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MUNICH — It’s getting close to midnight here in this beautiful German city. The streets, trams and subway trains in this picturesque, yet cosmopolitan, capital city of the state of Bavaria are starting to quiet down. The walking paths and wide open spaces of the Englischer Garten are no longer thronged with people, and the crowd at the Chinesischer Turm biergarten has largely thinned out.
I’ve already indulged in my first Bavarian guilty pleasure meal, schweinshaxe (pork knuckle). And truth be told, my first taste of delicious German beer. If you appreciate the beverage, you simply can’t afford to miss what the Augustiner or Hacker-Pschorr breweries have to offer.
I’m here to speak to subscribers of the German-language version of our flagship Safe Money Report publication, “Sicheres Geld.” These annual trips are always enlightening. This year I’m even more eager to get “on the ground” insights into what’s going on in Europe’s largest economy. And not just in Munich, but also Berlin (with a side trip to Prague to boot!)
|Europe is at the heart of what ails the global economy.|
Why? Simple. Europe is at the heart of what ails the global economy, and Germany is at the heart of Europe as the Continent’s largest economy.
The bitter sanctions war between the West and Russia is hurting the German economy because of the two countries’ extensive trade ties. Case in point: Exports to Russia plunged more than 26 percent year-over-year in August to just 2.3 billion euros ($2.9 billion). It’s also suffering from a host of other challenges, including recessions or weak growth in many of its European neighbors and trading partners.
In fact, the European Union just slashed its 2014 growth forecasts for the 18 countries that share the euro currency to just 0.8 percent. It expected 1.2 percent back in the spring.
Italy is forecast to shrink 0.4 percent, making its double dip recession official, with contractions on tap for Cyprus, Finland, and Croatia as well. Europe’s second-biggest economy, France, may skirt dangerously close to zero with growth of just 0.3 percent. But considering the EU was overly optimistic a few months ago, even these lowered forecasts may miss the mark.
|“I’ve told my readers to avoid U.S.-traded shares or ETFs of major European countries.”|
I’ve advocated being “short” or out of the euro currency for some time, and I’ve told my readers to avoid U.S.-traded shares or ETFs of major European countries. If you chart the iShares MSCI Germany (EWG) or Currencyshares Euro Trust (FXE) ETFs against the SPDR S&P 500 Trust (SPY), you’ll see that advice has panned out.
I’ll let you know if I find anything out here that changes my mind. But for now, while the heart of Europe may be a great place to visit, it’s not the best place to invest!
If you want to comment on Europe (especially if you’re reading from the Continent) or any other issue, please add your view point by clicking here. I will surely study your comments and respond upon my return from Germany.
|Other Developments of the Day|
Speaking of Europe, the Continent’s central bank left interest rates at their historically low levels today, putting any moves on hold as it waits to see how previous stimulus measures take hold. The move comes after the Bank of England also kept its rates on hold. The U.K. economy continues to show tentative signs of recovery, while the euro zone continues to languish in slow growth. Still, weak growth on the Continent will certainly weigh on the U.K.’s prospects going forward.
Meanwhile, former Fed Chairman Ben Bernanke told a conference that the ECB would have a difficult time implementing monetary easing in the way that was done in the U.S., according to CNBC. He cited European political realities: “The barriers to doing it are not really economic,” he said. “The legal and political barriers being thrown up are going to make it very difficult to do that.”
Electric-car maker Tesla Motors Inc. (TSLA, Weiss Ratings C-) posted a wider loss for the third quarter and cut its forecast for deliveries this year, attributing the delays to overhaul work planned at its factory, but comments about the outlook cheered investors. The California-based automaker said it lost $74.6 million, about double the loss from the year-ago period. It said it would likely deliver 33,000 of its Model S sedans, some 2,000 fewer than earlier forecast. Vehicle sales for the third quarter were 7,785, a touch below the 7,800 that Tesla had forecast it would sell for the period.
“Demand is not our issue; production is our issue. And being too perfectionist about future products,” Chief Executive Elon Musk said on a conference call, according to the Wall Street Journal. Investors were cheered, however, by comments that the company had reiterated its goal to sell 100,000 vehicles by the end of 2015 and that it would spend $350 million in this fourth quarter to increase output capacities.
President Obama vowed to work with the new Republican-led Senate, including cooperating with soon-to-be Senate Majority Leader Mitch McConnell of Kentucky. “I would enjoy having some Kentucky Bourbon with Mitch McConnell,” the president quipped during a press conference. Still, while promising to make strides to end gridlock, both men indicated they will stand their ground on important issues.
“We’re gonna function. We’re gonna pass legislation,” McConnell said in Louisville.
Until next time,
P.S. We can only leave Martin’s most crucial and timely video of 2014 online until this coming Sunday, November 9. Click this link to get the wealth-building answers you need now!