Is Europe becoming uninvestable?

[Marco Van Basten]

2 hours ago, james22 said:

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small

 

A risk-averse business culture and complex regulations have stifled innovation on the continent, weighing on its future

 

https://archive.ph/lbtkr

Yes, but Europe still has incredible companies and really good opportunities for investment.  ASML, Safran, Airbus, and my personal high tech favorites - CRH & Heidelberg Materials.  

[Spekulatius]

2 hours ago, Marco Van Basten said:

Yes, but Europe still has incredible companies and really good opportunities for investment.  ASML, Safran, Airbus, and my personal high tech favorites - CRH & Heidelberg Materials.  

Exactly. As a value investor, you want to go where the fish are, not where the other fishing boats are.

[Dalal.Holdings]

The best part about Euro investments is looking at their performance in USD terms (provided you didn’t borrow Euros to buy them)

[james22]

1 hour ago, Spekulatius said:

As a value investor, you want to go where the fish are, not where the other fishing boats are.

 

Really interesting question, actually.

 

Individual European companies might be undervalued because overlooked.

 

But they've still all the environmental constraints to contend with.

 

Is it worth the effort when you've got a better fishing ground?

[Dalal.Holdings]

I've been in Europe for a while, but I want to buy more.

 

I'd like the German government to get its act together and pass a budget that actually spends on infra and defense and pushes the country out of its multi-year stagnation. It seems Merz realizes this is the last chance for the mainstream to act (otherwise AfD will win the next set of elections). There ought to be a sense of urgency then...

 

However, the first vote for chancellor that failed was not reassuring as it indicates that there are some holdouts in the mainstream parties in Bundestag that may thwart the aggressive action Germany needs. And of course Merz has promised not to form a coalition with AfD members, so that leaves few options if he can't get votes from his own coalition...

 

Unfortunately, being decisive is not something Europe has had going for it for a long time, perhaps least of all Germany...

 

Germany is the only country in the West with the fiscal space to do something big and meaningful. They'd better act with a sense of urgency

[buylowersellhigh]

On 5/23/2025 at 11:31 AM, Marco Van Basten said:

Yes, but Europe still has incredible companies and really good opportunities for investment.  ASML, Safran, Airbus, and my personal high tech favorites - CRH & Heidelberg Materials.  

Did you buy Heidelberg on the German exchange? 

[Marco Van Basten]

1 hour ago, buylowersellhigh said:

Did you buy Heidelberg on the German exchange? 

I bought an ADR, which, in retrospect, was a mistake.  This is due to fees charged on ADRs every time that there is a dividend, and the fact that this fee is not deductible for income tax purposes.  

[buylowersellhigh]

1 hour ago, Marco Van Basten said:

I bought an ADR, which, in retrospect, was a mistake.  This is due to fees charged on ADRs every time that there is a dividend, and the fact that this fee is not deductible for income tax purposes.  

I am sure the capital appreciation has been good for you!

[Marco Van Basten]

13 minutes ago, buylowersellhigh said:

I am sure the capital appreciation has been good for you!

So I have about 20% of my portfolio in sand/gravel/crushed stone/cement plays.  I own MCEM, CRH, ACA & Heidelberg materials.  I made  a mistake in mid-March of this year, I should have sold my ACA & bought VMC instead, as ACA was roughly flat vs my purchase price while VMC was down 20%-25% from the time I had bought ACA and is a higher quality business.  If memory serves me correctly, I bought Heidelberg Materials on December 20th.  

Edited May 25, 2025 by Marco Van Basten

[John Hjorth]

On 5/16/2025 at 1:18 PM, Spekulatius said:

Belated answer,  it I think the Europeans want to do what the Chinese did.

1) force local investment and encourage joint ventures with Chinese auto makers

2) those joint ventures automatically lead to tech transfer, possibly enabled by contract real language too

 

This is basically an acknowledgement that the European auto makers are not competitive in EV and an attempt to change it.

 

The alternative is to seal of the EU borders from Chinese EV it when exporting cars world wide in part of your business model, how is that going to work? I think there is a risk that this doesn’t work out, but is there really and alternative?

 

I think we will find ourself in America with an uncompetitive auto industry if we continue on the current path. The chicken tax on trucks brought us the $100k Dodge Ram and F350 etc. Consumers pay for it dearly.

 

On 5/16/2025 at 4:05 PM, changegonnacome said:

Exactly who are you protecting/hurting in these scenarios - shielding any industry from competitive forces turns it into an arm of the government with all the inherent issues that brings. The protected win, the consumer via choice/price loses and society writ large loses as resources, by definition, are now being misallocated.

 

You can have national security overlay on stuff and no doubt it's the right posture - but national security becomes the last refuge of the scoundrel industrialist looking to be shielded from competitive forces by scaring/buying the politicians/public.

 

It's a dangerous road the US has started down with Trump - beware the industrialist who cries unfair trades practises what you just might be listening to is a crybaby who fell two steps behind his competition and is looking for a Government bailout via tariffs/subsidies. That pandora's box is now open in the US and given campaign finance rules here via Citizens United it could be deeply corrosive to what has made America great over time.

 

The car industry worldwide is just so crazy, from an investment angle. I diden't understand it untill I read Sergio Marcionnes Powerpoint deck  'Confessions of a Capital Junkie' at some time in 2015., so now about some 10 years ago.

 

Well paid engineers with visions, ideas and dreams, who are car lovers and car enthusiasts, tap dancing to work every day in great mood, to do what they love the most : Burning through shareholder money by designing and building cars, - it's called R&D -, so there is nothing left at all for the shareholders. [Think : Bugatti!]

 

- - - o 0 o - - -

 

Exactly about this industry, there exists double standards and hyprocrasy related to tariffs here in Europe, that perhaps some European citizens tend to forget.

 

Here in Denmark, we have no automakers. So, over time, cars has become tariffed the crap out of them [, but Danes in general forget it is so] :

 

Example :

 

A quick seach for the price of a Tesla X in the US gives :

 

The Danish Tesla website provides the following MSRPs  [ Link ] :

 

- - - o 0 o - - -

 

A few calculations, based on USD/DKK currency rate at 6.57 :

 

US Tesla Model X : USD 84,990,

US Tesla Model X Plaid : USD 99,990.

 

DK Tesla Model X : DKK 1,130,000 x USD/DKK [1 / 6.57]  ~ USD 171,994,

DK Tesla Model X Plaid : DKK 1,290,000 x USD/DKK [1 / 6.57] ~ USD 196,347.

 

- - - o 0 o - - -

 

The difference is about tariffs and VAT [VAT in general 25% here in Denmark], for tariffs on cars here, it's not called just that, what is is, but it is in stead called 'registreringsafgift' in Danish, 'Registration tax' in English, as separate component of the total price to pay for holding the vehicle for use on the Danish roads, with a license plate. So, the license plate on a Danish car is by far the most expensive part on on the car. 

 

- - - o 0 o - - -

 

Cars here in Denmark are likely one of largest schemes ever invented to fleece Danish citizens and thereby holding them down : When you buy a car here, first, one gets fleezed by the Danish state on the registration tax, next your bank fleezes you on your car loan, if you aren't able to pay in cash for the car, which eventually may imply, that you may have taken on interest bearing bank just to pay a tax on an asset that with few exemptions eventually ends up having no value at all.

Edited June 1, 2025 by John Hjorth

[Gamecock-YT]

At least you have nice bike lanes to make up for it and a healthier population as a result

[John Hjorth]

1 hour ago, Gamecock-YT said:

At least you have nice bike lanes to make up for it and a healthier population as a result

 

I diden't really see that response coming, I was expecting an outrage, perhaps blended with some pitty and 'we all feel with you - and understand how hurting and burdensome it must be!' 

[Gamecock-YT]

23 minutes ago, John Hjorth said:

 

I diden't really see that response coming, I was expecting an outrage, perhaps blended with some pitty and 'we all feel with you - and understand how hurting and burdensome it must be!' 

 

Top of mind as I've just spent the past 11 days cruising the Mediterranean with the largest majority on the boat being obese Americans. Plus I bet a majority of COBFer's haven't got to see how nice your bike lanes are in person.

Edited June 1, 2025 by Gamecock-YT

[Loss Horizon]

Interesting thread.

It's a bit hard to follow by now. Would be good if there was a summary with key points and references.

 

From what I see some of the models mentioned:

• Overregulation
• High energy prices
• Lack of venture capital
• Lack of IT companies
• Focus on machinery manufacturing and lack of electronics manufacturing
• Lack of successful startups
• Focus on intangible values like data privacy and reduction of CO2 emissions

I don't share some of the common views on the issues, but these are important points.

 

In general, I believe that as long as Adam Smith's model is working, the economy should be fine. Inefficient companies die, efficient ones grow, new products are developed every day. Companies and private property are well protected by the justice system and police. Supply chains and trade are well integrated into the global economy.

 

However the trouble is that the model is not favoring Europe in manufacturing competition against China. The whole European manufacturing might be at the point of the original Berkshire Hathaway when if was a textile maker. It's lost because it was not competitive structurally.

 

Today's China has cheaper energy, cheaper labor, comparable or better supply chains, it doesn't care about exploiting people or producing greenhouse emissions. In China you can make a product with toxic variety of plastics, unsafe electrics prone to short circuits, but quickly and at scale. Fast iterations. In Europe you can only sell what is absolutely safe to consumers, and have to obtain multiple licenses. Very slow.

 

But this is a very simplistic view. I would be interested to look into details of various models.

For example, China, while embracing free entrepreneurship in general, violates the model of free market by heavy state subsidies to certain industries. It makes for a visible success now, but not clear how it will play out long term.

 

The general sentiment on Europe is currently sharply negative. The good aspects could be easily overlooked behind it. For example, the whole concept of hidden champions. Another example, the advanced welfare state, while producing its share of troubles, brings in a lot of working age people, including skilled people. At least I see it in Germany. I would even draw a comparison to how the US was growing through centuries with constant inflow of immigrants.

 

The original Adam Smith's model had a bit of a blind spot where it's prone to excessive exploitation of people and environment to achieve better productivity. Maybe some state regulation could be a way to address it without breaking the model.

 

The intangible values, like sustainability, sometimes become real market forces. For example, some people opt to buy more expensive products when they are labeled as "bio", or "organic", or "made in EU".

[John Hjorth]

Hi @Loss Horizon,

 

Welcome to CofB&F! ,

 

From reading your post, do I understand it correctly, that you're German, and residing in Germany?

Edited June 1, 2025 by John Hjorth
Fixed spelling

[John Hjorth]

Here are some recent data gathered and processed by the Economist :

 

 

- - - o 0 o - - -

 

What do you see, related to Europe cf. USA ?

[Blake Hampton]

5 minutes ago, John Hjorth said:

Here are some recent data gathered and processed by the Economist :

 

 

- - - o 0 o - - -

 

What do you see, related to Europe cf. USA ?

 

This week's special report was interesting, and also kind of sad.

 

Private credit and private equity are both doo-doo.

[John Hjorth]

Blake [ @Blake Hampton ],

 

What has private credit and private equity perhaps being doo-doo according you to do [not doo-doo here] with this topic?

[Blake Hampton]

33 minutes ago, John Hjorth said:

Blake [ @Blake Hampton ],

 

What has private credit and private equity perhaps being doo-doo according you to do [not doo-doo here] with this topic?

 

 

Just saw the Economist is all.

[Loss Horizon]

1 hour ago, John Hjorth said:

Hi @Loss Horizon,

 

Welcome to CofB&F! ,

 

From reading your post, do I understand it correctly, that you're German, and resinding in Germany?

Thank you @John Hjorth !

 

I'm Russian, I moved to Germany years ago, and have mostly worked for American companies.

 

1 hour ago, John Hjorth said:

Here are some recent data gathered and processed by the Economist :

 

- - - o 0 o - - -

 

What do you see, related to Europe cf. USA ?

 

In "Euro Area" there is slightly lower economy growth. I assume it's temporary, caused by erratic trade before the tariffs. It's been near zero for a while, and the trade war is assumed to keep it that way.

 

The inflation is comparable. The unemployment is slightly higher, while in Germany there is virtually full employment.

 

The trade balance doesn't tell much, also probably skewed by the tariffs action. "Euro Area"'s budget is slightly more balanced, but still with deficit.

 

The interest rates are still weird as they were for a while. In the US most people and companies are all in into equity and debt while cash(deposits or short Treasuries) pays well over inflation, and corporate debt is expensive to maintain. In Germany and Europe the rate is close to zero over inflation but people still hoard cash and companies are relatively conservative with borrowing.

 

Long term rate in the US doesn't bode too well with amount of the government debt, which is going to grow ever higher.

 

I don't follow those metrics regularly. How do you use them?

Edited June 1, 2025 by Loss Horizon

[Marco Van Basten]

Article on Bloomberg stating that the European governments are considering a special tax on defense firms to make sure that the extra profits generated by defense companies from higher arms spending by European governments end up in the pockets of taxpayers and NOT shareholders...

[Dalal.Holdings]

Very Intelligent move from European regulators if true. Not only do the governments own significant stakes in many of the firms, but they also fund them and are desperate for these firms to become true champions. Great idea to hobble the firms just while they are getting going.

 

Only super smart Euro regulators come up with "special taxes" on their best performing sectors. These are very intelligent people who wear ties and ride bicycles to work and were educated at "the best" universities.

 

They also helped come up with amazing innovations like the AI Act and GDPR. True geniuses.

[Dalal.Holdings]

On 6/2/2025 at 10:45 AM, Marco Van Basten said:

Article on Bloomberg stating that the European governments are considering a special tax on defense firms to make sure that the extra profits generated by defense companies from higher arms spending by European governments end up in the pockets of taxpayers and NOT shareholders...

 

I haven't seen any other sources on this ... are you sure it's real ?

[John Hjorth]

On 6/2/2025 at 4:45 PM, Marco Van Basten said:

Article on Bloomberg stating that the European governments are considering a special tax on defense firms to make sure that the extra profits generated by defense companies from higher arms spending by European governments end up in the pockets of taxpayers and NOT shareholders...

 

42 minutes ago, Dalal.Holdings said:

I haven't seen any other sources on this ... are you sure it's real ?

 

Marco [ @Marco Van Basten ]

 

reading something at Bloomberg and posting about it here on CofB&F providing no source what so ever, dosen't make anything a reality.

 

The message is a miscarriage. EU does not have the authority to impose any tax on a EU member. Just usual EU nonsense laying around about everywhere, beeing quoted, and all that.

 

Perhaps I should add that left wing politicians arguing for separate taxes on the successful are about everywhere if one look around in Europe! So also in USA!

 

What Germany may do with regard to taxation of ReinMetall et. al. is another matter, alone for Germany to decide.

 

-Politicians are what they are : Funneling money into their control, to decide how to allocate! 

 

Just sayin' for all you New Yorker's.

 

[ @Dalal.Holdings]

Edited June 4, 2025 by John Hjorth

[Marco Van Basten]

53 minutes ago, Dalal.Holdings said:

 

I haven't seen any other sources on this ... are you sure it's real ?

Well, it has not been passed.  One of course never knows, but I would definitely assume that something version of this will eventually get passed.  European governments need the money, and this also ties in nicely with their philosophies.