Author Topic: What happened to European stocks starting April 2015?  (Read 7661 times)

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #10 on: January 06, 2020, 09:36:10 PM »
Is Europe/Italy in a stable equilibrium or not? Italian government doesn't have the money to remove toxic waste from a steel plant, but owes $2.3 trillion?

Italy
 - allowed a budget deficit of 2% of GDP
 - miraculously reports 0% GDP growth for 7 quarters in a row
 - ECB zeros out the interest rate, debt-to-GDP keeps climbing.
 - December factory orders in Italy had the worst contraction since 2013
 - Largest steel plant of Europe looks to shut down in Italy
 - Italian government gives legal immunity against toxic waste from the plant for buyers (see below).
 - Closes schools on windy days to protect children from toxic fumes from the steel plant.
 - German car production falls to 23-year low in today's news (Italy must be part of the supply
    chain).

https://www.dw.com/en/debt-and-doom-loops-the-eurozones-italian-nightmare/a-50019077

"Italy owes $2.3 trillion (€2.06 trillion) in public debt. That's around 133% of its GDP — a massive ratio that puts it in the top five in the world.

While the majority of that stock of borrowing is weighing down banks in Rome and Milan, European banks are severely exposed in the event of anything going wrong. France is in the hole for a potential €285 billion according to a study by Bloomberg, while German, Spanish, British and Belgian banks also have cause for concern."


https://www.nytimes.com/2020/01/04/world/europe/italy-ilva-arcelormittal-steel.html

"Outside, a towering smoke stack loomed above a landscape of blast furnaces and stockpiles of dangerous minerals. Dark puffs of industrial exhaust drifted in the sky like rain clouds. On “wind days,” the mayor cancels school for fear of toxic dust blowing through the town.

“I’m constantly cleaning,” Mr. Musciacchio said, showing how the metallic soot stuck to a magnet. Photographs on the wall honored his mother and other relatives who he said had died of cancer. “They died from living here, breathing here.”

At this point the steelworks appears to be too big to fail, and failing too much to keep running.

Its history mirrors the trouble of Italy’s broader economy, which over the last decade has, according to a leading Italian economist, experienced its lowest growth rates since the country formed in the 19th century."


s8019

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Re: What happened to European stocks starting April 2015?
« Reply #11 on: January 07, 2020, 01:21:03 AM »
I was thinking about this further this evening, specifically the massive US outperformance over the last 10 years. One huge force driving the domestic markets has been the collection of tech/software businesses which have collectively created literally trillions in market value. It's extraordinary to think about. Mark Andreeson famously wrote a piece in the WSJ (2011 I believe) which said something like "software is eating everything." I actually read the article the day it was published in the print edition of the WSJ. Unfortunately I wasn't smart enough to see or understand the future as he was describing it. Would be interesting to see a study on how much impact, say, the 10 or 20 biggest tech names have contributed to the market surge. Obviously the recovery of the big banks has been helpful too.

I keep thinking if you don't have these tail winds, and others like falling interest rates & QE, the next 10 years are going to be a much different story.

This was a factor for sure. I also think that overall (ex tech sector) profit margins for the same type of businesses in the US and Europe should be quite different. Take healthcare, for example. The difference in what US and EU hospitals charge for the same type of procedures may be as high as 10:1. And healthcare is a sizeable chunk of the index. Telecoms? I guess it is about 2:1 for broadband and mobile plans. And so on.     

scorpioncapital

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Re: What happened to European stocks starting April 2015?
« Reply #12 on: January 07, 2020, 04:47:06 AM »
Europe has some good companies but it's amazing what shooting yourself in the foot as a society and system can do to reduce returns. UK and Canada and Australia have not had great returns either due probably to commodity focus.

Cigarbutt

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Re: What happened to European stocks starting April 2015?
« Reply #13 on: January 07, 2020, 05:03:31 AM »
Europe has some good companies but it's amazing what shooting yourself in the foot as a society and system can do to reduce returns. UK and Canada and Australia have not had great returns either due probably to commodity focus.
I don't necessarily disagree but, if you have time, can you provide evidence backing this up?

rogermunibond

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Re: What happened to European stocks starting April 2015?
« Reply #14 on: January 07, 2020, 06:48:56 AM »
Lech Walesa interview by NHK - had some interesting comments w/r/t the European project.

https://www3.nhk.or.jp/nhkworld/en/tv/directtalk/20191225/2058586/

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #15 on: January 07, 2020, 09:14:31 AM »
I want to relive the 2008 meltdown. Italy needs to leave the Euro.

Italians were richer than Americans until they switched to the euro


"Italy was not always this way.

In the 1980s and 1990s, Italians were richer, on a purchasing power parity basis, than Americans. They managed that because Italy used the lira, and the currency was competitively devalued. It made Italian goods and services cheap, and spurred growth.

At the same time, Italy's debt load is rising. It currently stands at about €2 trillion ($2.25 trillion). Debt to GDP has reached 130%, a level not seen since World War II.

"The public debt ratio [to GDP] will probably continue rising and eventually prove unsustainable," Allen said."

https://www.businessinsider.com/italy-perma-recession-systemic-crisis-threatens-eurozone-2019-4

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #16 on: January 08, 2020, 08:25:53 PM »
https://think.ing.com/snaps/germany-new-orders-nov-19/

Looks like the Euro doesn't work for Germany either?

"Germany: Getting worse instead of getting better

A sharp fall in November industrial orders shows that a bottoming out of the manufacturing slump is anything but near

Currently, 2019 is on track to record a monthly average drop of some 0.6%. Moreover, while 2018 was mainly about weaker foreign orders, the order book deflation reached the domestic economy, with domestic orders dropping faster than foreign orders. To illustrate how unique this long stretch of falling orders is for German industry, the last time German order books shrank for two years in a row was in in 2001 and 2002. Ahead of the Great Recession, order books shrank by 2.9% on average every month in 2008.

All in all, there are still no signs at all of a bottoming out for German industry. Instead, the free fall continues. In fact, there is simply one word to describe the current state of the German industry: ‘dire’.
"
« Last Edit: January 08, 2020, 08:27:36 PM by RuleNumberOne »

james22

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Re: What happened to European stocks starting April 2015?
« Reply #17 on: January 09, 2020, 12:56:13 AM »
Would be interesting to see a study on how much impact, say, the 10 or 20 biggest tech names have contributed to the market surge.

https://www.valuewalk.com/2020/01/sp-500-revenue-and-margin-growth/
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Spekulatius

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Re: What happened to European stocks starting April 2015?
« Reply #18 on: January 09, 2020, 04:14:53 AM »
https://think.ing.com/snaps/germany-new-orders-nov-19/

Looks like the Euro doesn't work for Germany either?

"Germany: Getting worse instead of getting better

A sharp fall in November industrial orders shows that a bottoming out of the manufacturing slump is anything but near

Currently, 2019 is on track to record a monthly average drop of some 0.6%. Moreover, while 2018 was mainly about weaker foreign orders, the order book deflation reached the domestic economy, with domestic orders dropping faster than foreign orders. To illustrate how unique this long stretch of falling orders is for German industry, the last time German order books shrank for two years in a row was in in 2001 and 2002. Ahead of the Great Recession, order books shrank by 2.9% on average every month in 2008.

All in all, there are still no signs at all of a bottoming out for German industry. Instead, the free fall continues. In fact, there is simply one word to describe the current state of the German industry: ‘dire’.
"

This is all true to some extend, but as I mentioned before , most Germans don’t own stock and the unemployment rate is 3.2%, which is full employment and then some. The unrest in the populace, which will eventually eventually Merkels removal (imo) is related to I immigration policy etc and not to economic issues.
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wachtwoord

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Re: What happened to European stocks starting April 2015?
« Reply #19 on: January 09, 2020, 04:23:29 AM »
Europe has some good companies but it's amazing what shooting yourself in the foot as a society and system can do to reduce returns. UK and Canada and Australia have not had great returns either due probably to commodity focus.
I don't necessarily disagree but, if you have time, can you provide evidence backing this up?

Proof (I assume you mean the empirical kind) for something such as that will always be indirect at best since it's impossible to isolate the variable under study.

An  example of indirect evidence of what he's saying is in fact the lackluster return of the index discussed in this thread (but it can never be proof as so many other factors are present and can't be controlled pr compensated for).

The reason why his statement is obviously true is simple logic. However I won't delve into that as not to derail the thread into a political one.
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