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Dysfunctional Europe25 February 2015
War Room
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Dysfunctional Europe
Scenarios: What’s Next?
Dysfunctional Europe
HiddenLevers
MARKET UPDATE
Market Update
NASDAQ 5000!
Fed Postponing Rate Hike
sources: HiddenLevers, CNBC,
- notes
Oil Stabilizing (ish)
5,048 / 10 March 2000
HiddenLevers
DYSFUNCTIONAL EUROPE
Europe: Greece among PIIGS
sources: Eurostat, Eurostat, MarketRealist
Greek and Spanish unemployment significantly higher than others in PIIGS.
Greece saw more significant GDP pullback than rest.
Greece - highest GDP debt ratio.
PIIGS – 2014 Monthly Unemployment
PIIGS – Annualized GDP Change
Europe: 2012 Bailout Comparison
source: HiddenLevers
Euro Draw Downs Nov 2009 – June 2010 Oct 2011 – July 2012May 2014 – ????
2011-12Ended in Greek default Commodities crushedS&P unaffected
2014-15QE initiated by ECBS&P up up upMore Greek feistiness
Euro Crisis I Euro Crisis II:Greek Default
Euro Crisis III:Perfect Storm
Market Update – Ebola Pandemic
sources: Bloomberg, WSJ, Economist, Google Finance
Europe: ECB QE + US Markets Impact?S&P Intraday Chart: 16-27 Jan 2015
Rumors of ECB QE in Print
Official QE Announcement
1.5% growth over 3 days of QE announcement
Europe: Greek Exit Inevitable? Not really
Anti-austerity parties won ~60% of vote
BUT:In polls, 60% of Greeks want to keep Euro
Paul Kazarian(long Greek debt):Greek Debt has been cut already, is sustainable
+
Alan Greenspan:"I don't think it will be resolved without Greece leaving the eurozone"
+No consensus
+Germans willing to kick the can
sources: HiddenLevers, NY Times, Economist, BBC
Europe: Bottom for EUR?
sources:
6m
1999-now 10y
- USD- ECB QE- Greece- Technicals- CHF
bear flag
1.20 now resistancesub 1.00 EUR is not crazy
HiddenLevers
SCENARIOS: WHAT’S NEXT FOR EUROPE?
GOOD: Bailout Success
source: HiddenLevers
Greece meets expectations. ECB QE crushes it.
EU leaders concentrate on growth
EUR topside resistance at
1.20
No write off for
Greek debts
BAD: PIIGS Waddle Through
Germany keeps
kicking can
US decouples while EU gets hands dirty with debt.
source: HiddenLevers
No collapse, but no EU
growth
US/EUR reaches parity
UGLY: Euro Trashed
New elected leftists get
courage
source: HiddenLevers
EUR breaches all time lows
USD markets and GDP take hit
Euro falls below parity as Greece chaos unending.
Scenario: Dysfunctional Europe
€0.75
-33%
€0.99
-12%
€1.20
+6%
key lever
Greek reforms actually happen. ECB can concentrate on growing GDP.
Germany give + take with Greece on reforms, or prolongs process. US markets continue to ignore.
US equity markets correct as global growth prospects dim. Commodities crash further.
GoodBailout
Success
BadPIIGS
Waddle Through
UglyEuro
Trashed
Dysfunctional Europe: Take-Aways
US GDP = 75% domestic Both Greeks + Germanswant Greece in Eurozone
EUR has further downsideGerman piecemeal solutions will negatively impact EU growth
Product Update
RPQ (beta)makeoverScenario
Detail Pages
makeoverScenarioLibrary
reportsNew
Disclosures
modelOil Crash
white paper
Greece now the Achilles Heel of the European economy
