{"id":1428,"date":"2011-10-25T14:34:50","date_gmt":"2011-10-25T12:34:50","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=1428"},"modified":"2011-10-25T14:34:50","modified_gmt":"2011-10-25T12:34:50","slug":"el-panico-mr-market-y-el-valor-de-los-negocios","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/el-panico-mr-market-y-el-valor-de-los-negocios\/","title":{"rendered":"Panic, Mr Market and the Value of Business."},"content":{"rendered":"
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\"\"Some predict that this is a crucial week for the future of the Eurozone. These are the days when it will be decided how and in what way the EFSF<\/a>, which in turn must put out the fires in a periphery that is absolutely ablaze and spreading. Furthermore, and linked to this quest to square the circle, it seems that the Greek default is set to be quantified, at least this first one.\"\"<\/p>\n

The problem is that Germany, unsurprisingly, is not prepared to sacrifice enough of its own wealth to keep the peripheral parts of Europe afloat. And so Merkel proclaims to the world (and to her voters) that no one should expect any magic solutions to this impasse. Because we must not forget that what the\u00a0Euroschizophrenia<\/a><\/strong> On the whole, the aim is to distort a financial situation teetering on the brink of collapse, so that the \u00abAuditor\u00bb continues to certify that everything is under control and within reasonable parameters. And that \u00abAuditor\u00bb is none other than Mr Market, a malevolent entity with the nasty habit of\u00a0quote<\/em> calling a spade a spade (and, above all, a risk a risk, unlike the credit rating agencies). But the political agenda remains focused on making everyone \u2013 including voters \u2013 believe that the debts can be repaid in the future, and that the European periphery is solvent. Nevertheless, reality persists, and in the case of blatant and undeniable bankruptcies such as that of Greece, the aim is to plug the gaps with money that doesn\u2019t belong to anyone.<\/p>\n

\"\"Germany does not want to foot the bill for Greece\u2019s profligacy, its complete lack of economic discipline and its corruption \u2013 which is only natural. But politicians across the entire Eurozone do not dare to propose any alternative other than the simplistic and suicidal approach of maintaining the Eurozone as we know it. It seems unbelievable, but the leaders who embarked on the single currency adventure just over a decade ago had no plan B! In other words, it seems (and I say \u2018it seems\u2019 because I find it hard to believe, despite the evidence) that the most significant founding act in the developed world in recent times was carried out without considering the possibility that something might go wrong and that it might be necessary to backtrack, or to amend the roadmap for the EU and its single currency. How is it possible that not a single European leader warned, at any point during the Union\u2019s development over the last two decades, that the economic convergence of the Eurozone could be blown to smithereens in the face of a financial crisis such as the one we have experienced? Because it stands to reason \u2013 and is obvious today \u2013 that only through a sustained economic boom lasting decades would we have been able to harmonise the PIIGS economies sufficiently with the German economy. Therefore, why did no one warn of the enormous risk and draw up a plan B in the event of failure in that perfect harmony<\/em>, which has been shown to be nothing more than a letter to the Three Kings? To have embarked on this adventure with no other options than the ideal scenario is, by any measure, surreal.<\/p>\n

But as well as lamenting the short-sightedness of our past leaders \u2013 and that of today\u2019s politicians \u2013 we must learn to interpret the current situation as accurately as possible in order to navigate the present and future quicksand of the Eurozone. And at present we are seeing how, despite Merkel announcing with great fanfare that there will be no quick-fix solution tomorrow, the panic and pessimism of the last three months have subsided in Mr Market. A paradox? Perhaps only on the surface. Yes, yes, that very Market which has not only stopped falling in recent days but has even rebounded is none other than the Auditor himself, whom politicians try to deceive by juggling financial statements. Could it be that the politicians (including the Troika) have finally managed to dazzle Mr Market with their top hats full of leveraged, half-dried multinational rabbits? I don\u2019t think so. Rather, it seems that the leaders have allowed (if not actually caused) this deterioration in the situation.<\/p>\n

\"\"<\/p>\n

However, any movement \u2013 however futile it may prove to be in the medium term \u2013 is interpreted by the market as a step forward that warrants an upward price adjustment. But the main reason for these price rises is probably the low valuations at which many excellent companies are trading, for one reason alone: panic. And when that panic subsides (until the next wave), money flows back into these excellent, extremely undervalued companies like flies to honey. If, on top of that, European leaders hold marathon meetings, with specific dates set for announcing their far-fetched agreements, a rebound is on the cards. This is because the corporate profits of many companies with global operations remain robust, despite the prospect of recession in the developed world. As you can see from the chart above, the S&P\u2019s price-to-earnings ratio (P\/E) tended, throughout the last century up until the mid-1990s, to fluctuate between a low of around 7 and a high of around 24. Subsequently, the tech bubble and other excesses drove them to surreal heights, only for them to return today to moderate levels below 15. By this we mean that, despite this year\u2019s falls, corporate profits remain robust and the share prices of certain companies are very attractive. Given this oversold condition and these P\/E ratios, share prices tend to recover as soon as market panic subsides.<\/p>\n

Therefore, whilst we welcome the initiatives, marathon meetings and coordinated resolutions from European leaders, we should assess them for what they are. They are nothing more than stopgap measures \u2013 reactive rather than proactive \u2013 which are far from solving the root problem of the Eurozone. Nevertheless, many companies and markets are so oversold that only the fear of financial collapse can keep them at such low levels. Nevertheless, it is certainly true that they could still fall much further if panic becomes widespread, but we must view that scenario as a historic opportunity to acquire excellent companies at prices and valuations that we are unlikely to see again for many years.<\/p>\n

 <\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Algunos vaticinan que estamos viviendo una semana crucial para el futuro de la Eurozona. Unos d\u00edas en los que se decidir\u00e1 c\u00f3mo y de qu\u00e9 manera se financia sin coste el EFSF, que a su vez debe apagar los fuegos de una periferia absolutamente en llamas y propagante. Adem\u00e1s, y ligada a esa b\u00fasqueda de […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41,42,40,52,37,48],"tags":[],"class_list":["post-1428","post","type-post","status-publish","format-standard","hentry","category-economia-y-finanzas","category-estrategia","category-gestion-financiera","category-asesoramiento-patrimonial-multi-family-office","category-reflexion","category-asesoramiento-patrimonial-multi-family-office-crear-mi-propio-family-offices"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1428","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=1428"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/1428\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=1428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=1428"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=1428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}