The headline risk here, folks, is that if you wait for your central banker to give you insight into ...
The Hand-Wringing Goes On
02/12/2009 12:32 pm EST
The overall sentiment at The World Money Show in Orlando last week was certainly much more sober than in the past, yet attendees didn’t seem to be buying in to “the sky is falling” mentality that pervades the business media today. Instead, the investors I spoke with were looking for some solid advice and ideas for the eventual market rally.
As for the advisers, most appeared to be cautiously optimistic, although a few see a fairly dim picture of the world equity markets for at least the first half of this year.
Unfortunately, news from around the globe continues to support that view.
In the UK, unemployment hit a 12-year high, having increased for 12 straight months and soaring to 1.97 million folks in December. Even worse news: The government expects that figure to top three million before the economic crisis ends. And the Bank of England warns that the British economy could contract by 4% this summer as the recession deepens.
World markets continue their malaise, despite President Obama’s success in finally getting his $789-billion stimulus plan passed by the Senate. (It’s now in a conference committee.)
Tuesday’s markets were pummeled by the lack of specifics in Treasury Secretary Timothy Geithner’s separate $2-trillion bank rescue package, with the Dow Jones Industrial Average plunging by 382 points. (It rebounded 50 points Wednesday on the economic stimulus plan’s progress.)
And continued dismal reports from around the globe didn’t help markets Wednesday.
The UK’s FTSE 100 nudged up a bit, some 21 points, from its lowest point in a week, while the European markets, represented by the FTSEurofirst 300 index, hit their lowest closing since February 3rd.
Credit Suisse (NYSE: CS), Switzerland’s second-largest bank, announced that its 2008 earnings fell short by SwFr8.2 billion—much worse than previous estimates, due largely to investment banking losses.
And is there ever going to be any good news from Royal Bank of Scotland (NYSE: RBS)? Now, the bank is slashing up to 2,300 UK jobs, in another example of the little folks having to pay for the excesses at the top. As you may recall, 68% of RBS will soon be owned by the government, and its former top executives received a tongue-lashing during a parliamentary inquiry earlier this week.
But RBS isn’t the only European bank that has big problems. The Telegraph reported that the European Commission issued a memo detailing the dangerous state of toxic debt in European banks, while the International Monetary Fund (IMF) said that European and British banks have three-quarters as much exposure to US toxic debt as our banks do, but haven’t been as quick to “take their punishment”. The IMF went on to say that US banks have written down $738 billion, while those in Europe have taken just $294 billion in write downs.
Furthermore, the IMF surmised that European banks have $1.6 trillion in exposure to Eastern Europe, which some are calling Europe’s “subprime debacle”.
In Asia, China reported a shocking 17.5% drop in exports in January and a 43.1% decline in imports—the latter due in part due to falling oil prices.
Nissan Motors (NASDAQ: NSANY) announced it would lay off 20,000 workers, and its stock surged 7%.
And in an interesting reversal of fortune, USA Today reported that affluent Chinese are coming this month to Boston, New York, San Francisco, and Los Angeles to hunt for bargain homes costing $300,000 to $800,000. Hey, we’ll take any good news!
A recent study by Cushman & Wakefield estimated that global investment in commercial property will decline by 5% in 2009—a lot better than the 59% drop last year, with most of that decline coming in the US.
Nevertheless, as bad news makes its way through the markets and economies of the world, advisors are still looking for good ideas that might actually make investors some money.
This week’s features include a technical analysis of several interesting global regions from Eoin Treacy, global strategist at Fullermoney.com.
And Nick Lanyi, editor of High Yield International, focuses on a mining powerhouse, while Peter Shearlock, contributing editor at the IRS Report spotlights a telecom company that should profit from a weaker British pound.
Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.
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