Sunday, September 25, 2011

Greece´s default will come in few weeks

A new austerity plan from Greece´s Government aimed at obtaining the new financial help from the EU is under way
The plan will cut some pensions by 20 per cent, put 30,000 state workers on 12 months' notice with a 40 per cent pay cut and extend by at least one year a new property tax.
These measures will surely increase social unrest. This is expected to happen also in Italy and Spain as both countries are showing signs of lack of determination to reduce spending and implement fiscal balance.
In my opinion the situation is manageable from a technical point of view although from a political perspective the situation is explosive.
In first place, the European Union is not showing commitment and determination to put in place the measures needed to re establish balanced National figures in the weakest countries. The northern ones are stronger while the ones in the south are weaker in terms of fiscal situation.
If we see a uniform and firm approach from the leading economies in order to strengthen the Union´s situation, the general perception will change.
In second place The weak Government in Spain, with presidential elections in 60 days is doing nothing. The unpopular figure of the Italian president and his lack of action are not helping at all.
Finally the worst case scenario would be the common European currency disappearing.
I do not see it happening so far, although this is becoming a common topic in certain power circles. 

Friday, September 16, 2011

Don,t cry for it Argentina

Argentina as well as other Latam countries are experiencing increase of prices of Real Estate.
The explanation in the case of Argentina is a combination of prices imbalances (the exchange rate is an unrealistic over-valuation of the peso) which is the characteristic of this rich country in the last five decades. The cyclical peso overvalue and drastic devaluation afterwards in a typical ten years period. The uncertainty of the economic measures that will be taken after presidential elections in late October also contribute for investors to "secure" their cash holdings.
Several investors required my opinion with regards to the Real Estate Market in that country. A quick analysis shows that prices are close to the highest levels registered if we study a time series of prices for the last forty years.
It is time to sell in my opinion. The question then is what to do with the money obtained. The alternatives are various and it will be the subject of my future comments.

Going back to the Real Estate markets in the region, practically all the countries in it are experiencing price increases in the prices of the housing market. This is not a bubble in the magnitudes observed in Spain for example, but it should be observed carefully since price corrections will come sooner or later.
In coming comments we will cover this subject in more detail by country.  

Monday, September 5, 2011

Europe again !

Today´s stocks black Monday in Europe is a consequence of
a) the strong feeling that something bad might happen to the Greek economy since they announced that they will not be able to reach the committed ceiling deficit of 7,5% of their GDP

b) The perception that some European banks are in a weak position regarding credit quality and capital, situation that could worsen if worst come to worst in Greece. If Greece goes south it will surely impact on some European banks that hold their promissory notes.

c) The connection between the situation in the US (banks falling prices on Sept 2nd impacted on prices today Monday the 5th)

All in all and whether we like it or not "everything is connected"
Hopefully we will soon see the end of the double dip recession