Some interesting currency moves today

[Wd40]

Rock and roll times, until the music stops

[PNGMK]

Meanwhile...

'Germany is expected to approve the new eurozone bail-out deal for Greece in a parliamentary vote on Friday but has warned that Athens will receive nothing unless it honours its commitments under the deal.

Wolfgang Schaeuble, the German finance minister, said he was “stunned” after his Greek counterpart, Yanis Varoufakis, spoke again of a debt restructuring on Greek radio, and the Athens government indicated it would block plans to privatise strategic assets.

“If the Greeks violate the agreements, then they have become obsolete," a visibly angry Mr Schaeuble said at a meeting to persuade German MPs to support the deal in today’s vote. The meeting in Berlin came after Germany’s biggest-selling newspaper launched a campaign against the Greece deal, printing “NEIN!” across an entire inside page, and encouraging readers to take selfies holding the page up and send them in for publication.

“No more billions for greedy Greeks,” the newspaper added, in only slightly smaller print. The page was printed in the blue and white of the Greek flag, instead of Bild’s more usual red and white.' [continues]

http://www.telegraph.co.uk/finance/econ ... reece.html

Ah, a master-class demonstration of EU unity...

Phuck em. Although I agree that Greeks are Greeks I honestly don't blame them for pushing back on the austerity nonesense.

In other news the small lot size (100 now, it used to be a min. of 1000 shares) on the SGX has definitely helped some of the blue chips climb. Singtel has been particularly good for me this year.

[JR8]

Greece is being forced into purgatory to save the euro
By Roger Bootle, executive chairman of Capital Economics

---
... [skipping down towards the end of the article]

...It is interesting to consider the IMF’s role in all this. The nickname for the IMF in the markets is “It’s mostly fiscal”, reflecting the IMF’s view that when a country gets into trouble, the manifestation is a huge government budget deficit. And the cure involves spending cuts and higher taxes. That is exactly what happened in Greece. But there was a difference. In most cases, the traditional IMF medicine counter-balances fiscal tightening with a devaluation of the exchange rate. The idea is that as the fiscal tightening squeezes domestic demand and threatens to cause higher unemployment, then a more competitive currency encourages net exports. Essentially, exports fill the hole left by the retreating government

But this was not possible in the Greek case because the country does not have its own currency – because it joined the euro. The only way of compensating for this absence was to allow domestic deflation of prices to produce an “internal devaluation”. What a laugh! We learned in the 1930s that this does not work. Deflation is extremely slow and painful and, even if it succeeded in improving competitiveness, it would worsen the debt ratio because it reduces the money value of GDP (the denominator of the ratio). The result is that Greece is on the road to misery, with no obvious escape.

Why don’t the Germans understand the logic of this argument? They tend to look at matters with regard to debt – and economic policy more generally – moralistically. The Greek public sector has been wasteful in the extreme and Greek taxpayers have treated paying tax as near-voluntary. Accordingly, they have had it coming to them. When they reform themselves, then the economy will bounce back.

I am speechless at this attitude. Yes, the Greek public sector has been appallingly wasteful and making it less so is an important part of boosting Greece’s sustainable growth rate. But the current priority is not that, but boosting Greece’s actual growth rate now – and that is all about demand. There is no such thing as a free spending cut. Even tax evaders and under-employed public servants go shopping.

Why do the IMF and the other lenders persevere with this destructive path? The answer is IMP: “It’s mostly political.” That is to say, it is driven by the overriding will to keep the euro on the road. By now you should know my answer. Greece should come out of the euro and allow its new currency to depreciate sharply, perhaps by 30pc to 40pc.'
----

So, that's one more (highly informed/academic) opinion that Greece is being kicked to near-death by Berlin, in order to save their project the Euro.

http://www.telegraph.co.uk/finance/econ ... -euro.html

[JR8]

Glaxo (GSK.LN) opportunity:
'All in all, the Glaxo-Novartis deal will be extremely beneficial to Glaxo’s earnings over the long term. Cost savings of £1bn per annum will also widen the group’s profit margins, boosting profit for shareholders and giving more room for dividend payouts as well as stock buybacks.

But investors are also set to profit in the short term. You see, there’s one key paragraph in the Glaxo-Novartis deal document that many investors seem to have missed:

Capital return
GSK plans to use net after tax cash proceeds of $7.8 billion to fund a capital return of £4 billion to shareholders following completion of the transaction. This return is expected to be implemented through a B share scheme in 2015, subject to approvals. Specific details related to the execution of the B share scheme will be sent to shareholders in due course.

With around 5bn shares outstanding, a cash return of £4bn is worth around 80p per share. In other words, Glaxo’s investors are set to receive a special dividend of 80p per share this year. This is excluding the company’s regular, quarterly dividend payout which is also set to total 80p per share for the year.
Set to outperform

So overall, Glaxo’s shareholders could be set to receive dividend income of 160p per share this year, a yield of 11% at current prices. This hefty yield should help Glaxo outperform during 2015 and most investors will be looking to reinvest the payout which should push the company’s shares higher. '
http://www.fool.co.uk/investing/2015/02 ... this-year/

What's not to like? An 11% div this coming year* + future synergies, from an ultra Blue-chip stock?

I just trimmed a relative dog in my portfolio, and topped-up on GSK...



* Note: article was c1 month ago. Annual Forecast Yield is as of this pm 10.3%

[JR8]

As Borat would say: 'Two thumb up, double successes yes?'

'Other data released on Monday morning confirmed that the Eurozone was in deflation for the third straight month in February, with consumer prices falling 0.3%, though not as bad as the 0.5% decline expected.

The figures came ahead of a policy meeting on Thursday at which the European Central Bank will launch its €1trn quantitative easing (QE) programme.'
http://www.digitallook.com/news/market- ... 57013.html

[Wd40]

Euro has just fallen to below sub 1.1 levels. What a massive fall this has been, in the last one year, EUR has fallen from 1.39 to 1.09

A 20% fall! If an emerging market currency had fallen that much, it would have been called as a rout and would lead of capital outflows and stocks crash but when Japan, Europe and Australia devalue their currency, their stocks go up. Funny.

[Wd40]

In other news the small lot size (100 now, it used to be a min. of 1000 shares) on the SGX has definitely helped some of the blue chips climb. Singtel has been particularly good for me this year.

May be time to take profits from your Singtel shares:

http://sbr.com.sg/telecom-internet/news ... ile-market

[Wd40]

http://www.bloomberg.com/news/articles/ ... a-bay-area

BHP, which has about 230,000 square feet of office space at Marina Bay Financial Centre Tower 2, is looking to vacate about 100,000 square feet, said the person, who asked not to be named as the discussions are private. The company will rent two floors with an area of about 40,000 square feet at CapitaLand Ltd.’s new office tower CapitaGreen, the person said.

Another casualty of the Australian mining slump.

[PNGMK]

http://www.bloomberg.com/news/articles/ ... a-bay-area

BHP, which has about 230,000 square feet of office space at Marina Bay Financial Centre Tower 2, is looking to vacate about 100,000 square feet, said the person, who asked not to be named as the discussions are private. The company will rent two floors with an area of about 40,000 square feet at CapitaLand Ltd.’s new office tower CapitaGreen, the person said.

Another casualty of the Australian mining slump.

Plenty more to come. Australian unemployment is up to it's highest in two decades.

[JR8]

Euro has just fallen to below sub 1.1 levels. What a massive fall this has been, in the last one year, EUR has fallen from 1.39 to 1.09

What a massive loss of face for the Eurocrats. It's was below parity vs the US$ before [Jan-00 > Nov-02]. That prompted huge amounts of navel-gazing re: whether Euroland could ever hope to compete vs the USA...

Meanwhile today:
---
The euro has been falling mainly because of the divergence in economic performance between the eurozone and the United States. Where the eurozone's recovery from the global financial crisis has been at best anemic, the U.S. economy appears to be going from strength to strength.

The currency movements are mainly driven by the actions of central banks. While the European Central Bank has slashed interest rates and launched a massive money-creating stimulus, effectively diluting the value of the euro, the U.S. Federal Reserve is doing the opposite. It is preparing to raise interest rates after deciding last year to end its own stimulus program.

Friday's forecast-busting U.S. jobs report highlighted that divergence. It ratcheted up expectations that the Fed would start raising interest rates as soon as June, prompting a flurry of dollar buying. How quickly the euro and dollar get to a 1-to-1 value will depend on market fluctuations.

"After such a strong, sustained downtrend, the road to parity may not be a straight line," said Kathleen Brooks, research director at Forex.com.

Since its launch in 1999 at a rate just below $1.18, the euro has spent most of its time above current levels.

In its early days, the euro was relatively friendless, and in late 2000, the European Central Bank and other central banks intervened in the markets to prop up the ailing currency, which at one stage fell to a low of a little over $0.82.

That appeared to help and the euro staged a rebound, pushing back above parity with the dollar in late 2002. By the summer of 2008, just before the global financial crisis took a particularly damaging turn with the collapse of U.S. investment bank Lehman Brothers, it struck its all-time high just above $1.60. [an extract from the below]
---
http://finance.yahoo.com/news/euro-drop ... 21428.html

A 20% fall! If an emerging market currency had fallen that much, it would have been called as a rout and would lead of capital outflows and stocks crash but when Japan, Europe and Australia devalue their currency, their stocks go up. Funny.

There are tides of outflows from the euro, much of it heading for Zurich; hence the current stresses on the Swiss 'peg'. In a currency zone (EU) that large there only so many foreign possibilities, and only so much money is 'mobile'. For example wasn't it only recently I posted about the 'purple-tide' (i.e. the E500 note, used where large chunks of cash are being shifted around) pouring into some global beacon of strength like Hungary? There is a disparity in the economic cycles, the US is tightening as growth takes hold, the EU is easing to attempt to keep the south of Euroland afloat. This particular 'show' is far from over... you can expect the soiling of many north-Euroland gussets to come, especially the day that parity (I expect!) looms again.

[JR8]

Skimming the news this morning, re: European economies.

... “It is especially encouraging is the news that all four largest euro countries, Germany, France, Italy and Spain, are all now expanding in unison, which should help improve the sustainability of the recovery for the region as a whole,” he said...
http://www.digitallook.com/news/news-an ... 58847.html

Things appear to be starting to look up. It also reminds one that despite the seemingly continuous grief the 'PIIGS' economies seem to get Italy and Spain are in this 'top 4 largest'. Underlines the curious polarity that exists within Euroland.


And this is OT in some ways, but with reference to the upcoming film 'Suite Francaise':

'The sad truth is that the wartime French authorities enthusiastically co-operated with the Germans over the deporting of Jews. More than 76,000 were sent from France during the Nazi occupation, including 11,000 children, according to the Holocaust research centre Yad Vashem. Only 2,500 survived.'
http://www.dailymail.co.uk/news/article ... rayal.html

... Since it is something rarely discussed, and would make for highly impolite conversation in much of Europe, I'm usually quite surprised to be reminded how deep the ties between wartime Germany and France went. Not only France of course, there were other collaborator-regimes, but France was by far the most significant.

[Primrose Hill]

does this mean that it is time to buy euro stocks/EUR itself/european properties etc?
Wonder what will happen when the others like Portugal/Italy when it is their turn to come up with the monies to service their debts?

[JR8]

Short answer: Don't know. I stick to UK stocks, and get all the exposure vs the Euro I would wish for via those companies business with Europe.

Maybe identifying candidate stocks with a particularly high proportion of revenues in Euro might be one way. But I think that shrinks into insignificance vs other factors.
These are my own 'stock-pick' hurdle criteria for the LSE:
- prospective yield >= 4%
- prospective P/E <= 10
- market cap >= 500m
- dividend cover >= 1.2+

Other things can get factored in too; which is why I read the business round-ups each day. Matters such as established supermarkets facing new and major competition versus discounters such as Lidl, Aldi etc. Oil and oil service stocks vs the outlook for oil prices vs the state of economies that are major importers (China etc).

Well, it's quite enough to keep me out of trouble

Buying property? As an investment, or a second home? I wouldn't touch buying property there. You think 'B2L'ing in the UK is challenging enough even when it's home turf, then how about dealing with a foreign jurisdiction and language with all your future property affairs? Plus where would you buy it; you can buy property for peanuts in large swathes of France, same as Kansas.... maybe for similar reasons?

re: PI
Well they rubbed along just fine AFAIR prior to the Euro. Neither were in the rich-league, in the same way the per capita GDP of Malaysia is incomparable vs that of SG. If ASEAN had it's own single currency (any suggestions for it's name?*) then I expect the SGns would be up in KL kicking their 'lazy feckless buntots to a pulp', as Germany is doing to Greece.

I digress. S. Europe has historically had weaker economies, I'm quite sure you could correlate it with climate, the local 'manana' mentality, infrastructure (road, rail, telecoms etc), and so on. But they always struck me as generally content societies. The people by and large lived the lives they wished for. Now they're being forced to live the lives that Berlin alone considers is best for them.


*The thaler was the dominant currency in Europe for centuries. It's named morphed as it's reach spread, into such as the dollar.
http://en.wikipedia.org/wiki/Thaler

Also from the above:
'in England the word "dollar" was in use for the Thaler for 200 years before the issue of the United States dollar, and until the half crown ceased to be used following decimalisation in 1971, the term "half a dollar" could be heard for "half a crown".'

Well I never. I remember the half-crown coin, but I can't say I recall it being called 'half a dollar'... hmmm.

Meanwhile the ASEAN currency of the future... how about Leeder?

[JR8]

‘European finance ministers are to reject reform proposals for Greece when they meet on March 9th, the Sunday Times reported. The plan includes hiring tourists as undercover tax inspectors in Greece’. http://www.digitallook.com/news/press-r ... 59197.html

Things are apparently getting that desperate

[JR8]

'1445: Analysts at Deutsche Bank now see the euro/dollar dropping to parity this year, instead of 1.05 as it had previously estimated.

1634: The drop in the single currency continues to accelerate. It is now off by 1.29% to 1.0711.That, in turn, is weighing on front month Brent crude oil futures, which are losing 2.01% to hit $56.82 per barrel.
'
- See more at: http://www.digitallook.com/news/market- ... Q28nI.dpuf

From a rolling news feed last night (The times given are ex London). The Euro's 'demise' is fast accelerating. I reckon we'll see Eur/USD parity sooner than is currently expected. Once the market (esp 'hedge funds' etc) get their teeth into a target of parity it's likely to come pretty swiftly. I wonder who the main casualties of that will be...

Edit to add:
Googling on 'euro parity casualties' brought up a couple of things...
'"Year to date, the euro's down 11 percent. This is only March. Do we have another 7 percent before the end of this year? I don't see why not," said Marc Chandler, head of foreign exchange strategy at Brown Brothers Harriman. "We're only about half way to where we're going (against the euro). ...There's another 30 cents or so on the downside."
Chandler said the euro could be setting up to retest its all-time low just above 0.82 to the dollar by 2016.
"As the euro/dollar goes down it's going to be deflationary for everybody else. It's going to be bad news for emerging markets," said Woo. He said China could possibly be forced to devalue its currency as the euro sags against the dollar. Europe is China's biggest export market.
"That's why it's the currency wars. Someone wins. In this case, it's clearly Europe," said Woo...'
http://finance.yahoo.com/news/mighty-do ... 59267.html

re: casualties, here's Cramer's view... [last night]
'Cramer: Watch out for emerging 'wreckage''
http://www.cnbc.com/id/102491381
... he sees Brazil as an early casualty.'