Europe Still Slow, Even Out of Recession

10/01/2013 6:00 am EST

Focus: FINANCIALS

Jon Markman

Editor, Trader's Advantage

Despite the fact that Europe is no longer in a recession, every country except for Germany is still running at stall speed, says Jon Markman of Markman Capital Insight.

SPEAKER:  Hi, I am talking about Europe with Jon Markman.  Hi, Jon and thanks for being here.

JON MARKMAN:  Thanks, Nancy. Nice to be here. 

SPEAKER:  This week there was some news out that we think Europe is finally out of the recession, the bands are playing, and the cheerleaders are rah, rah, rah.  What do you think?

JON MARKMAN:  You know it has come out of recession, which is great, statistically speaking it has come out of recession, but it is really still at stall speed.  It is not like it is roaring forward.  What is really happening is that Germany is being more successful…

SPEAKER:  Exactly.

JON MARKMAN:  And the rest of the countries in Europe are still pretty lackluster.  As an industry, this is what we are really the most concerned with here.  It is actually kind of neat news because, if you can think back to when the Unites States came out of recession…

SPEAKER:  Oh, we did. Oh that’s right, we did.  I forgot.

JON MARKMAN:  Yeah, you remember that.  It was like in late 2009 probably.  Again, we would have a conversation like boy, we may be out of recession but it has been very lackluster.  Well, the best time to buy stocks or companies is when everything looks terrible.  Obviously, the depth of the recession would be the very best time, but now that you are just barely coming out of it, I think is the time when the stocks are really very cheap in the United States as well as overseas.  I have been really looking askance at these European companies because of the weak environment over there, but that is probably a good time to look at them.  My work shows that they are actually very cheap, as much as two and a half standard deviations cheap, which is about as cheap as anything ever gets.

SPEAKER:  Are you buying individual stocks or ETF Funds?

JON MARKMAN:  There are quite a number of ETFs someone can buy.  There is a good one from Wisdom Tree called European Hedged Equity.  I think it is HEDJ, there is another one and there are several from iShares as well, but you can buy individual companies, some of the energy companies over there such as Total in France, the wireless company Vodaphone is also still a good buy.  The banks have been really, really beaten up but are starting to improve.  I am talking about companies like UBS in Switzerland, Credit Suisse in Switzerland and even some of the British banks that have been beaten up such as Lloyd’s and Barclays. 

SPEAKER:  As an individual investor, would you say maybe even multi-nationals that do business in Europe or would you just say forget those guys?

JON MARKMAN:  No, I think that the multi-nationals that do business in Europe have been unfairly maligned in recent months.  You have probably heard a lot of people say only buy companies that focus on the U.S. domestic economy.  I think that is probably not exactly right.  Companies that sell into Europe have gone through a period in which they have had to adjust to weaker sales, government austerity, etc, but now we are probably coming out on the other side of that, so it is probably time to start looking at them again. 

SPEAKER:  Super.  Thanks Jon.

JON MARKMAN:  Thank you.

SPEAKER:  Thanks for joining us at the Money Show.com Video Network.

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