Crisis - Cluster Family Office

Peripheral bubble: The perfect storm.

Philippe Legrain is the author of several books, such as «Open World: The truth about globalisation«He has also been and is a very influential person in EU economic policy. Not for nothing has he been a senior advisor and head of the analyst team of the Bureau of European Policy Advisers for the President of the European Commission José Manuel Durao Barroso. And as such, has led the team that has directly advised the EU's strategic economic policy.

Well, from his privileged perspective, Legrain has recently published an article in the Financial Times entitled «.«Investors are ignoring eurozone risks«This is in line with our opinion, which we have reiterated in several articles about the mirage of bonanza that the markets are quoting with respect to the European peripheral economies: «...the European Union's peripheral economies are in a state of crisis.«Mátrix and the green shoots«, «The double standards of bubbles«and many others.

Below is a free translation and commentary of Legrain's article:

Peripheral bond yields are reaching bubble proportions. Markets awash with liquidity both camouflage and exacerbate long-term economic problems and insolvency. Investors and policymakers should have learned that lesson in the pre-crisis bubble years. Yet they have gone from hysterical panic to short-sighted complacency in less than two years. (more…)

The double standards of bubbles

We all shudder (or should shudder) when we contemplate the possibility that our money is invested in assets whose prices are at what is known as a «bubble», i.e. at levels far higher than their real intrinsic value, the result of unfounded speculation. Investing in bubbles is the mistake we all want to avoid at all costs, because if they burst, the losses will be irrecoverable or, at best, it will take decades to recover the value lost. Because, if the capacity of those assets to generate Value does not increase considerably, those prices at which we buy wildly will not occur again without the help of a new bubble on that same asset, which may never happen or take more years than our own investment life. Therefore, the losses we risk are permanent and not temporary. And the time it takes for our investments to recover from temporary price declines (which can occur in virtually any asset). is inversely proportional to the intrinsic value of those assets. Y is the big difference between investing well and investing badly.

(more…)

Russia's motives

A través de la siempre recomendable newsletter de John Mauldin, hemos tenido acceso a un análisis, a nuestro juicio muy interesante y revelador, que realiza Louis-Vincent Gave, de Gavekal Research, sobre los motivos que han llevado a Rusia a actuar como lo está haciendo en el conflicto de Crimea. Y también nos ayuda a comprender las claves que pueden determinar la evolución de este conflicto y la geoestrategia general que de él se derive. Vamos a tratar de resumiros los principales argumentos de este análisis, así como haceros algunas reflexiones sobre ellos: (more…)

Mátrix and the green shoots.

Some will say that the recovery of the Spanish economy is a fact, and that to say the opposite is to be prophetic, unpatriotic or worse. Moreover, the markets momentarily endorse the solvency of the Spanish economy. Yes, those same schizophrenic, inefficient and bipolar markets that good investors know how to take advantage of in the long term. And the fact is that the Mátrix in which we live is pricing assets such as Spanish debt at the prices of when Cayenne Porsches and Audis flooded Spanish cities, in the days when there was plenty of work and credit, and a shortage of workers. The news is nothing less than that the Spanish 10-year bond is trading at a paltry 3.39%, breaking records from 2006! (more…)

From Russia with (more) Courage.

13 months ago we wrote a article in which we told you about the enormous value that existed in the Russian stock market.. In it we cited some companies that were trading at extraordinarily low earnings multiples, whose businesses were very stable and therefore had a dizzying potential for revaluation. Well, the geopolitical circumstances, i.e. the botched EU/US attempt to foment a pro-European revolution in a Ukraine at least half of which is pro-Russian, have caused the semi-war conflict to affect Moscow's stock market with sharp falls, adding even more value to some of its companies.

We should not lose sight of the fact that the conflict does not directly affect Russian territory or its economy. Or at least not as much as it does the EU itself, which is as recklessly dependent on Russian oil and gas supplies as a diver is on his oxygen tank. You will get a clearer idea of what I mean by looking at the graph at the end of this article. this Gurusblog article.

It is clear, then, that it is not Russia that has the most to lose in this conflict, but the EU. And yet the Western (US-EU) strategy, in its eagerness to incorporate Ukraine into NATO and thus advance the allied military border to the very line between Ukraine and Russia, has upset the fragile balance of the government in Kiev. A once pro-Russian government, but governing a single state, and now non-existent, unrecognised by the east and southeast (Russian-speaking) and financially bankrupt. Thus the secession of Ukraine into two antagonistic camps, pro-Russian and pro-Western, seems unstoppable. (more…)

Confiscación única sobre la riqueza.

Hace casi un año que ya advertíamos que el consejo de sabios alemanes, que asesoran a la Cancillera Merkel, recomendaba a los gobernantes del sur de Europa confiscar una parte del valor de los inmuebles a los propietarios de la periferia de la UE para evitar la quiebra del Sistema financiero periférico. En aquel momento, ese organismo conocido como los «cinco sabios» argumentaba que cuando fuera necesario un rescate de los bancos o Estados del sur, se realizase de manera interna (bail-in), o sea con dinero de los propios ciudadanos residentes en los países en apuros. Y que confiscar una proporción del valor de los inmuebles era la manera más fácil, práctica y sencilla de obtener el dinero necesario para evitar la quiebra de Estados y sistema financiero periférico. Porque hacerlo al estilo chipriota, confiscando una parte de las cuentas bancarias, generaba una mayor alarma social, y además era más fácil para «las presas» evitar la confiscación transfiriendo el dinero fuera del país (com hicieron los chipriotas mejor asesorados). En cambio los inmuebles están cautivos, no se pueden transferir de la noche a la mañana a Luxemburgo, Suiza o Alemania, y a la vez está mejor visto ~~robar~~ confiscar a los propietarios de inmuebles -a los que se les supone un mayor patrimonio- que a los ahorradores/inversores que viven de alquiler. (more…)

La Era de los Bancos Centrales

Parece que las piezas del puzzle del New Normal comienzan a encajar. Pero como no podía ser de otra manera al tratarse de una nueva normalidad, el encaje de dichas piezas es hoy por hoy mucho menos estable y geométrico que en el Old Normal. Y lo que hoy puede parecer una parte ya confeccionada del rompecabezas, mañana puede demostrarse de nuevo un caos muy incierto.

La gran diferencia entre esta nueva Era y la anterior es lógicamente el tamaño del balance de todos los bancos centrales de las economías desarrolladas: FED, BoE, BoJ y, en menor medida hasta el momento, BCE. La huída hacia delante que está suponiendo el Quantitative Easing, está determinando el aumento del precio de cotización de prácticamente todos los activos y Mercados directamente relacionados. Y esa realidad es tan contundente como efímera, puesto que la fabricación de dinero a destajo es tan influyente en el precio de los activos como insostenible, debido al cierre del grifo del QE que en algún momento no muy lejano deberá producirse. (more…)

Financial Repression: Un salvavidas para endeudados y una condena para inversores.

A muchos les sonará ya este termino de Represión Financiera, pero para la mayoría todavía será algo desconocido, un término técnico más en estos años en los que hemos aprendido a hablar con cierta naturalidad de hipotecas subprime, desapalancamientos, del new normal o de la ya manoseada estanflación. Ahora el escenario en el que nos movemos y vamos a movernos en los próximos años es el de la Represión Financiera. Y para ello se han puesto de acuerdo quienes antaño dominaban la economía pero que ahora tratan desesperadamente de no ahogarse en su propio vómito, o sea su endeudamiento casi infinito: Europa, USA y Japón. (more…)

Spain, recovery or lies?

We cannot ignore articles such as the one just published by Roberto Centeno in ElConfidencial.com, Neither for its forcefulness nor for its coincidence with many of the arguments that we have been giving since Cluster Family Office. Before going into the details, it is worth remembering that Centeno was CEO of companies such as Butano, Enagas, Campsa and is currently Chairman of Eneroil. He also holds a PhD in Economics from the Complutense University of Madrid and is Professor of Economics at the School of Mining Engineering of the UPM.

Although we have linked to the original article at the top of this post, we will summarise some of the arguments here. Be prepared for the traumatic shock of a few slaps of reality, such as we have been warning constantly, again and again. But as in the Matrix movie, most prefer to take the blue pill of the declarations and versions of the virtual reality of recovery, which governments try to hammer into our heads. However, we are already we recommended you to take the red pill 5 years ago. How time flies....: (more…)

The government decides that we will all guarantee 50 billion more to Spanish banks.

All of us are going to pay out of our own pockets. That is the decision taken unilaterally by the government. Without consultation, without objections, without light or stenographers, without shame. And the fact is that, as the accounting trap that converted the banks' tax credits into assets has gone wrong because the imminent Basel III regulations prohibit such a martingale, now the Government has decided to convert these future tax benefits of the banks directly into assets guaranteed by the State.

50 billion euros - that's nothing - will remain on the balance sheets of Spanish banks as assets, since otherwise Basel III would oblige the tax credits to be counted for what they are, i.e. a potential future and uncertain saving, and only if the bank is still standing after a few years and also makes profits that can amortise these tax credits. (more…)

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Category: Crisis

Peripheral bubble: The perfect storm.

The double standards of bubbles

Russia's motives

Mátrix and the green shoots.

From Russia with (more) Courage.

Confiscación única sobre la riqueza.

La Era de los Bancos Centrales

Financial Repression: Un salvavidas para endeudados y una condena para inversores.

Spain, recovery or lies?

The government decides that we will all guarantee 50 billion more to Spanish banks.

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