(Please join me in welcoming two of the world’s most respected investment analysts to the Weiss Research team! Boris Schlossberg and Kathy Lien (click here for bios) — both regulars on CNBC — are widely quoted and sought after by cautious investors the world over. We believe their insights will help make 2016 among your most profitable years ever! — Martin Weiss)
As ISIS is losing ground in the Middle East, it has made Europe target No. 1. The terrorist organization is smuggling thousands of extremists amid the flow of refugees, forcing Europe to choose between protecting humanitarian values and maintaining security. It is the largest refugee crisis of our generation and the greatest threat to the world since 9/11.
Another global terror attack was reported today in Indonesia (details still developing; see Other Developments below). But, after the recent Paris tragedies, should ISIS “flip the switch” now in Europe in a Mumbai-style attack, where there were 12 coordinated shooting and bombing attacks over a four-day period, the Continent will convulse into crisis not seen since the days of the World War.
|Is there a future for the euro currency and the European Union as a whole?|
Borders will be sealed, threatening the entire fabric of the European Union. The great unification project will come under attack as everyone retreats to national identities. This is where the great flaw of monetary union without political union will be truly revealed and the euro currency will face its existential moment.
Hopefully this won’t happen. But the world is relying on intelligence agencies to thwart a growing number of attempts and, in the past year alone, they have let too many terrorists slip by.
To avoid a repeat of any scenario, European nations are spending money on tighter security measures, such as more processing centers and border fences, which translate into greater public spending at a time when the debt-to-GDP ratios in places such as Belgium and Greece already exceed 100%.
The challenge of absorbing all of the refugees is occurring at a time of weak European growth. In the third quarter of last year for example, the eurozone economy expanded by a mere 0.3%, while the U.S. grew 2%. Productivity has always been a problem in Europe, but the population is aging and the Continent could face the same issues as Japan.
|“The challenge of absorbing all of the refugees is occurring at a time of weak European growth.”|
And let’s not forget Greece. That country will be making headlines again this year because the Syriza-led government is taking too many pages out of the books of left-leaning U.S. economists. There’s significant opposition to their pension, tax and other structural reforms, so we wouldn’t be surprised if everyone starts talking about Grexit again.
And then there’s Russia. In 2015, that country’s brazen intervention in Ukraine shattered Europe’s illusion that conflict on the Continent was long-gone history. The EU was forced to enact sanctions, straining relations with Russia. By midyear, EU leaders will need to decide whether to scrap or extend those sanctions. Sclerotic growth, the refugee crisis, ISIS aggression and Russian tensions could lead to xenophobia in Europe — an attitude that is never good for trade or economic activity.
But not all is lost for Europe. If there are no additional geopolitical disruptions in the coming year, Europe could continue its recovery. Navigating that path can be tricky and in the coming weeks we will show you some opportunities.
Boris and Kathy
(Editor’s Note: Boris and Kathy will have the next installment of their week-long special series Friday morning.)
Regular columnist Mike Larson takes a look at your recent comments:
What’s going on in China? Where are our markets headed? And how about the NFL returning to Los Angeles? Those were some of the questions you were discussing online in the last day.
Reader Carmelo said that what’s happening now in our markets is the inevitable result of too much funny money during the boom. The comments: “It has been, and still is, a drugged economy. That’s the reason that it needs a severe dis-intoxication cure.”
But Reader Gordon said investors shouldn’t be blind to opportunity. His comments: “Get in there and buy in the morning. Buy on the dips. Don’t be drips. It’s the greatest buying opportunity of a lifetime. Let the bear trap catch you by the wallet.”
When it comes to China, Reader Al said: “China must resolve itself as either capitalist or communist. The capitalist moves it has launched in the past decade are indeed applaudable, yet they remain entrenched in a communist society, controlling and discriminating their populace.
“When I read analysts’ financial views and opinions, I cannot help but think the big picture of democracy and indeed opportunity for global citizens is overlooked, especially in regards to China. Saudi Arabia, India, and Russia (to name only a few) also play the game of lip service regarding their autocratic rule.”
Reader Donald L. added: “Too many investors thought of China as an industrialized national economy, which it is not. At best it is a sub-contractor you deal with as needed and for as long as it benefits you.
“When they change the rules, as they often do, be prepared to change suppliers. Long term reciprocal arrangements with countries, like companies, are built over time and based on mutual trust and best interests.”
Finally, in regards to the latest move in the pro football world, Reader Pete C. said: “I have thought for quite some time that L.A. needed a team again – it’s just too big of a market not to have one!”
Reader Chuck B. added: “So L.A. steals two teams from elsewhere. This will be the second time they take away from St. Louis — didn’t they build a new stadium to keep the Rams, a few years ago?
“Maybe it is time for the NFL to think about adding six more teams — one in each division. Aside from St. Louis and San Diego, there are other cities that might like teams. Offhand, Silicon Valley/San Jose, San Antonio, Orlando, Memphis, Raleigh/Durham and Norfolk/Virginia Beach/Newport News come to mind as perhaps having the populations to support teams.”
Thanks for taking time out of your busy day to comment on these important issues. It’s very clear that market action and the economic backdrop in China are at the forefront of the minds of global investors. I believe the country is undergoing a severe liquidity squeeze, coupled with massive capital outflows — and its “amateur hour” responses to those threats are killing confidence.
We’re getting dramatically oversold here as a result of the news. But at least as of yesterday, you could argue we still haven’t seen true panic selling (though we’re getting closer). That’s probably the biggest missing ingredient to a short-term, oversold bounce … even as I believe we’re in a longer-term bear market that will result in lower stock prices.
If you haven’t weighed in yet, you’ll find the discussion section lower down on this page. I’d love to hear from you.
Several apparent ISIS terrorists attacked the Indonesia capital of Jakarta with guns, grenades, and suicide bombs. But only two civilians were reported killed and 20 wounded in the attacks that targeted a major commercial thoroughfare. Five assailants were also killed, while four were arrested.
Shares of France’s Renault SA (RNSDF) plunged as much as 20% in Europe after government antifraud investigators raided the firm’s facilities. Reports suggest officials were investigating whether Renault tried to circumvent emissions testing requirements like Germany’s Volkswagen (VLKAY).
The federal government is trying to pierce the veil of secrecy over big-ticket, all-cash real estate purchases in cities popular with foreigners. In March, the Treasury Department will start requiring “beneficial owners” to be revealed for large residential property purchases in New York and Miami.
Buyers can currently hide behind limited liability companies, shell firms and other entities to avoid having their names in public property records and media reports. But the government is concerned that criminals and corrupt foreign government officials are abusing that privilege to use the U.S. real estate market to launder dirty money.
The Powerball rollover frenzy is over! Three separate tickets sold in California, Florida, and Tennessee all had the right combination of five regular numbers (4, 8, 19, 27, 34), plus the Powerball (10). Winners will share a jackpot that turned out to be close to $1.6 billion, the most of any lottery, anywhere in the world, ever. Did you win?
What do you think about the government’s effort to find out who really is snapping up all these multi-million condos and homes? How about the news that other auto manufacturers may have cheated on emissions testing? Do you expect more attacks like the one in Indonesia? Let me hear about it in the comments section below.
Until next time,