|Dow||+39.81 to 17,613.74|
|S&P 500||+6.34 to 2,038.26|
|Nasdaq||+19.08 to 4,651.62|
|10-YR Yield||+0.05 to 2.36|
|Gold||-$21.30 to $1,148.40|
|Crude Oil||-$1.33 to $77.34|
I wrote this missive yesterday, and wanted to share it with you because it may have some important lessons about the world for you as an investor. Cheers!
ON THE EC172 TRAIN SOMEHWERE IN THE CZECH REPUBLIC COUNTRYSIDE – It’s quiet here, this two-top table in the nearly-empty restaurant car of my train from Prague. My cell phone is alternating from “No Service” to minimal bars as the countryside … the small towns … the men fishing from cheap plastic chairs on the banks of the River Elbe … and a couple walking their baby in a blanketed pram pass by in a blur.
I’m not sure where I am exactly. And frankly, because of the biggest German rail strike in decades that you might have read or heard about, I’m not so sure exactly when I’ll make it to my ultimate destination – Berlin. What was supposed to be a direct trip may now involve stops in Dresden and Leipzig, along with two train transfers, or taking a bus rather than a train. Oh well – you have to roll with the punches I guess!
My trip has been a mix of business and pleasure, one that has given me the opportunity to connect with colleagues, old and new friends, and our European readers. And it comes at a momentous time – the 25th anniversary of the fall of the Berlin Wall on Nov. 9, 1989. The city of Berlin is alive with celebrations, commemoration ceremonies, visiting dignitaries, and a symbolic line of 8,000 white balloons that are poised to be released into the air soon, recalling the collapse of the Wall all those years ago.
Yet even as the celebration is raging, and I eagerly count down the hours until my arrival so I can join in, I can’t help but wonder about what is happening in Europe now. The train strike that paralyzed the regional, intercontinental and freight trains in Germany over the past few days isn’t the first over the past several months – and it hasn’t just been the train operators. Lufthansa pilots have gone on strike several times as well, resulting in massive flight cancellations and traveler headaches.
|Germans this week celebrated the 25th anniversary of the fall of the Berlin Wall.|
That’s emblematic of the ongoing labor issues that Europe has faced for years – not to mention sometimes business-unfriendly rules and regulations that can make it a tough place to operate.
Speaking of airlines, my Delta flight to Munich was the emptiest I can recall in the five years I’ve been traveling here. Perhaps it’s just a coincidence, as the flight attendant from Poland that I chatted up said it’s generally been busier on recent days. But perhaps not.
Europe’s economy has been challenged for some time, and the euro has been falling sharply against the U.S. dollar. Maybe European companies are cutting back on travel to cut costs? Or maybe more European vacationers are finding it too expensive to travel to and spend in the U.S.? It’s not such a far-fetched conclusion to come to, especially when you consider the recent string of lousy economic data out of Europe.
Meanwhile, it’s hard to overlook the symbolism of former Russian President Mikhail Gorbachev coming to Berlin for the 25th anniversary celebration … but current Russian President Vladimir Putin nowhere to be found. I’m writing this piece from territory that used to be firmly in the Soviet Bloc. I walked the streets of Prague where Russian tanks and troops once suppressed a Czechoslovakian uprising in 1968.
The environment couldn’t be more different now. Street performers playing Andean music or dancing in giant panda suits can be found around the city, as can Western clothing and restaurant chains like Guess and TGI Fridays. Roving British stag or bachelorette party groups are more the norm, rather than roving bands of soldiers carrying machine guns.
But news broke today of more massive shelling in the Ukrainian city of Donetsk. And last time I checked, Putin hasn’t handed Crimea back to his neighbors. Sure, he hasn’t reconstructed a 21st century Soviet Union (yet) … at least not in the same way his predecessors did decades ago. But could he be in the process of doing so over the coming months and years, in a 21st century way? Via proxy armies of “rebels,” political arm-twisting, and economic pressure, perhaps involving the reduction or cutting off of gas supplies to Western Europe?
It’s not so far-fetched a theory – and when you talk to people on the streets here, it’s definitely in the back of their minds. You can’t escape it, like the cold November rain in Munich or the thick fog blanketing the hills here in the Czech countryside.
So as I see it, Europe is a Continent at a political, economic and historic crossroads. The joyous and raucous celebrations 25 years ago and today in Berlin can’t completely mask the underlying concerns, the worries that the way forward may be more complicated and potentially tumultuous than the past quarter century.
As an investor – even now with the Dow at new highs – you would do well not to forget that other markets and other parts of the world aren’t enjoying the same success we are. If we can’t pull them along with our strength, they may drag us down with their weakness.
|“If we can’t pull them along with our strength, they may drag us down with their weakness.”|
Now, it’s time to go back to enjoying the picturesque scenery. Na shledanou.
Any thoughts on how Europe and the rest of the world will affect our prospects here in the U.S.? European countries generally have more safety nets for citizens who find themselves in financial difficulties. But, critics say, they also have higher taxes and systems that stymie personal initiative. Do you have experience in Europe or viewpoints on the economic systems on the Continent vs. that of the U.S.? Click here to comment.
|Our Readers Speak|
Our column weighing the benefits and risks of raising the minimum wage brought a flood of responses from readers. Mike Larson will be back from assignment in Europe on Wednesday and he will be sure to review your comments and give his views. Click here to comment on the minimum wage issue or on any other matter.
|Other Developments of the Day|
It’s 50/50. Former President George W. Bush said the odds are evenwhether his brother, Jeb, will run for president in 2016. The former president said the former Florida governor is “wrestling with the decision” for the Republican nomination. W. told CBS’ Face the Nation broadcast that he’d be “all in” if Jeb decides to run.
Big changes in Russia. The central bank there eliminated its daiy controls on the value of the ruble, basically allowing the currency to float freely on financial markets. It made the move as the country and its currency continue to suffer in the face of Western sanctions over its activity in Ukraine. To prevent a total collapse of the currency, however, the central bank said it was reserving the right to intervene if needed to stem “threats to financial stability.” The country had been eating through its currency reserves in recent months in an effort to support the ruble. The economy has also suffered with the falling of oil prices, the main source of income for the country.
Preparing for a long drive? There is some good news at the pumps this holiday season – the average price of gasoline in the U.S. fell 13 cents in the past two weeks to the lowest level in four years. The authoritative Lundberg survey said prices fell to $2.94 a gallon of regular grade gasoline. The decline was drive, of course, by lower crude oil prices – something that can certainly reverse quickly. The peak price for regular gasoline in 2014 was $3.72 a gallon in May.
In the recent survey, San Francisco posted the highest average ($3.27), while Memphis was the lowest ($2.65). Enjoy the lower prices while they last – and drive carefully!
Remember, you can click here to add your views on these matters or anything else!
Until next time,
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