Friday, November 18, 2011

PRIS and Carlos Slim

On November 1, 2011, I wrote that PRIS was trading below $4 and was worth more than that, so long as Europe didn't return to the Dark Ages.  It seems that Carlos Slim agreed with me.  Slim's Carso SA announced today that it bought 3.2% of PRIS.  The stock has responded, up almost 17% today alone and roughly 20% from its closing price on November 1.  Hope you got into PRIS.  I did -- I like to put my money where my mouth is.  I bought it at $3.73.

Original Thoughts and Jim Jubak

While I have some respect for Jim Jubak as a thinking entity, I don't generally find myself persuaded by his advice.  Looks like we're in lockstep on Europe, however, as he sees Germany as fighting a losing battle to inevitability in the midst of the EU debt crisis:

Thursday, November 17, 2011

Follow Up on EU Debt Crisis and Jim Cramer

I'm following up on my last post which suggested that EU money printing is certain, in my worldview.  Namely, the Europeans do not have the stomach for sufficient belt tightening.  Nor do they want to permit widespread default.  So, money printing appears to be the most likely option for them.  I'm not sure why Jim Cramer left that off the menu in his analysis today:

"So we spiral and we spiral, with every auction now turning into a down 1% rout at a minimum, and there are auctions as far as the eye can see and not enough money from different entities to buy them all.

Ways out? Default, which would be devastating but would allow for a new beginning somewhere down the road. Restructuring, budget reform, lower standard of living, increased savings rate to buy the bonds? Obvious. But have you thought about the problems we're having here with our own debt committee?"

Now, I think there is a limited possibility that I could be wrong and the Europeans will simply fail to be able to agree on money printing before certain countries are forced to default.  It's the option the Russians chose back in the late '90's and they've seemingly rebounded fine.  But the backstop against money printing, Germany, does not want to see default happen.  So the Germans will ultimately be presented with a choice:  print money, make up the difference out of their own coffers, or permit default.  Which would you choose?  And does anyone really believe that the Germans are resisting money printing because, as they say, they remember the lessons of The Weimar Republic?  I don't.

Wednesday, November 16, 2011

The EU and Money Printing

Markets rose recently on news that the EU had agreed on a "rescue fund" for its members, the most infamous of whom have recently been Greece and Italy.  Since that announcement, however, Italian bond yields have skyrocketed, presumably reflecting the belief that the rescue fund will be insufficient and Italy, as well as other countries like Greece and Spain, will ultimately default on their debt (basically bonds).  Forces are thus putting increasing pressue on the European Central Bank to print money to buy more EU member sovereign debt and thus act as a stopgap against panic selling of this debt (and a refusal by markets to purchase more of such debt).  Ask yourself:  what happens if the European Central Bank announces that it will print money ("monetize") to buy more debt?  Also ask yourself how likely this now seems.  The first answer for me is "massive rally" and the second is "very."

Monday, November 14, 2011

What About Spain and Portugal?

So we heard much about Greece and now Italy, with respect to Europe's debt crisis.  Forgotten, it seems to me, is that the names we originally heard with respect to the crisis were Spain and Portugal.  Won't it be time for their names to come round again once Italy is "solved," as we will undoubtedly be told that it has been?  What does this mean?  More shocks and more downward moves in the markets.  Particularly, if politicians in these countries think they can make hay about pretending to resist the EU.  I say "pretending" because these countries do not have much credibility when it comes to threats. 

Tuesday, November 1, 2011

A Greek Hiccup and PRIS

Well, it seems Europe has experienced the temporary (probably) toe stub I mentioned last time.  The Greeks want to vote on the bailout and now some folks are wondering whether the funds the EU plans to commit are enough.  Given the time scale for the EU rescue playing out, this should provide plenty of volatility in the markets for some time to come.  I don't say this from any expert knowledge of the EU crisis.  Far from it.  I'm speaking as someone who asks:  how will the news on Europe be reported?  Rescues, followed by toe stubs.  In short, volatility.  And if the rescue ultimately fails, don't be around that day.  PRIS, a stock I've mentioned before looks to have been unfairly punished today.  It's below $4.  It's worth more than that as long as Europe doesn't descend back into the dark ages.