Is Europe becoming uninvestable?

[Luke]

It's interesting what they demand from China is kind of the opposite of what they are doing themselves: 

 

[james22]

On 9/9/2024 at 10:04 AM, UK said:

And even central planning is very hard to implement:)

 

And can't work when it is.

[Dalal.Holdings]

 

This one guy gets it.

 

The rest of the EU bureaucrats celebrate not when they build something, but when they create new regulations:

 

 

 

Reminds me of people at mission control celebrating the Apollo landings or SpaceX employees celebrating their own milestones. In the case of the EU, however, the milestone is creating more regulations.

[SharperDingaan]

Amusing thread!

 

One invests in Europe for the portfolio diversification; the more different Europe is vs the US or Asia, the better. If it's not your thing, simply walk away.

 

Diversify by either residing in Europe and investing primarily in the US or Asia; or residing in the US or Asia and doing some investment in Europe. Choose between stocks and bonds, or direct ownership of real estate; each has its own set of risks.

 

Europe is multiple countries, all with different political/economic priorities and economic realities; accept the sandbox for what it is, or go elsewhere. For the most part there are solid pockets of opportunity within each country; it's just a different shade of green.

 

The reality is that Europe is fighting a war on its patch (Ukraine), is caught in a tariff war (US/China), is ramping up defence spending to 2%+ of GNP, and experiencing rising extremism; it isn't looking good. There aren't going to be any 'break-ups', but there is going to be significant economic disruption; see it as either an opportunity or threat, and act accordingly. 

 

While the value of USD/EURO/YUAN will change according to the political manipulation of the day, nothing prevents you from storing your accumulating value in Gold/BTC etc. Fiat currencies progressively devalue, whereas Gold/BTC doesn't; BTC also has the advantage of better portability.  

 

SD

 

 

 

Edited September 11 by SharperDingaan

[fareastwarriors]

Europe’s new normal: High energy bills, fading industry and one chance to fix it

[John Hjorth]

4 minutes ago, fareastwarriors said:

Europe’s new normal: High energy bills, fading industry and one chance to fix it

 

The Politico article title does not fairly represent the factual content of the article, which is not about Europe, but about Germany. And, yes, Germany is hit by that related to material mistakes of both commision and omission, related to German energy policy.

[james22]

5 hours ago, SharperDingaan said:

One invests in Europe for the portfolio diworsification . . .

 

Corrected for you.

[SharperDingaan]

The Politico article focused on German energy policy ... expressing woe is me for the next 2-3 quarters; really?

 

It's Germany folks ... lost 2 WW's, and after each truly devastating loss, came back a whole lot stronger than it was before. Yes it wasn't fun, but there are few other places in the world as good at recovery as Germany; and Germany does it very, very well. Drop another 1/3 to 1/2 in price, and both BASF and Thyssenkrupp are solid long-term holds; probability of getting there before everything is done? fairly high.

 

Not that long ago, CS blew up, and got forced into UBS; driving UBS to modern time lows. Today UBS is near twice the price it was, and materially stronger than in was pre CS merger. While disruption will not be great for BASF/Thyssenkrupp employees, and the thousands reliant upon those ongoing pay-cheques; similar post-disruption gains .... are not unreasonable.  Diversification is also the difference between living in a place (US), and just investing in it (Europe/Asia).

 

Long way from being 'uninvestable'.

 

SD

 

 

 

 

 

Edited September 11 by SharperDingaan

[Sweet]

5 hours ago, Dalal.Holdings said:

 

This one guy gets it.

 

The rest of the EU bureaucrats celebrate not when they build something, but when they create new regulations:

 

 

 

Reminds me of people at mission control celebrating the Apollo landings or SpaceX employees celebrating their own milestones. In the case of the EU, however, the milestone is creating more regulations.

 

Totally.  The thread title should be changed to ‘Why is Europe uninvestable?”

 

Good to see Draghi speaking some common sense.

 

Edited September 11 by Sweet

[Dalal.Holdings]

America innovates.

 

China replicates.

 

And...

 

Europe regulates.

 

I can't get over the level of smugness in this photo. 

[Spekulatius]

Even relatively  small Euopean companies produce and sell world wide. There is opportunity with every baby that gets thrown out with the bathwater. 

[UK]

Europe is very different, country by country, also if you buy particullar company, you look mainly at the company, not at the country (well if it is not some uninvestable place) or region. But perhaps you should somewhat consider all regionwide issues while investing in the broad ETF (like Stoxx 600) or some regulated sectors or financial institutions. E.g. major French bank and major US bank perhaps is different, at least in my view, but business such as LVMH?

 

I personally am somewhat interested in Europe and its macro/future trajectory because as a EUR based person, but investing mostly in North America or globally, I have very large and permanent currency missmatch, more so, if I at times use some leverage, which is cheaper in EUR, or was otherwise obtain in EUR in the first place. For all this I have stopped worrying about the longer term demise of the USD long ago (the hardest period was just after GFC, perhaps just until EUR debt crisis, a few years later), especially on relative basis, but still yearly fluctuations of EUR/USD up to some 10 percent are sometimes irritating..but that is what I have to live with. Also, and this is somewhat more of a wishfull thinking, but in my position I naturally would not mind at all EUR maybe taking path of JPY in the longer term, hence my bias/interest for future of Europe, its macro and EUR. Confessions of a eurofunded capital junkie:))

 

Edited September 12 by UK

[Luke]

6 hours ago, Dalal.Holdings said:

America innovates.

 

China replicates.

 

And...

 

Europe regulates.

 

I can't get over the level of smugness in this photo. 

Bit too simple @Dalal.Holdings. Europe was historically and is still an important player in tons of businesses. The cliche "innovates, replicates, regulates" is just not the reality although it might sound catchy if you are a newspaper agency trying to sell articles. China is also a more and more innovating emerging power that is on par with western economies. Situation is more complex and your statement doesnt do it justice. 

[Luke]

If you take Europe in its entirety, you will find many high-quality businesses comparable to US ones. Lots of them are high up in the value chain, too. But I guess it's again this sort of tribalism that Americans have to feel superior above every other country, which is why they like to read about how bad everything else is and how amazing the US is. 

Edited September 12 by Luke

[Luke]

27 minutes ago, UK said:

Europe is very different, country by country, also if you buy particullar company, you look mainly at the company, not at the country (well if it is not some uninvestable place) or region. But perhaps you should somewhat consider all regionwide issues while investing in the broad ETF (like Stoxx 600) or some regulated sectors or financial institutions. E.g. major French bank and major US bank perhaps is different, at least in my view, but business such as LVMH?

 

I personally am somewhat interested in Europe and its macro/future trajectory because as a EUR based person, but investing mostly in North America or globally, I have very large and permanent currency missmatch, more so, if I at times use some leverage, which is cheaper in EUR, or was otherwise obtain in EUR in the first place. For all this I have stopped worrying about the longer term demise of the USD long ago (the hardest period was just after GFC, perhaps just until EUR debt crisis, a few years later), especially on relative basis, but still yearly fluctuations of EUR/USD up to some 10 percent are sometimes irritating..but that is what I have to live with. Also, and this is somewhat more of a wishfull thinking, but in my position I naturally would not mind at all EUR maybe taking path of JPY in the longer term, hence my bias/interest for future of Europe, its macro and EUR. Confessions of a eurofunded capital junkie:))

Europe is actually a country with tremendous potential if it would have more of its own strategic positioning and a healthy leadership change towards competence and independence. I think that coming decade this political leadership change is forcably going to happen the more previous political mistakes become apparent (energy crisis, migration crisis, leaning too much to the US instead of eastwards, starting to favour own industries, blocking out US tech in favor of own players to get technology independent etc) 

[UK]

34 minutes ago, Luke said:

Europe is actually a country with tremendous potential if it would have more of its own strategic positioning and a healthy leadership change towards competence and independence. I think that coming decade this political leadership change is forcably going to happen the more previous political mistakes become apparent (energy crisis, migration crisis, leaning too much to the US instead of eastwards, starting to favour own industries, blocking out US tech in favor of own players to get technology independent etc) 

 

I would not hold my breath for this. At least not until some another serious crisis, the only time when something could be done at all. As WB said some 10 years ago, Euro project without common budget and borrowing is not finished either and nobody knows how this movie ends. Looking relatively things are even more obvious and easier. Just compare the state system in the US, with national states in EU. In one case it is healthy competition and governance innovation (which ever state does best, sooner or later will be copied by other) and it is endless conflict of national interests with some additional layer of non elected bureaucracy. It is obvious for me which system works, but sure you can find what works very well or even better on a country level in Europe:). There are some other unfortunate circumstances, such as ability to control its borders, proximity of Africa or even suddenly Russia now, energy independence, military dependence, but perhaps most importantly demography and immigration, except maybe for GB, which just does not work well in high social spending countries (even low skilled immigrants are mostly coming to US to work, not to receive free money, as most hope by coming to Germany or Sweden) and so on, that just do not work to Europe favor. Add new competition from rising Asia in general and China in particular and try to answer which region between the three is an obvious geopolitical/economical patsy at the table? And yes, despite all this, it is still one of the best place to live and invest and I do both:)

 

Edited September 12 by UK

[Luke]

1 hour ago, UK said:

 

I would not hold my breath for this. At least not until some another serious crisis, the only time when something could be done at all. As WB said some 10 years ago, Euro project without common budget and borrowing is not finished either and nobody knows how this movie ends. Looking relatively things are even more obvious and easier. Just compare the state system in the US, with national states in EU. In one case it is healthy competition and governance innovation (which ever state does best, sooner or later will be copied by other) and it is endless conflict of national interests with some additional layer of non elected bureaucracy. It is obvious for me which system works, but sure you can find what works very well or even better on a country level in Europe:). There are some other unfortunate circumstances, such as ability to control its borders, proximity of Africa or even suddenly Russia now, energy independence, military dependence, but perhaps most importantly demography and immigration, except maybe for GB, which just does not work well in high social spending countries (even low skilled immigrants are mostly coming to US to work, not to receive free money, as most hope by coming to Germany or Sweden) and so on, that just do not work to Europe favor. Add new competition from rising Asia in general and China in particular and try to answer which region between the three is an obvious geopolitical/economical patsy at the table? And yes, despite all this, it is still one of the best place to live and invest and I do both:)

 

Yeah there are huge challenges ahead but with the right political leadership and reforms of the EU this continent can flourish. Sadly, so far its seems like that this wont happen that fast but the rising right and alternative parties are a small sign of wanted change. The worse it gets, the more voters will switch. But it could very well also be that the train is gone for good and that europe will just fall behind to a rising asia. 

Edited September 12 by Luke

[Luke]

Regarding the state of the US and its future in this trio US-EU-Asia i liked the description by wikipedia on american affairs journal view on the developments in the US: 

 

"Production and technical expertise have shifted to China and Asia, domestic capital has flowed into unproductive share buybacks or tech schemes (Uber, WeWork), and America has become a country with a two-tiered service economy, with bankers, consultants, and software engineers at the top and Walmart greeters and Uber drivers at the bottom."

 

"It is hard to look at Wall Street trends over the past thirty years without drawing the perverse conclusion that the most effective use of capital, in Wall Street’s eyes, is to pour it into financial assets or the valuations of software companies. For over thirty years, the PRC has consistently taken the other side of this bet. The PRC evidently believes that hard assets and manufacturing capabilities are good to own, not only for their immediate economic returns but because they bring many valuable intangibles and synergies with them: a highly skilled industrial workforce, faster prototyping cycles, and mastery of supply chains. Thirty years on, can anyone really argue that the PRC bet wrong?"

 

This is also true for other asian coutries, taiwan, India etc. They all have the manufacturing hubs. while a lot of that is still owned by US investors, the design and financial companies owning that infrastructure only provide scarce jobs to a IMO tiny elite while a large majority is in a bad middle income trap and angry. Onshoring IMO is not possible so overall development of the US will not be great but the tech high flyers will probably still do well! 

[UK]

1 hour ago, Luke said:

Regarding the state of the US and its future in this trio US-EU-Asia i liked the description by wikipedia on american affairs journal view on the developments in the US: 

 

"Production and technical expertise have shifted to China and Asia, domestic capital has flowed into unproductive share buybacks or tech schemes (Uber, WeWork), and America has become a country with a two-tiered service economy, with bankers, consultants, and software engineers at the top and Walmart greeters and Uber drivers at the bottom."

 

"It is hard to look at Wall Street trends over the past thirty years without drawing the perverse conclusion that the most effective use of capital, in Wall Street’s eyes, is to pour it into financial assets or the valuations of software companies. For over thirty years, the PRC has consistently taken the other side of this bet. The PRC evidently believes that hard assets and manufacturing capabilities are good to own, not only for their immediate economic returns but because they bring many valuable intangibles and synergies with them: a highly skilled industrial workforce, faster prototyping cycles, and mastery of supply chains. Thirty years on, can anyone really argue that the PRC bet wrong?"

 

This is also true for other asian coutries, taiwan, India etc. They all have the manufacturing hubs. while a lot of that is still owned by US investors, the design and financial companies owning that infrastructure only provide scarce jobs to a IMO tiny elite while a large majority is in a bad middle income trap and angry. Onshoring IMO is not possible so overall development of the US will not be great but the tech high flyers will probably still do well! 

 

Luke, I am open minded re Asia and even China, especially if Xi/CCP comes back to their senses:), but the most important thing for me is to figure out long term direction of EUR/USD, and my bet, perhaps not completely by choice, is more on USD (long term) in this regard.

 

Edited September 12 by UK

[Sweet]

9 hours ago, Dalal.Holdings said:

America innovates.

 

China replicates.

 

And...

 

Europe regulates.

 

I can't get over the level of smugness in this photo. 

The guy centre ground was bragging about it.  Regulating a nearly non-existent industry in Europe. And the regulation will probably help ensure all the AI innovation doesn’t happen in Europe.

 

Larry Ellison (think I have that right) said yesterday that AI servers is going to be dominated by about 7 or so companies.  To enter the game you need a founding investment of $100 billion.  There are a range of American companies willing and able to put those kind of sums up, not sure there is a single EU one.

 

9 hours ago, Spekulatius said:

Even relatively  small Euopean companies produce and sell world wide. There is opportunity with every baby that gets thrown out with the bathwater. 

“no EU company with a market capitalisation of more than euro 100 billion has been created from scratch in the last 50 years, while all six US companies with a valuation of more than euro 1 trillion have been created in the same period.”

Written by Mario Draghi found here: (https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en)

 

No doubt there are opportunities but that fact alone is insane.  

[Luke]

1 hour ago, UK said:

 

Luke, I am open minded re Asia and even China, especially if Xi/CCP comes back to their senses:), but the most important thing for me is to figure out long term direction of EUR/USD, and my bet, perhaps not completely by choice, is more on USD (long term) in this regard.

 

I think its better to go short EUR and borrow it than USD although i wouldnt mind owning debt in them vs high quality assets that pay a higher interest. Like, a mortgage at 3% in EU is still banger if you reinvest it in good stocks! 

[UK]

18 minutes ago, Luke said:

I think its better to go short EUR and borrow it than USD although i wouldnt mind owning debt in them vs high quality assets that pay a higher interest. Like, a mortgage at 3% in EU is still banger if you reinvest it in good stocks! 

+1

[fareastwarriors]

lol what.

 

 

Why are caps now attached to bottles? Blame the EU

[UK]

1 hour ago, fareastwarriors said:

lol what.

 

 

Why are caps now attached to bottles? Blame the EU

 

Yea, this is what happens when you have an army of non elected biurocrats trying their best to find something 'usefull' to do:). And caps attached is the least bad of things they have managed to achieve, because presently it feels like whole industries (old, like oil or autos and even newest, like AI) and countries are being shot relentlessly at their feet with a double barrel gun, because of too much of this ESG and green energy bullshit:))

 

Edited September 13 by UK

[John Hjorth]

2 hours ago, fareastwarriors said:

lol what.

 

 

Why are caps now attached to bottles? Blame the EU

 

1 hour ago, UK said:

 

Yea, this is what happens when you have an army of non elected biurocrats trying their best to find something 'usefull' to do:). And caps attached is the least bad of things they have managed to achieve, because presently it feels like whole industries (old, like oil or autos and even newest, like AI) and countries are being shot relentlessly at their feet with a double barrel gun, because of too much of this ESG and green energy bullshit:))

 

 

Haha Damn, it's so annyoing with those attached caps! - I did not know it was an EU thing.

 

Story from earlier about EU crumbled cucumbers :

 

The Guardian [November 12^th. 2008] : EU bends the rules on cucumbers.

 

Quote

The US may have Barack Obama but the EU has Mariann Fischer Boel.

"This marks a new dawn for the curvy cucumber and the knobbly carrot," said the European agriculture commissioner today, referring to the imminent decision to scrap EU laws banning imperfect-looking fruit and vegetables. ...

 

 

Edited September 13 by John Hjorth