be built, and tools will be made , harvest will be harvested and life goes on.

Basically, the whole Europe will experience a new start and even though the world are willing to put money into keeping this experiment alive, and the money is there...it will not be a bankrupsy, but it will be the same as a new start after a bankrupsy...fresh start.

It has shown that countries coming out from a fresh start have done remarkably well in only a short number of years, compared with countries that keep on trying to stay alive with a huge mountain of debts.

The tap on Europe, for mebership fees, has been huge, a drain that have acted as a huge tax, it will now be taken away.

All this paying for each other have also been huge, (extremely huge) and also acted as a huge communal tax, that will now be taken away.

The scenario that Europe will be dragging and dragging, I don't see that, instead, with countries that have gotten back their currency and their self determination the propsects is set for an exploding market.

So that is my take on the European future, will EU go down, and each member country will get back a currency they can do whatever they will with, it's not a drag, it is a shot in the arm.

The timing if it....well hard to say. Greece may default, and a lot of banks will get hit, and send shockwaves all around bringing down any security, may it be currency, stocks or bonds.

But where will it end, will the Central banks shoot in liquidity, ..the whole thing survives....ok that is the turning point. that will be the bottom then.

This is on a short term, a very possble scenario.

Will there be a political fallout ( highly probable) and the memberstates will discuss and discuss ( as usually) and finally agree to break it up....that will be an orderly de- construction of it. ...and somewhere in that process, there might be another low.

Will Greece fall, but stay in the EU, and keep the EUR, ....well guess what....gues who will start to scream about ...urgently getting loans to build it up again...Greece.

Will the meberstates still keep the EU and the EUR, or do they see that this EU affair is a done deal now?

In there would probably be another low.

Or..One significant memberstate, get an election and their new parliament will decide to leave....and insist on it, and set dates....wow, EU will go up in fumes, just like that...and we will have another low.

Where to buy at the lowest point will be a matter of discretion, but by following the affairs how they develop in EU, I have a very strong feeling that it will not be hard to pinpoint any bottoms.

How long did it take for the Iraqis to go from old currency to new currency? And then from unstable currency to stable currency?

Don't know in days or weeks exactly how long it took, but once the stuff was in Iraq, it was an immediate exchange, all the old currency with Saddam was exchanged for the new currency.

To get stable...to this day Iraq is much more stable, but not fully stable....Iraq had a much different situation, Iraq had just experienced 30 years of hard dictatorship, where an estimate of a little bit over a million Iraqis "dissapered" during that time.

They just took over filled jails, and reduced the jail population with taking a buss with prisoners out into the desert, to a pre made buldoozed massgrave and shot them, and covered them up, they still find those graves .

There was no instiutions that functioned, everything was looted.

All property was government property, as Hussein ran a Stalinistic type dictatorship, There was really nothing that one could call a bank there, there was some small private enterprises, called banks, but the state banks, acted more or less as a place for Saddam to keep his money.

Once the invasion took place, ( I am writing all this just so you can see how different this is from Europe) the whole population went in and looted everything they could see, everything that was governmental. Depots, cars, ships, buildings, army depots, ( there was a lot of those around), and the population got immediately a full arsenal with weapons, high grade military weapons, plenty, and plenty of blasting material, grenades and small arms ammo.

The population had nothing, and suddenly all this stuff , that was government stuff, they figured...we have paid for it, ..it's ours...so lets go and get it.

Iraqs Central Bank for example, was looted to bare walls. As was most anything governmental.

That was the starting point for the Iraqis, an oil industry that was so neglected that nothing or very little worked, and no seismiolgical surveys done in 30 years.

It also opened up a can of worms. Iraq like many other countries, was a state that was drawn into a map by the British, way back, and did not consider that the lines was drawn in such a way that the country got split into three ethnic regions, Kurds, Sunni and Shiite.

So in the beginning, when there was a formal occupation, it was run by a US administrator Mr Bremer, and he set in as one of the first measures, a new currency. Once it was introduced, it became very popular, as it was made with all the modern safety measures that only modern countries had, waterstamp, holographic print, microprint and a lot of ther stuff that makes it very hard to falsify, the old currency could be duplicated on a colorprinter easily.

Iraq had at this point...nothing...a lot of bridges bombed out, but had good money coming in from it's rudimentary oil production system.

The oil for food program was lifted ( and revealed a lot of corruption involving UN highups) and Iraq was able to sell oil on the open market. Iraq had a lot of debt, but in a meeting in Paris, by most of the debtoors, it was decieed to forgive Iraq for most of it, they came down to 15 billions from ...I think it was around 90 billions at most.

Iraq had stil a lot of sanctions on it, up until recently, mostly regarding debt to Kuwait for wardamages. But if it is notlifted now, it is at the tail end.

So here is Iraq, new currency, and free to do whatvever it wants, and got it's first election.

Iraq public had no history, or not even a tradition of democracy, and ...in may ways naively, the west thought that it was just a matter of sprinkle democracy pixels over Irak and everything will be dandy....hah.

Not so, the first thing they did was to form political block along their religious lines, the religious caracters, immediately got involved and made everything holy.

And with weapons in hand they decided to kill each other for a couple of years.

It opened up a big can of ethnic worms, that had been closed for years and years.

AlQueada was there and blew up each fractions big holy Mosques, to put more fire underneath the whole situation, and it was very close to civil war for a while.

When it was as most hot, some bases was living on MRE's (Meals Ready to Eat...yuck)as supply convoys could not get through.

In this situation, try to build up a functional government, industry, electricity, roads, etc, was almost imossible...the economy was not even there. Street vendors and goat herders, smuggling, and looting, crime and killings was pretty much the daily choirs.

The market ended up in an inflation that was around 70-90 % swinging around those numbers, and the Central Bank of Iraq ( now , rudimentary built up) had no other choice but to impose super high interest rate of up to 17%.

That didn't really help any kickstart of jobs etc, because no one could get a loan, with those rates, plus most money was bound up anyway, sitting in an account somewhere collecting super high interest....but it did in fact bring down the inflation, to just a few %....plus, there was not much of an industry in Iraq, so these super high interest rates didnt really hurt anyone that much anyway.

So...there is more to it, but I think you get the picture of how that happend. I don't think it is possible to compare any of that to the situation in Europe, would EU decide to split up.

Nothing is looted in Europe, they have a functioning industry, and fuctioning society that is well organized. Iraq is very uneducated, but Europe have one of the highest educational levels in the world.

A straight comparison with Europe and Iraqs currncy swap can not really be made either, as Iraq, merely changed the face of their currency, but exchanged it to a 1:1 basis in exchange value, so even if Saddam dissapeared from the face of the money, they didn't really change currency per see.

Europe , if they break up, each country that bring in their own currency will have to do their own exchange rate towards the EUR, when they exchange, quite a difference from the Iraqi situation.

Historically when countries swap currencies, it is usually a face change...like they get 1 new currency for 1000 of their old, and so on, but that is just a face change, not a complete currency swap.

The only historical ( that I am aware of) currency swap that involves a disbandining of an old currency and introduction to a new, in such a big scale as if the EUR is dismantled, would be when Europe went from their own national currency to the EUR.

...so Europe have experiece of going though this in the past, will they abandon the
EUR. So I don't see that the mechanics of it will be much more difficult this time.

Going from the EUR back to their national currency, will be a unique experience, but who knows...they may want to continue the experiment and do a northern and southern EUR...who knows.

Europe is for the Europeans to decide.

Yeah, Iraq and Europe...not a great comparison. But your response was timely as I just started a book on Iraq. It amazes me that when presented with freedom a significant number of people make killing their neighbor their top priority. And democracy only works if mature market, legal and cultural institutions support it. This has been proven at enormous cost in human lives, again and again.

I am having some trouble getting my head around the mechanics of a "Euro divorce". I still think that the Euro has a better than 50% chance of continuing the way it is into the foreseeable future. Marriages that last are not necessarily marriages that work.

I have been looking for a strong European movement against the Euro, but I am not really seeing it. I thought the Germans might be the guys to break it all up -- why would they agree to sign for Greek debt? But no, it turns out that the opposition party supports eurobonds and is likely to replace Merkel in the not so distant future. And the Greeks are upset that the gravy train is slowing down, but still they don't seem to want to set up house on their own. They just want a better deal. Maybe the Finns will do something. But if it does happen, the process of divorce will probably be a lot more painful than getting married was.

And until then, we will wait, like hungry vultures, waiting to suck some meat off of our European cousins.

Oh no it's breaking up, you should go to YouTube and see a couple of Nigel Farage bombs he is letting off in the EU parliament. You will notice if you go to the earlier ones, how mocked he is, but if you choose a couple of the later ones...how silent they all are...its a doom and gloom place now.

Ah, Nigel Farage -- I love his videos. But really, he is a Brit and not part of the Eurozone. So when it comes to the Euro, he is in the same boat that you and I are in. He can't vote. He can't even vote for somebody that can vote.

We need Germans, Finns or Greeks, electing politicians that are willing to vote for monetary separation. And we need them in large numbers in at least one or more countries. Instead we have Merkel and crew who are the strongest opponents to Greek bailouts (note, they still support the Euro) but are not really opponents even to the bailouts -- they are really only mildly critical every so often. And they are losing seats to a party that supports Eurobonds! And if any country shouldn't support Eurobonds, it is Germany.

There may be a war on against the Euro, but so far, the side for the Euro has all the money and almost all of the votes. And from what I have seen, the most fierce fighters against the Euro are not even part of the Eurozone.

And now the US Fed has weighed in. They like the Euro so much that they are willing to extend unlimited credit to the ECB to keep it afloat. Really, I see this as a stealth attack against the value of the dollar, but that is another issue. So now the forces for the Euro have even more money.

Who knows, Europeans may change their mind if Italy goes down the drain. But I am not seeing the required populous movement against the Euro just yet. Club Med does not want to give up the gravy train, while the Fourth Reich still is imagining a thousand years of empire-- or federation or peace or whatever they want to call it.

Britain is in the EU. And are in the Eurozone.

Only difference they don't use the EUR, they're in it as much as the others, my friend.

Britains involvement in bonds with the other EU countries is as mixed up as any other country in the EU.

Britain did one thing right though, they did not use the EUR, but other than that, Brussels decide when to open and close their post offices, and how much bend a banana can have. 75% of all the laws in Britain are made by Brussels.

The market will take care of the Eurofanatics.

I would say, let Greece default, and the rest will take care of itself.

When a Greek default is a fact....the political outfall will begin.

I think it will be a repeat of when Jetsin walked over to Kremlin and had to tell Gorbatjev to take down the hammer and sickle flag.....even when it was over Gorbatjev didn't realise that it was over, and it may very well happen here as well.

There was no revolution or popular vote that took down the Soviet Union.

No popular vote put the EU commision in it's place in the first place, EU is not a state, and it does'nt need anything else other than someone or something that turns the switch off.

That switch is the market that have come back and bite.

When that market is biting, it will be real what the EU is creating.

Germany is already pretty far into refusing more payments...and that's it....and what you are watching is the swansong.

Just lean back and have another bowl of popcorn.

"Just lean back and have another bowl of popcorn."

Pretty much my game plan

Unexpected can happen!! For instance, Ben at the last minute turned the US tears to joy in FOMC news last week.

Not sure if the post to follow will add anything to the preceeding discussion.
In the event of a real disintegration of the financial structure of Europe it may be of value to see who is left standing with assets.
Most of the carnage will occur in the digital money empires. Cash will be the only real thing left. Whomever is a holder of the digital debt will be eliminated for they will have no one to sue. It is far to complicated to put back together once the deed gets done.

That is the essence of a true crash. In the blink of an eye confidence is lost and contracts become worthless.
Hard assets such as land and cash cannot be eliminated. The thing that goes is the contract law which allows for business to be conducted.

This we all pray does not occur, but someone will take the loss for all the bad debt.
It can no longer be diluted, too much of it. The longer the delay in reconciling the situation only means the depth of the insuing bust will be deeper.

I'm looking for another bear market rally and to have it hold around the US Dollar Index @ the 80 region.
Then the next leg down for a big October panic driven,final washout.
It'll scare the wits out of all the corrupt G20 politicians and their bankster buddies.