Big Problems in Europe, if True.

Investment Analysis Clubs Macro Economic Trends and Risks
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One of my news feeds included a link to a troubling report of purported energy-related leverage. I have been conditioned to never accept as true anything published first on ZeroHedge, but the following linked essay, if true, would be valuable information for anyone who still holds European equities or even Euro bonds (myself included):

https://www.zerohedge.com/markets/sweden-austria-start-baili…

Sweden, Austria Start Bailing Out Energy Companies Triggering Europe’s “Minsky Moment”

Last weekend, Credit Suisse repo guru [Zoltan Pozsar] published what may have been the most insightful snippet of the entire European energy crisis (to date) when he extended the infamous “Minsky Moment” framework to Europe, and specifically Germany, which he said “can’t cover its payments without Russian gas and the government is asking citizens to conserve energy to leave more for industry.” He then elaborated that "Minsky moments are triggered by excessive financial leverage, and in the context of supply chains, leverage means excessive operating leverage: in Germany, $2 trillion of value added depends on $20 billion of gas from Russia… …that’s 100-times leverage – much more than Lehman’s." (Zoltan’s entire note is a must read for everyone with a passing interest in what comes next)… [Emphasis modified from original.]

https://www.zerohedge.com/markets/sweden-austria-start-baili…

Please do not shoot the messenger. I’m sure that plenty of regulars on METAR already are aware of this information - in a more believably accurate format than the electronic rag put out by a fictional pseudonymous character (Tyler Durden). The linked piece includes links to Financial Times and other more reputable sources.

I can hardly grasp the very idea that Europe may have to bail out energy-generating utilities powering the “economic engine of Europe” - Germany - along with electric utilities in Austria, Sweden, and Finland. If this is truly the case, then what hope is there that the PIIGS-based power companies can avoid insolvency unless they are able to harness enough solar and wind power to offset the lost petroleum products supplied by Russia?

I defer to the best judgment of Jeff, SuisseBear, the Captain, and others who I consider experts in European investments. I would certainly hate to see more bailouts and money-printing just to cover the outrageous prices for Russian gas that been “laundered” through China to get around sanctions.

We’re still trying to get over COVID-related supply chain crises. What a mess.

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There may be an even bigger problem in the eurozone as Germany is losing the will to continually bail out Italy via the moribund ECB:

Revenge of the Bundesbank spells serious trouble for Italy

The real danger for Italy is that it might be asphyxiated slowly by untenable borrowing costs

https://www.telegraph.co.uk/business/2022/09/02/revenge-bund…

The article is behind a paywall but is sumarised here:

With inflation running at a fifty-year high in Germany, 14% in the Netherlands, and 25% in Estonia, it is politically impossible to keep mopping up Italy’s debt issuance under the ‘guise’ of monetary policy. The euro’s crash to dollar parity has been the last straw. The Bundesbank has lost patience.

The ECB is in the worst internal disarray since the depths of the eurozone debt crisis.
Hawks and doves are contradicting each other daily on fundamental strategy.
Markets have no idea how the new ‘anti-spread’ tool (TPI) to protect Italy is supposed to work, or whether it is legal outside an emergency.

“It is a complete shambles. Christine Lagarde has lost control and is not showing any leadership,” said one source close to the Bundesbank.

https://www.linkedin.com/posts/adam-bostock-3139b4_revenge-o…

The euro was created for political, not economic reasons, and the strains are showing. I sometimes thing that Germany will be the first to leave the eurozone to save its own economy.

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I defer to the best judgment of Jeff, SuisseBear, the Captain, and others who I consider experts in European investments.

The Captain has currently ZERO European investments and has no plans to diversify outside the US security markets. In the past The Captain had investments in Europe all of which had their problem, either for lack of reporting or the financial industry fleecing dividend payments and ADRs.

Want international exposure? Invest in MULTI-NATIONALS on the US security markets. Tesla, for example, has Giga-factories in China and Berlin and is rumored to build the next one in Canada where they already have other lesser facilities. EXXON is all over the world but it trades on the NYSE. Whatever industry you want to be in, you’ll find American multinationals trading on the NYSE, AMEX, or NASDAQ.

KISS!

The Captain
when America dies there will be no place to hide so don’t worry about it

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I can hardly grasp the very idea that Europe may have to bail out energy-generating utilities powering the “economic engine of Europe” - Germany - along with electric utilities in Austria, Sweden, and Finland.

What you are seeing are the unintended consequences of the IDIOTIC policies of the Climate Alarmist Greens who have coopted both governments and academia with their doomsday scenarios.

Individual investors’ best revenge is to soak up as much of the grants and subsidies these stupid policies are creating. It’s your tax money, after all, that you are getting back!

The Captain
believes there are saner policies to keep our planet clean and green

The Captain
makes max use of Portuguese recycling bins

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The “Minsky Moment” is applied to financial sceanrios which suddenly become unsustainable.

For cold countries that rely on imported energy to survive … maybe they have a rather more fomidale Minsky Moment imminent …

This doesn’t apply to Canada, Russia or Norway with ample fossil fuel reserves … but what about say the UK.

The popultaion needs energy to keep warm. 50% of food is mported? Fertilisers double the domestic food output … where does that leave it without all the imported stuff? maybe able to support 1/5 of its current population.

Horrendous social problems ahead … even without continued large scale chain-immigration …

And the social Minsky Moment could apply to USA re water, certainly is some places?

And, well, the whole world re over usage and destruction of natural resources …

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This doesn’t apply to Canada, Russia or Norway with ample fossil fuel reserves … but what about say the UK.

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Europe has ample coal reserves to last for many years. Germany and Poland can supply the rest of Europe for many years.

https://public.euracoal.eu/download/Public-Archive/Library/C…

Not much has change in European coal reserves in the last 10 years.

Jaak

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