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Posts Tagged ‘France’

Is a Euro Break-Up Priced In?

November 4, 2011 Leave a comment

I’m not a fully-fledged contrarian, and never have been. But smart investors must constantly ask themselves what’s already reflected in market prices. Because, if the thing you fear is already reflected in prices, that leaves a lot of room for upside surprise. A year ago, a euro breakup seemed impossible. Now it’s…inevitable? You be the judge:

Bogus Bailout: Why Europe Isn’t Off the Hook – Charlie Gasparino, NY Post

The Euro Zone Needs A Bigger Bazooka – Jason O’Mahony, MarketWatch

Survival Of The Euro Depends On France – Michael Sivy, Moneyland

Euro Crisis: Doubting ‘Domino’ Effect – Edward Lazear, Wall Street Journal

Achilles’ Heel of the Eurozone – Dimitri Papadimitriou, Los Angeles Times

Why We Can’t Escape the Eurocrisis – Gerald O’Driscoll, Wall Street Journal

Europe’s Doomed, Doomed I Say – Felix Salmon, Reuters

Is Greece Just Bluffing to Get a Better Deal? – Cyrus Sanati, Fortune

What Will China Demand to Save the Euro? – William Pesek, Bloomberg

The Mysterious, Gravity Defying Euro – Kenneth Rogoff, Project Syndicate

The DSK Debacle and Markets

May 17, 2011 Leave a comment

The wildly theatrical perp walk and amazing no-bail incarceration of Dominique Strauss-Kahn—International Monetary Fund Managing Director, aspiring next president of France , and, perhaps, part-time philanderer—is less a catastrophe for markets than is being bandied about in the media.

 Mohamed A. El-Erian, titan of PIMCO, believes this is a big deal. I have the utmost respect for Mr. El-Erian, but disagree. Indeed, in Mr. El-Erian’s own words:

Should he be forced to step down, DSK would be the third successive head of the IMF to leave suddenly. Once again, this would catch the institution with a selection process for the top position that is still overly dominated by politics, horse-trading between Europe and the US and other outmoded characteristics.

These facts alone strongly suggest the world gets along just fine no matter the IMF leader. My view is that the mainstream media has overblown this thing by initially saying, “Hey, this is an important guy most of you’ve never heard of!”, which has been conflated to “he was so important, in fact, that without him potentially all the European sovereign debt woe solutions will be derailed.” Unlikely. The IMF is a highly political, and ultimately fairly small, issue in all of this. True, their capital has assisted with the bailouts in Europe so far, but ultimately it’s the EU (with a heavy dose of Germany ) calling the shots here. If there is to be more help from the IMF, it’ll come with or without DSK.

This whole thing roils French politics, no doubt. DSK was the shoe-in presidential candidate to overtake a severely weakened Sarkozy. Now, that seems done. It’s worth noting though, that DSK was a leader in the socialist party—something the French need less of. So his departure from both the IMF and the political scene, from an economic ideological standpoint anyway, is not a negative to my view.

Bottom line: there’s little or nothing about this sensational scandal that should derail global capital markets, which have been through many catastrophes, scandals, and even assassinations of important leaders, and lived to tell the tale.  

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