James,
a few thoughts on recession:
> How are things in Germany?
Well, we are at the beginning of an economic upturn. So things look good. The election changed the political gravity towards middle/leftish. We will have to expect mor government, more taxes, less freedom. The first signs are not encourging: Schröder agrees with french leaders to seek more international currency regulations. Ou future finance minister/taxman) LaFontaine has his household in the "Saarland" where he currently is Ministerpäsident, in a mess. I
call that to make the goat the gardener. Terrible. He already grabs to where he should not grab, the independent Bundesbank, asking for lower rates. The average rate for all maturities in Deutschland is 3,9% against 5% in your country. The yieldcurve is normal (not inverted as in the USA.).
The high labour cost here made the european economy, at least in th cold north, rather efficient, because we cannot resource to cheap labour. So longer term thought, the high labour cost can be outweighed by higher motivation, which is needed for knowledge workers more, than for stupid machine like workers in dark satanic machilladoras in Mexico, where people nearly starve, when working there..
> Are you also worried about lower corporate earnings in general in Europe?
No, I'm not worried in general. Things look good. A word of caution may be appropriate for the car builders, as the global economy has exess capacity. But, again, who would substitute a Mercedes with a Hyundai? No, on really.
> What is your opinion on the euro currency?
Look at the world GDP 1998 (as of the british "Economist", the propaganda machine of the interest behind the IMF, that is anglo-american finance and oil):
World GDP share 1998
USA 20,4%
EU 19,8 %
Other developed economies 4%
Japan 7,7 %
Other Asia 26,5%
Ex Soviet block 4,8%
Latin America 8,8%
Other devoloping countries 8 %
America grows, its outer trade is rather small. Europe grows quite well. We are more dependant on the world trade, but again: 40 % German foreign trade is with France.
Conclusion: The developed world, except Japan, is in good shape. The IMF (namely Michael Camdessus) recently, yesterday cried "Wolf", say globaal recession. I don't believe in it. the IMf wants more money funded from the U.S.A., but Congress denied so far. Now the resort to public threat. Maybe I would do the same in their position. Would I be
right? No!
Japan had their problem since 10 years now. will the come to insight tomorrow? Why so sudden? somehow the japanese must have a cultural problem, to deal with the issue. I have no more insight.
> What is your opinion on the euro currency?
Well we have fixed exchange rates since may, so the Euro currency is there already. We will have a central european bank next year. Hopefully it will be political independent, as the Bundesbank is, but France oppses it. 12 out of 15 countries in Euro land have a leftish governemt by now. so chance are, we will become policical money, meaning buy voters today, get the money back by inflation (rob them later).
The gerneral voters are dumb, do not understand the inherent consequences of government deficits. Even as we in Germany had *THREE* revaluation this century, robbing all the poor savers, folks are to stupid to understand. They will never learn, and the leftish parties cash in on that hollow heads. That's, unfortunately, the way it goes.
Conclusion:
Short term: The single currency will help businesses, as it lets them run multinational operations more efficient, the stock mareket in Euroland will become more competitive, as currency risks are eliminated.
Long term: As the budget policy remains in each country, the euro has a hole in the bucket. Some crazy medideranean government will borrow the shit (excuse my wording) out of the faith in the Euro, to run budget deficit spending, and the Euro central bank cannot stop it! so sometime later, we will have quite some more inflation, than what we in Germany or in the nort were usd to, meaning the euro will loose value against the US $ later (some years from now).
I only invest in tech, as that's the only thing I understand.
Where global currency pressures on resources make commodities cheaper, and hi-tech oil exploration increases oil reserves some deflationary pressure exists.
When the DAX looses 5,5% in a day, gold reaches 300 $ an once, as of today, versus the low of areound 246 $ for 28g quite some people must heavily be scared. May time to buy stock!
Regards Lutz
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