The Elephant in the Room.

This is not a blog in my usual style. I have been very busy of late and unable to devote the time needed. Hence this is just a thought provoking rant with a bit of catch up.

Germany has used the Euro zone as a vehicle to conquer the world. IT SHOULD BE EXPELLED or Gerpelled!! (sorry but if you can have Grexit)

I cant help but feel that we have all been duped. German re-unification was always going to be tuff. But once accomplished, a behemoth of productive capacity was born. The trouble is, such an animal would suffer the fate of an ever accretive currency due to its success. How about hitching a ride with the lame ducks of Europe where the great German production machine can hide like an overgrown parasite. In the early days of the Euro, interest rates were held low due to the significant fiscal and monetary drag faced by the the German economy following re-unification.. The trouble is, these low rates, were not appropriate for the lame ducks. They had been restrained from easy credit in the past because the markets knew they could not be trusted. As individual countries they faced exorbitant interest rates and weak currencies. Why? because they are liars and cheats. I don’t mean that in a bad way, but, they just are. When they joined the Euro, everybody said go away and say 5 Hail Marys and don’t lie again. Once they had finished praying, they enjoyed the fruits of this forgiveness, easy money at unbelievably low interest rates. This set the seed of today’s debacle. Well its time we expelled the Alien lurking with the sheep’s clothing! A Euro without Germany would fall around 30%, this would create inflation to a degree but not much (see the example of the UK) It would most certainly drive exports from the Industrial areas and importantly, it will allow the Mediterranean countries to regain the holiday market from the likes of Turkey, Egypt, Tunisia etc. I know it sounds crazy but I cant see Greek people enjoying being in the Euro over the next ten years under German rule.

I wounder why all the highly paid economists and Politicians could not see what Germany was up to. ooohhh yes I can, they were all too busy with their snout in the trough!


As a catch up. I know I have not blogged for a while.

Steel companies continue to plunge. China is pumping ever greater quantities into inventory. One of two things will happen with this pile of metal. One, it will topple, killing the BRIC economies who depend so much on the raw materials required to make it (Iron Ore, Coal), or secondly, Tracey Emin will flick a bit of paint at it and win a Turner Prize. Shipping stocks continue to plunge with the Baltic Freight Index pointing to complete capitulation in that sector. I will update the AP Moeller chart (16 year head and shoulder) soon. Mining companies (and the machine suppliers eg Joy Global) continue to plunge with BHP close to a 20% fall at the base of another head and shoulders (charts another day). Truck manufacturers in the US continue to fall with a sudden fall off in Class 8 truck orders being a big surprise to analysts (read Finance-Reaper you guys). European truck manufacturers still have further downside, mainly Volvo, as MAN and Scania will soon be fully under the ownership of VW to create another global German super industry power. The only saving grace for them (Volvo) is a merger with or a takeover from a Chinese player looking to compete and take the technology.

The UK is hurtling towards the end game. I have blogged regularly about sterling, inferring significant weakness with a target of the all time low vs the $ of 1.08. I have talked in the past of Sterling strong vs Euro and weak vs $. This is the worst case scenario for UK manufacturing.

The UK government are not being straight with the budget deficit. It is getting worse and will continue to do so. If the weak kneed amongst you call for massive infrastructure spending to drive some growth, I refer you to a previous blog regarding the vast numbers of overseas machinery manufacturers and immigrant site workers who would  benefit from this spending, ccrrraazzzzyyyyyy! With respect to the thorny issue of management remuneration, I would like to offer a solution. A 90% tax on any income which is over 40 times that of the average wage in the company. Given that this multiple has grown from around 35 in the 1990`s to around 100 today, it would have some impact. Shareholders can veto the tax if 51% vote in favour of a much higher reward (highly unlikely). As a significant proportion of management have driven profits by squeezing the employees to breaking point, thus driving up their own salary, its about time their compensation is improved in line with the entire company.

The US is on collision course with reality. As I have said since the spring, stock prices were not looking any further than their nose. Tough decisions are due by the end of this year. Are US politicians capable of steering the good ship Boston tea Party away from the rocks? I wont answer that, simply I will direct you to the US Postal Service (USPS). It is up guano creek without a paddle, losing money like there are no tomorrows and needs to cut staff and logistical facilities. If that outcome is anything to go by, they have still not learnt any lessons. Good luck electing the next can kicker!

China. I refer you to my December 19th blog quoting Larry Lang. He claimed 70% of Chinese GDP was infrastructure. As I have stated many times, the huge overcapacity in heavy industries will be their downfall.

As for Greece and Spain, I refer to my December blog Economageddon..The end is near..Thank goodness! I have not changed my view on the countries just that Germany should go, not Greece.d

Friday, June 1st, 2012 Predictions

3 Comments to The Elephant in the Room.

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