Category — Europe
Deutsche Bank a Target?
Was Citibank floating a trial balloon on the market?
Shares of Deutsche Bank AG, Germany’s biggest bank, rose the most in nine months on speculation that the bank may be acquired by Citigroup Inc.
April 20, 2007 No Comments
The Laffer Curve in Estonia
We’ve previously posted about the right side of the Laffer Curve , but what about the left?
The Gartman Letter describes the booming economy in Estonia after the tax rate was lowered.:
The tax started at 26%, fell to 22% as the revenues taken in at the first rate were far above expectations so the authorities thought it wise to cut the rate, expecting to take in less revenues whilst still balancing the budget. They were wrong in doing so, for at 22% they began to take in more than they were taking in at 26%, and so they are cutting it to 20% in ’09. There are few, if any, deductions and they are for mortgage interest, educational expenses, and charitable donations. Estonia is booming. Immediately after the fall of the Soviet Union, Estonia’s average per capita income was 35% of that of its European neighbours. Now, Estonians are nearly parity with western Europeans, and the economy is growing at more than 10%! …direct foreign investment in Estonia is now 20% of GDP. As a result, tax revenues are moving up even more swiftly than the GDP can grow.
April 19, 2007 No Comments
Two New Highs Today: Dow All Time and Pound 15 Year
Taking inflation into account, these gains aren’t that spectacular. But who cares about inflation?
The Pound highs are more significant. The carry trade might be dying but the GBP hasn’t slowed down.
April 18, 2007 No Comments
Factor-Price Equalization Theorem – Proof of Concept
Econ majors will remember the Heckscher-Olin model and its implications. In time, in a free market, the prices of goods and labor will be equalized across borders. For the worlds oldest profession this had taken some time. Bloomberg details the real life proof of the theory:
The number of people offering sex for money has risen by a third in Zurich and 80 percent in Geneva since Switzerland opened its borders to workers from the 15 EU-member states at the start of 2004, police estimate.
…
The number of registered prostitutes in Zurich rose to almost 4,000 at the end of 2005, from 3,000 in 2004, police there said. Police haven’t released 2006 figures for Zurich. The number in Geneva increased to about 1,500 at the end of 2006, from 837 in 2004, police said.
Most of the new sex workers came from neighboring Germany and France. Switzerland doesn’t track the number of registered prostitutes nationally.
The influx of sex workers has cut prices for “quickie” sexual intercourse to a range of 30 to 80 francs ($24 to $65) from 150 to 250 francs ($122 to $203), said Adrian Klaus, a social worker with Basta, a support group for prostitutes.
March 5, 2007 1 Comment
Investing in Montenegro: The First Mediterranean Tiger
The Austrians are calling this a long term opportunity. The tiny country plans on joining the EU within a decade:
Montenegro chooses to join the EU will be crucial for its future and the future of the Balkan region. While the EU can be an attractive option, it is not clear to us that it is the best route to follow. In any case, keep your eyes open on little Montenegro, as we may see in the next decade the rise of the first Mediterranean tiger.
Right now it looks like most of the opportunities are in property, but with a low cost of living and beautiful beaches it might be a nice place to ride out the US real estate collapse.
February 28, 2007 1 Comment
Inflation Coming to the Eurozone as Money Supply Hits 17-year High
M3 is high and rising:
Money supply in the eurozone grew faster in January than at any time since early 1990, raising expectations of further interest rate rises by the European Central Bank in the coming months.
February 28, 2007 No Comments
How the UK Housing Bubble Hurts the US Dollar
From the pink FT:
With house price inflation on this scale, the Bank of England can surely not ease rates any time soon. This strengthens sterling against the dollar, which is weakened by the widespread belief that the housing downturn will force the Federal Reserve to cut rates. UK housing is pushing up sterling, while US housing is pushing down the dollar.
The trade is continue to long the GBP/USD (which is the same as shorting the US Dollar) while UK housing remains strong.
December 7, 2006 1 Comment
The Ultimate International Arb Opportunity
Buy in Paris and sell in Hong Kong. If the spreads move against you the worst case scenario is that you end up drinking a lot of Jack. Best case is you make a profit. Win-Win.
Chart from todays WSJ
November 14, 2006 No Comments
Panic on the CDS in London – Credit Derivatives Plunge
Traders are running to the safety of the sidelines as massive selling continues:
Investment banks and hedge funds are being forced to rapidly adjust their trading strategies amid a wave of reported “panic selling” in the US and European credit derivatives market last week. This heavy selling has driven the cost of insuring debt against default in the market for credit default swaps to record low levels – signalling either that investors are extraordinarily optimistic about the outlook for corporate debt, or that prices are so distorted that they are no longer being paid for the risks they are taking on.
November 6, 2006 No Comments
Is a Big Move in the Euro Coming Soon? – Currency Volatility at Record Low
A report from Dailyfx.com points out:
It is interesting to note that this is the tightest the bands have ever been for EURUSD (since the advent of the euro in 1999). Going back 10 years with synthetic prices, there are only two instances when volatility was this low – December 1996 and August 1998. Both instances led to breakouts within 2 weeks and moves of over 1,000 pips in less than 2 months.
If a directional play is too bold another way to play increased volatility is by using options. A long strangle will allow a trader to profit from increases in volatility without a huge premium.
October 4, 2006 No Comments
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