It’s time for Schadenfreude in Britain over Germany, the hereditary enemy in all late-night TV moveis. Here is the Daily Telegraph‘s Jeff Randall’s take on the problems of the common currency Britain is not part of:
The euro has many flaws, but its weakest link is Greece, whose fundamental problem is that for years it spent too much, earned too little and plugged the gap by borrowing in order to enjoy a rich man’s lifestyle. It flouted EU rules on the limits to budget deficits; its national accounts were a moussaka of minced statistics, topped with a cheesy sauce of jiggery-pokery.
By any legitimate measure, Greece was unworthy of eurozone membership. That it achieved card-carrying status was down to the sleight-of-hand skills of its Brussels fixers and the acquiescence of central bank bean-counters. Now we know the truth, jet-hosing it with yet more debt makes no sense. Another dose of funny money will delay but not extinguish the need for austerity.
This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med. No amount of pit props from Berlin can save the euro Mk I from collapsing under the weight of its structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.
To quote Mandy Rice-Davies, of the Profumo Case, “he would say that, wouldn’t he?” I know that recalling this sex and spy brouhaha of the Macmillan prime ministry dates me, the fact is that the anti-euro Daily Telegraph is only preaching to the converted.
Preaching to the converted is also big in the USA. While I think the Euro is the source of concerns about a double dip recession coming to the fore yesterday, there are people citing political developments stateside as the cause, like controls to protect consumers of some financial services (like brokerages). That’s self-serving too.
Wall St collapsed yesterday not because of anything done on Capitol Hill. It collapsed because of a global shakeout in optimistic long positions: Australia, platinum, oil, Europe, the euro, Brics, and whatever else you may have been tempted by. There was a rush for the exits. So what do you do now?
Firstly, while I may have been premature, you take Gutele Rothschild’s advice. There will be a reversal of the downtrend, probably as soon as next week.
You might want to buy protection against volatility with an ETF which goes up with the VIX. Remember that you absolutely do not want to use stop loss positions on your portfolio because the new circuit breakers will not necessary save you from these sales which can cost you dearly even if the price drop is not ten percent.
And you protect yourself with yields.
Shares bearing a high payout can be bought at a discount using borrowed money, to produce a steady income stream.Today’s issue for subscribers is about a strategy to enhance your income in the present selloff using other peoples’ money. I call it a reverse loan. Details for subscribers only. You can also subscribe to a copycat account tracking my plays with Covestor.com
