One way to try to determine what’s going on in Europe, particularly “Old Europe” as our Secretary of Defense so diplomatically put it, is to watch what the Eurocrats are doing. And so the New York Times today dedicates an article to the many stumbling blocks that keep this band of old countries from realizing the dream of a Federal Republic of Europe. With Sweden and England staying our of the Euro –the Swedish vote was just a few months ago and may even have cost the life of the Swedish Finance Minister who was a supporter of joining-- and less and less talk from London on joining up, it might have come as no surprise last week when France and Germany, the two mega-powers of the currency block selfishly decided to break the rules they themselves imposed on the other member countries by continuing to run deficits of more than 3% of GDP.
To make matters worse, delegates meeting in Naples this week to come up with a constitution for the broader political entity failed miserably in making any real progress. The countries disagreed on even whether the EU should have its own Foreign Minister and thus a joint foreign policy. Nearly all of the countries balked at this idea even while the military aspirations of certain Europeans (mainly France) to create a third force were subjected to continued NATO dominance, or, one might say the near status quo.
All this and more you can read in the newspaper. My perspective is a little different. So by way of hoping you continue reading, let me ask rhetorically; why should you be interested?
I’ll hit the second point first: you might be interested in European investing as a hedge against a sinking dollar while getting a double bang for your buck. Pick a good stock trading say in Germany, buy it in Euros today and when it goes up as, say, the dollar continues its fall, and you gain on both ends.
But, of course, the dollar could firm and the Europeans are even hinting today that they may intervene to not let their currencies grow so strong they can’t compete with the US in certain key markets, like airplanes. That makes sense but as traders like George Soros have taught us in the past, central banks can intervene and use their good money to try to soak up the fast growing pool of dollars floating around out there (the US trade deficit runs at $1.5 billion a day) but the US in an election year can print more dollars than anybody might want to buy. After all, even countries can get sick of losing money through massive interventions. It’s like paddling upstream with your hands if, say, US Xmas sales aren’t that hot and, say, businesses continue to improve their productivity by getting more out of fewer workers by issuing pink slips and moving service jobs to India.
You may want to consider buying euro-denominated stocks or making pure currency plays.
But, what I wanted to point out from my nest high above one of the best open air food markets in Rome located at Campo dei Fiori, is what you see in the stores, on the shelves, in the market stalls and even on the road.
Italians, at least in the city here, tend to buy their goods from small stores not from big-box operators. It’s amazing how little things have changed in this regard. And even though it is possible to see so-called foreign goods such as Heineken beer and Quaker Oats, most Italians are still mainly consume Italian goods. You also get the feeling that a lot of the clothes are made here as well. Certainly, there’s no doubt about the shoes.
In other words, integration is more of a slogan than a fact on the ground. Each Old European country has its own language, customs, uses, etc. that change slowly. Italian stores are full of the same cakes, cookies and other goodies for Xmas with little penetration for new habits. The number of large retail stores like Upim and Standa have not increased in central Rome in the last 30 years.
What has changed is the mix of automobiles. Back in the 70’s you basically only saw Italian cars on the roads. Fiat, had practically a monopoly. In France Renault and Citroen had the same total dominance. That’s changed a bit with Japanese manufacturers and French and German cars taking much greater market share. In France, I rented a Czech made Skoda from AVIS.
And so what this says to me about this huge community with a combined GDP larger than that of the US is that the advantage goes to the very big multinationals that can eventually consolidate markets. It’s pretty clear that some of the European automakers, like the airlines, will fall to multinational ownership.
The reason the Euro is strong is more one of lack of flexibility than anything else. Even if the French and Germans push their debt limits a bit above the 3 percent mark, that’s still half of what we’re running in the states, not to mention Japan’s 7% plus deficit.
Also, and most importantly, the Europeans are not running a current account deficit –which means that they, in total, sell more goods outside Europe than they import. At Wal-mart back in the US, the story isn’t quite the same, as we know. US consumers buy goods made mainly by Asians though German-made cars, for one, don’t do too badly.
If you are betting against the dollar, you are mainly saying that American’s won’t stop buying a whole lot more than they sell abroad. You are also betting that the country will continue to run high deficits. Nobody is guessing that George Bush is going to raise taxes in an election year, are they?
So, of course, no one is feeling sorry for me being in Rome, even if my latest run to the ATM had my bank taking $244 for a 200 Euro withdrawal. Germany has been in a long decline as it absorbed all those East Germans. Maybe the muscle guy in Europe is ready for a recovery. Not that they’ll get rich trying sell their noodles to Italy.
Regards,
rmb
dymaxionweb@verizon.net
Copyright 2003 Richard Mendel-Black All Rights Reserved
If you would like to receive the DymaxionWeb musings directly to your e-mail box, please write to dymaxionweb@verizon.net with the word Subscribe in the Subject field. We will be happy to put you on our list.
If you would like to reproduce any of RMB’s postings you
must include the source of your quote and an email address
dymaxionweb@verizon.net
One way to try to determine what’s going on in Europe, particularly “Old Europe” as our Secretary of Defense so diplomatically put it, is to watch what the Eurocrats are doing. And so the New York Times today dedicates an article to the many stumbling blocks that keep this band of old countries from realizing the dream of a Federal Republic of Europe. With Sweden and England staying our of the Euro –the Swedish vote was just a few months ago and may even have cost the life of the Swedish Finance Minister who was a supporter of joining-- and less and less talk from London on joining up, it might have come as no surprise last week when France and Germany, the two mega-powers of the currency block selfishly decided to break the rules they themselves imposed on the other member countries by continuing to run deficits of more than 3% of GDP.
To make matters worse, delegates meeting in Naples this week to come up with a constitution for the broader political entity failed miserably in making any real progress. The countries disagreed on even whether the EU should have its own Foreign Minister and thus a joint foreign policy. Nearly all of the countries balked at this idea even while the military aspirations of certain Europeans (mainly France) to create a third force were subjected to continued NATO dominance, or, one might say the near status quo.
All this and more you can read in the newspaper. My perspective is a little different. So by way of hoping you continue reading, let me ask rhetorically; why should you be interested?
I’ll hit the second point first: you might be interested in European investing as a hedge against a sinking dollar while getting a double bang for your buck. Pick a good stock trading say in Germany, buy it in Euros today and when it goes up as, say, the dollar continues its fall, and you gain on both ends.
But, of course, the dollar could firm and the Europeans are even hinting today that they may intervene to not let their currencies grow so strong they can’t compete with the US in certain key markets, like airplanes. That makes sense but as traders like George Soros have taught us in the past, central banks can intervene and use their good money to try to soak up the fast growing pool of dollars floating around out there (the US trade deficit runs at $1.5 billion a day) but the US in an election year can print more dollars than anybody might want to buy. After all, even countries can get sick of losing money through massive interventions. It’s like paddling upstream with your hands if, say, US Xmas sales aren’t that hot and, say, businesses continue to improve their productivity by getting more out of fewer workers by issuing pink slips and moving service jobs to India.
You may want to consider buying euro-denominated stocks or making pure currency plays.
But, what I wanted to point out from my nest high above one of the best open air food markets in Rome located at Campo dei Fiori, is what you see in the stores, on the shelves, in the market stalls and even on the road.
Italians, at least in the city here, tend to buy their goods from small stores not from big-box operators. It’s amazing how little things have changed in this regard. And even though it is possible to see so-called foreign goods such as Heineken beer and Quaker Oats, most Italians are still mainly consume Italian goods. You also get the feeling that a lot of the clothes are made here as well. Certainly, there’s no doubt about the shoes.
In other words, integration is more of a slogan than a fact on the ground. Each Old European country has its own language, customs, uses, etc. that change slowly. Italian stores are full of the same cakes, cookies and other goodies for Xmas with little penetration for new habits. The number of large retail stores like Upim and Standa have not increased in central Rome in the last 30 years.
What has changed is the mix of automobiles. Back in the 70’s you basically only saw Italian cars on the roads. Fiat, had practically a monopoly. In France Renault and Citroen had the same total dominance. That’s changed a bit with Japanese manufacturers and French and German cars taking much greater market share. In France, I rented a Czech made Skoda from AVIS.
And so what this says to me about this huge community with a combined GDP larger than that of the US is that the advantage goes to the very big multinationals that can eventually consolidate markets. It’s pretty clear that some of the European automakers, like the airlines, will fall to multinational ownership.
The reason the Euro is strong is more one of lack of flexibility than anything else. Even if the French and Germans push their debt limits a bit above the 3 percent mark, that’s still half of what we’re running in the states, not to mention Japan’s 7% plus deficit.
Also, and most importantly, the Europeans are not running a current account deficit –which means that they, in total, sell more goods outside Europe than they import. At Wal-mart back in the US, the story isn’t quite the same, as we know. US consumers buy goods made mainly by Asians though German-made cars, for one, don’t do too badly.
If you are betting against the dollar, you are mainly saying that American’s won’t stop buying a whole lot more than they sell abroad. You are also betting that the country will continue to run high deficits. Nobody is guessing that George Bush is going to raise taxes in an election year, are they?
So, of course, no one is feeling sorry for me being in Rome, even if my latest run to the ATM had my bank taking $244 for a 200 Euro withdrawal. Germany has been in a long decline as it absorbed all those East Germans. Maybe the muscle guy in Europe is ready for a recovery. Not that they’ll get rich trying sell their noodles to Italy.
Regards,
rmb
dymaxionweb@verizon.net
Copyright 2003 Richard Mendel-Black All Rights Reserved
If you would like to receive the DymaxionWeb musings directly to your e-mail box, please write to dymaxionweb@verizon.net with the word Subscribe in the Subject field. We will be happy to put you on our list.
If you would like to reproduce any of RMB’s postings you
must include the source of your quote and an email address
dymaxionweb@verizon.net