Last night I read the news about the delaying of the Basel III requirements for European banks and thought, “The market will like this tomorrow.” Well, the market may have loved the news, but it sure ain’t showing the love this morning. I guess the dour news about the upcoming earnings reports is keeping the market from showing the love. As well, the lack of love might be coming from the rhetorical battle the US politicos fought this weekend over the breathless media airwaves. It does make one stop and think when the minority leader of the US Senate states the Republicans would rather see the country default on its debt rather than raise the debt ceiling without meaningful spending cuts. Yes, I can see why the market would spook over those words.
Call me crazy, but I really don’t think the Republicans will crash the global economy in order to get what they want. If I am wrong, the longer-term view of the market is bleak. If I am right, then up and down is what to expect until the deal is done, especially with earnings coming out soon. If you think as I do, though, then take advantage of the up and down in the market. One place to look is the commercial REIT zone.
- The United States dominates the list of places that global commercial real estate investors would prefer to put their money this year, while China has lost some luster and Turkey has added sparkle, according to a survey of international investors. For the first time since 2001, four of the top five cities that investors said they favor were in the United States.
Europe is still economically a basket case, but slowly signs are pointing to a bottom. Along with the slight uptick in the December manufacturing numbers and the Basel III announcement yesterday, we have news that inflation is not an issue currently.
- Euro zone factory prices fell for the first time in five months in November, pulled down by a slide in the cost of energy and giving the European Central Bank ample room to consider another interest rate cut.
Manufacturing costs dropping means lower prices for consumers. Now, if the governments there can stimulate the economies enough to generate some hiring, the situation in the Eurozone could turn around in 2013. One way that might happen is the delaying of the Basel III requirements that banks increase their cash buffer. This means banks will have more money to lend, and if they actually do it, this will provide a stimulus, along with the lower cost of money. Looking back to the path the US banks followed after their demise, there is reason to think Eurozone banks will quickly realize that acting like a bank is the way to increase revenue. Acting like a bank means lending. Look to the Eurozone financial sector for opportunity.
Sometimes, I look out over the investment world and I wonder how some folks arrived a place of managing the money of others. Really, I often hear some of the stupidest things from folks who have control over millions, if not billions of dollars of other people’s money.
- It would be fair to say that U.S. hedge-fund manager Kyle Bass does not expect the explosion in global debt in recent years to turn out well. “This ends through war,” Bass, the founder of Hayman Capital Management in Dallas, said. “I don’t know who’s going to fight who, but I’m fairly certain that in the next few years you will see wars erupt, and not just small ones,” he told a recent conference.
Sure, anything can happen, but another global war? Picture this … Germany does not like the economic mindset of France as it pertains to reducing debt in the Eurozone and it does not like the debt of Spain, as it is a drain on the German economy, so it rolls its tanks across the French border and then its army heads for Spain. The US, of course, supports Germany, as it is the stronger economic player, so it dissolves NATO and attacks both Spain and France. Or how about this … Spain and Italy go to war because Spain wants a greater share of the resort trade along the Mediterranean to help in its debt reduction program.
Seriously?
Trade in the day; Invest in your life …
