Outside the Box

Perspectives on the Crisis in Europe

John Mauldin

November 1, 2011

This week's Outside the Box will be unusual. Rather than one essay, I give you a number of short ones, and links that are representative of the confusion that is Europe, along with a little history. As I noted this weekend, last week's Eurozone announcement was short of details, and very little of the real work had been done. Merkel has to get her own country on board, keep the other nations that are in trouble from demanding haircuts, and keep the markets from trashing Italian and Spanish debt. Berlusconi has to figure out how to get the Italian budget balanced while staying out of jail and "balancing" his social calendar. Maybe he can dollar-cost average with a 70-year-old date? (Sorry, that was snarky, but it is so easy.)

Europe's problems will visit shores all over the world. China will not come to the rescue, at least not cheaply. It is becoming increasingly unclear where they will get the money without ECB participation, but that is VERY euro bearish.

I don't want to seem like I am piling on Euroland, but they are the crisis du jour. And it's just a matter of time until it's the US. Sigh.

And lest I forget again, let me say a special thanks to Joan McCullough for pointing me last week to Mike Masters, who was very helpful in understanding the intricacies ofcredit default swaps and their implications.

Another busy week and lots of airplanes. It will be my first time ever on Aer Lingus, as I fly to Ireland. This weekend will be fun, and even though I will do a few speeches, it will b a very different crowd than I normally speak to. No PowerPoints, just explanations of how the world works to average people – while professional stand-up comedians try and keep me honest! We shall see how that works.

Your keeping it simple analyst,

John Mauldin, Editor
Outside the Box

Like Outside the Box?

Then you'll love John's premium publication, Over My Shoulder. Each week, after sorting through vast amounts of economic, political, and investing news, John sends Over My Shoulder subscribers his pick of the week's most important commentary and data.

It's your opportunity to get the news John thinks matters most to your finances.

Learn More About Over My Shoulder

From David Zervos (of Jeffries and Company), writing this morning:

Seeing Greek bond investors take a 50 percent haircut, the 10yr BTP/Bund spread back to the August wides above 400 and the 10yr OAT/Bund spread north of 100 at the same time spoos have rallied 20 percent and CDX HY has fallen nearly 300bps over the past month is about as good as it gets for our "Fed Reflation vs European Detonation" view of the…

Discuss This

4 comments

We welcome your comments. Please comply with our Community Rules.

Comments

Walter Bruno

Nov. 5, 2011, 1:58 p.m.

Mr. Papanicolou evidences a lack of analytical capabilities in his reply to Walter Bruno`s comments. His emotional statements might hide an endeavor to appease Greek`s bad conscience for playing havoc in Europe and/or justifying the extraction of additional billions from German and European taxpayers.
Nobody would claim that during the German occupation in WWII, Greek casualties did not happen. However, as stated below ” there was never a policy in place to harm Greece or to plunder the country. Germany`s sole purpose of being there was to avert an Italian defeat and to prevent the Anglos from entering the country thus, gaining a bridgehead to invade continental Europe. Yes, ambushing partisans, in today`s jargon terrorists or freedom fighters (take your pick) mainly, communists and their financial supporters, were persecuted with German efficiency”. This, of course also meant that “innocent” (?) villagers were shot for reprisal if partisans did not come forward after having killed German solders. A practice not uncommon on both sides during the War. So much to the “monuments upon monuments in so many Greek villages”. Apart from the fact that monuments in Greece prove little. They could also express a patriotic attitude after the war ie,” keeping up with the Smiths”, sorry Smithios. Last not least, the 10 percent figure of population losses claimed, is more than doubtful as some other figures from victors after the war. Even your compatriot David Zervos admits that the Greece had lost more people during the civil war and exodus through British and Americans fanning it , than through German occupation. Has only one Greek ever claimed compensation from them? ” Intentional famine “, caused by the occupation. I challange this statement as defamatory. Again, father, a contemporary witness in Greece complained repeatedly to his wife at home that often he and his staff had to eat the same dish ie. duck or fish, for weeks in a row. Conclution: No conspiracy theory. Fact is : Greece, an agricultural country was unable to feed its own population. Sitting in coffee houses waiting for food deliveries from abroad, during wartimes did not work. It worked, however, for a couple of years after joining the EU and especially, the euro zone with EU ( German) subsidies, low German backed interest rates and fraudulent financial advice from Wall Street. Greece should wake up and shed their southern way to do business. Probably, mankind, however, will reach Mars earlier than Greeks changing attitudes.
Source: JohnMauldin.com (http://s.tt/13GB5)

Walter Bruno

Nov. 2, 2011, 8:26 a.m.

Perspectives on the Crises in Europe- A Reply to David Zervos (of Jeffries and Company)

From Dr.Walter Stolber,Switzerland

David Zervos recapitulates some known and unknown historical episodes of Greek`s recent history. Some amusing like Italians` desire to drink coffee rather than fighting the war their leader Mussolini had declared against Greece. Others, less correct when claiming that the Germans who rushed in to rescue the Italiens from being defeated “ravashed the country”. In fact, there was never a policy in place to harm Greece or to plunder the country. To the contrary, Greece was admired by many influential Germans as the craddle of European culture. Their sole purpose of being there was to avert the Anglos from entering the country thus, gaining a bridgehead to invade continental Europe. Yes, ambushing partisans, in today`s jargon terrorists or freedom fighters (take your pick) mainly, communists and their financial supporters, were persecuted with German efficiency.
For support and amusement some personal notes: Father, a director for the German Reichsbank was sent to Greece from Berlin headquarter to administer monetary policy. From his personal home leave visits and letters to his family, it is known that he was welcome at the Greek National Bank, never had felt threatened or unwanted, neither in Thesaloniki nor Athens. Indeed from the Greek King,  he received a high medal for salutary work in favor of a grateful country.
Not yet convinced, Mr. Zervos? Here, an other delightful story from father`s experience of Germans “ravaging Greece”. Due to a friend, Director of a hosiery back in Germany, father was able to buy silky nightgowns for his Greek secretaries (in war-time, who can be choosy?). What a surprise when the same secretaries proudly showed up in these nightgowns for the annual New Year celebration- family style at the Greek National Bank, under German control!
Back to the thrust of Mr. Zervos endeavors insinuations and thesis that foreign bad guys in recent history- Germans, British and Americans, the later two even more thoroughly than Germans were fanning civil war and exodus- were GUILTY for today`s economic mess in Greece.
Glancing into Greek`s past,  one has to conclude, however,  that Zervos assertions are plainly wrong. Fact is that the country has a very long tradition of governmental deceit, lying and incompetence dating back to the Middle Ages when German Emperors and others learnt their lessons in that part of Europe. More recently, members of the â??UNION MONTETAIRE LATINEâ? which Greece joined in 1868 learnt a similar lesson . Greece was thrown out ot that union in 1908, let us call it diplomatically, due to incorrect behavior. The Swiss ambassador to France at that time is quoted â? it was a mistake to accept Greece a member to our unionâ?.( One has to wonder which excuse Mr. Zervos might come up with to justify this sober event in his former home country:  the Turks, eventually?). A precursor to what can be expected when today`s political establishment in central Europe has matured.
There might be some hope that the learning process has started. A few days ago, French President Sarkozy was quoted of having come with the same conclusion as the Swiss ambassador some hundred years ago.
History seems repeating itself. Unfortunately, however, for taxpayers and markets this political learning process will become ever more costly with each passing day.

Duncan Hume

Nov. 1, 2011, 3:51 p.m.

It is often suggested that Greece or Italy (or other) fiscal collapse will result in the end of the Euro. It is more likely that the Euro will continue. As weak members of the eurozone are expelled the Euro will probably initially strengthen. The eurozone grew country by country, it may well end the same way.

chip rohlke

Nov. 1, 2011, 10:34 a.m.

I’ve been saying for 30 years that God has to pull down the idol of Mammon in the West to get the hearts of people again. Prosperity is fine for the outward man but does little for the inward…in fact it usually destroys it.
Most of us put so much time and effort into acquiring and keeping Mammon and so very little into our spiritual life. One lasts but a few short years and offers little real hope in the face of old age, disease and death. The other holds promise for eternity though the cost to follow Christ may be everything you have in this world including your life.
Seems to me we are so worried about economics we have little time or energy to think about God. Somehow I don’t think Christ died on the cross for nothing…and it’s a world tragedy that few seem to truly appreciate and apprehend the work done there.
Chaplain Chip Rohlke

© 2013 Mauldin Economics. All Rights Reserved.

Outside the Box is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting www.MauldinEconomics.com.

Please write to subscribers@mauldineconomics.com to inform us of any reproductions, including when and where copy will be reproduced. You must keep the letter intact, from introduction to disclaimers. If you would like to quote brief portions only, please reference www.MauldinEconomics.com.

To subscribe to John Mauldin's e-letter, please click here: http://www.mauldineconomics.com/subscribe

To change your email address, please click here: http://www.mauldineconomics.com/change-address

Outside the Box and MauldinEconomics.com is not an offering for any investment. It represents only the opinions of John Mauldin and those that he interviews. Any views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with, Mauldin's other firms. John Mauldin is the Chairman of Mauldin Economics, LLC. He also is the President of Millennium Wave Advisors, LLC (MWA) which is an investment advisory firm registered with multiple states, President and registered representative of Millennium Wave Securities, LLC, (MWS) member FINRA, SIPC, through which securities may be offered . MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB) and NFA Member. Millennium Wave Investments is a dba of MWA LLC and MWS LLC. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article. Mauldin companies may have a marketing relationship with products and services mentioned in this letter for a fee.

Note: Joining The Mauldin Circle is not an offering for any investment. It represents only the opinions of John Mauldin and Millennium Wave Investments. It is intended solely for investors who have registered with Millennium Wave Investments and its partners at www.MauldinCircle.com (formerly AccreditedInvestor.ws) or directly related websites. The Mauldin Circle may send out material that is provided on a confidential basis, and subscribers to the Mauldin Circle are not to send this letter to anyone other than their professional investment counselors. Investors should discuss any investment with their personal investment counsel. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments. John Mauldin is the President of Millennium Wave Advisors, LLC (MWA), which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS), an FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. Millennium Wave Investments cooperates in the consulting on and marketing of private and non-private investment offerings with other independent firms such as Altegris Investments; Capital Management Group; Absolute Return Partners, LLP; Fynn Capital; Nicola Wealth Management; and Plexus Asset Management. Investment offerings recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 1/3 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisor's services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommend/market, they only recommend/market products with which they have been able to negotiate fee arrangements.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor’s interest in alternative investments, and none is expected to develop.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs may or may not have investments in any funds cited above as well as economic interest. John Mauldin can be reached at 800-829-7273.