Apocalypse Now?

Timeout to think and read

Each weekend is a wonderful time to look at the markets performances and also rest from daily events when stocks change hands, currencies impact the economies and one world market affects the other.

It is also important to assess the coming week and how will it be. I read the blogs and interviews of many well known investors and famous economists. Their words are worth more than gold, they made their money because they knew better than others about things to come and took better economic decisions.

Optimism and Pessimism

There are always the pessimists and of course the optimists. The pessimists will tell you that the markets are too high, that there is a high risk in the markets, and that people are about to lose their pants.

The optimists will probably say that the worst is behind us, that the markets are recovering (look at GM), and that the world is back on the right track and no force can stop it.

PIIGS

Last week I wrote about the Irish economy that is an example of an economically sick continent, Europe. Like Greece before it, Ireland will get assistance and loans from the European Central Bank and from the International Monetary Fund.

Senior economists say that the European pattern cannot last forever and that a day will come and neither the EU nor the IMF will have the sources and the political power to save another weak EU country.

Citigroup bank is very much concerned. The bank says that now the eyes are focused on Ireland, but once the Irish problem ceases another problem will rise, probably Portugal. Portugal is at a higher risk than Ireland. It has more debts and it is issuing bonds on a daily basis to cover those debts. No one really knows how Portugal intends to finally stand behind those bonds and pay their value to those who bear them. S&P cut Portugal's long term credit rating from A+ to A-, which is a bad sign for Lisbon.

Nouriel Roubini

The "prophet" was heard again this week. He says that Portugal is the next country to go into a debt crisis, but that after Portugal Europe will have to face the Spanish problem.

According to Prof. Roubini, the Spanish public debts are at one trillion Euros ($1.36 trillion). This is a number that no one can pay. No one will come from Mars or from the Moon to save the EU or the IMF. There is simply not enough money in the envelope, says the Professor.

Apocalypse now

I always thought that Roubini was too exaggerative. This time I think there is a lot of sense in his words. We all know that Europe is sick and that at the moment it has the resources to deal with Greece, Ireland and even Portugal. But to deal with Spain? No way!!

Spain

Don't say it is a far country in the other side of the Atlantic Ocean. Look at the Irish impact on the market this week it will be nothing compared to what will happen if Spain calls for help. It already has 21 per cent of unemployment. The public debt is enormous. Those problems are acoustic and it does not seem that they will be solved soon.

A Spanish crisis will cause a domino effect in Europe that will rapidly spread to the entire world. If a 2008 scenario is at our doors, than we should expect really hard times sooner than we think.

Summary

I will follow the news this week and promise to report on any new event in Europe and in the global economy. The opportunities are always out there but there are more and more risks than before. Maybe it is time to wait a bit and keep our money away from the dangerous fire.

Speaking of "Apocalypse now", enjoy "The Doors" a bit: