Eurozone

James Mackintosh Buchheit’s Greek lessons for Madrid

October 18, 2012 9:43 am by James Mackintosh

Lee Buchheit is a man worth listening to. The Cleary Gottlieb lawyer wiped €100bn off Greece’s debts when he restructured the country’s bonds at the expense of the private sector, in just the latest in a long line of sovereign defaults he has overseen.

Now he’s airing his thoughts on the options for Spain and Italy, jointly with Mitu Gulati of Duke Law School – and rather bravely, he’s due to speak about it in Portugal next week.

His key message is that Spain is running on borrowed time, and should get on with a Uruguay-style debt reprofiling as soon as possible, extending maturity dates on bonds far into the future but continuing to pay interest. Read more

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Posted in Eurozone |

James Mackintosh Finding cheap European shares

October 2, 2012 9:49 am by James Mackintosh

Even after the extraordinary summer rally in European equities, strategists continue to punt European shares as cheap, and so worth buying. Unfortunately, it’s more complicated than that.

The sell-side analysts pushing the idea are too numerous to list, but one of the better argued cases is that presented by the cyclically-adjusted price-earnings ratio (CAPE), which averages profits over 10 years in an attempt to eliminate the effects of the economic cycle.

Paul Jackson at Societe Generale has some nice charts showing Europe looks cheap, and demonstrating the use of one derivative of CAPE, the cyclically-adjusted dividend yield.

CAPE vs its average Read more

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Posted in Equity markets, Eurozone |

James Mackintosh Banking on the eurozone

September 19, 2012 7:08 pm by James Mackintosh

Being widely hated is one thing, but being widely hated and poor is even worse. This fate almost befell Europe’s bankers earlier this summer. Share prices have soared in the past two months, so all the bankers now have to worry about is mobs with pitchforks.

Seriously, though, European banking seems to be returning to what passes for normal nowadays: money markets have stabilised, bond markets reopened and Americans are even willing (at a price) to put dollars back into French banks, as I discuss in today’s Short View video:

The result has been that eurozone bank shares were one of the smartest investments of the year – as long as you avoided the trouble periphery. This chart shows the split in returns from buying eurozone core or eurozone periphery banks. Read more

Posted in Banking, Bonds, Equity markets, Eurozone, The Short View |

John Authers London Property III: This Time It’s Granular

September 12, 2012 6:40 pm by John Authers

Judging by the response to my Monday column, a lot of people are interested in central London property. As that has been followed by news that a London house is on sale with an asking price of more than £100m, in Hampstead, it’s easy to see why. One of many requests was for more granular data.

Thankfully, I can oblige. London, obviously, cannot and should not be treated as one market. In particular, “prime” central London, because of its appeal to international buyers, seems to follow very different dynamics from the rest of the capital. That appeal varies according to area. The following chart, provided by Hometrack, plots every Greater London broad postcode on two scales – their performance since the overall market first peaked five years ago, and their actual price. Read more

Posted in Eurozone, Property, Real estate, Uncategorized |

James Mackintosh Drawbacks of gold-backed bonds

August 31, 2012 3:31 pm by James Mackintosh

My colleague Gillian Tett wrote a nice column today on talk of using the gold reserves of struggling European countries to help lower their financing costs.

She highlights a suggestion from the Gold Council, the miners’ marketing group, that European countries could issue bonds backed by their holdings of gold. Read more

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Posted in Eurozone, Gold, Italy |

James Mackintosh From ECB to QE3: acronym needed

August 29, 2012 1:57 pm by James Mackintosh

It may not be the most urgent problem facing the European Central Bank, but as Mario Draghi slaves away on his plan to save the euro – missing out on the hospitality of the US Federal Reserve’s Jackson Hole symposium – one goal must be to find a snappy name.

Central bankers are terrible at it, but central bank watchers quickly converted the dull “quantitative easing” from the Fed and Bank of England into QE and then QE2 (and there’s an outside chance of QE3 being hinted at in the US this Friday). Read more

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Posted in Eurozone, The Short View |

James Mackintosh Super Mario II

July 31, 2012 2:14 pm by James Mackintosh

Mario Draghi has promised to do what it takes to save the euro. Markets are doubtful (video) – but the logical conclusion of the European Central Bank boss’s justification for action is that the ECB should be shorting German bonds – Short View column here. Read more

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Posted in Eurozone, The Short View |

James Mackintosh Markets doubt Draghi

July 30, 2012 2:11 pm by James Mackintosh

The post-Draghi recovery has stalled. To recap: last Thursday ECB president Mario Draghi said the central bank is ready to do whatever is needed to save the euro, and markets went wild.

The markets are more nuanced today.

  • The euro is down (perhaps rationally: if the euro solution is to print money, debasement offsets the continued existence of the currency). Just as important for the technically-minded is that the euro failed to break its 30-day moving average, at $1.237.
  • The German 2-year yield has set a new low, coming close to -0.1% before recovering a little. Flight capital, in other words, is still headed for Germany. Longer dated German bond yields remain wider than last week, but are still tighter than at the start of July. There is not much confidence that Draghi will succeed in the face of the Bundesbank’s opposition.
  • On the plus side, Spanish yields continue to improve, with the 10-year having now plunged a full percentage point since last Tuesday, and short-dated yields also dropping sharply. Again, though, things remain worse at the end of July than they were at the start.

The two most important eurozone charts after the turn

 Read more

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Posted in Bonds, Eurozone, Uncategorized |

James Mackintosh Don’t bank on these shares

July 11, 2012 11:27 am by James Mackintosh

The new blog challenge: put these in order of how awful they’ve been since the euro was created:

  • Greek banks
  • Irish banks
  • Spanish banks
  • Italian banks
  • French banks
  • British banks
  • German banks
  • American banks

It is a serious challenge, given how much everyone hates all the banks. But if forced to choose, the order might reasonably go something like the above – the periphery, in order of rescue, middling eurozone, then the Brits (many of them already nationalised, plus the Libor-struck Barclays), followed by under-capitalised Germans and finally the resurgent Americans as the best of a bad bunch.

Equity investors don’t seem to share this view, as this great chart shows. Read more

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Posted in Banking, Eurozone |
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